CPCU Ethics test UPDATED ACTUAL
Exam Questions and CORRECT Answers
Ethical behavior is based on - CORRECT ANSWER - reasoned consideration of all issues
surrounding a conflict
Morality is - CORRECT ANSWER - universal and basic to human relationships
Maintaining high ethical standards is best associated with - CORRECT ANSWER -
knowledge of law and regulations
The Sarbanes-Oxley federal law requires that publicly traded companies identify principal ethics
officers, create anonymous hotlines for reporting unethical behavior, and - CORRECT
ANSWER - establish codes of ethics.
Enforceable components of the CPCU Code of Professional Conduct are the - CORRECT
ANSWER - Guidelines and Rules.
Lloyd is a commercial property underwriter at Insurance Company (IC). Two years ago, he
completed his studies and obtained the CPCU designation. Due to recent changes in workers
compensation legislation in one of the states in which IC operates, the insurer has arranged for a
one-day seminar to explain the changes and the impact they will have on underwriting and claim
settlement. Considering Lloyd's obligations under the Code of Professional Conduct (the Code),
which one of the following statements is correct?
Choose one answer.
A. Lloyd is required to complete any training made available by his employer.
B. Because Lloyd has his CPCU, further training is considered unnecessary.
,C. The Code requires Lloyd to remain current on all changes in insurance legislation.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend. -
CORRECT ANSWER - D. Because the seminar is not directly related to Lloyd's job, he is
not obliged to attend.
Ming is the chief actuary at ABC Insurance and a CPCU. Ming has developed a new method for
calculating incurred but not reported losses (IBNR). He has tested the method over a number of
years and has found it to be much more accurate than the traditional method used by most
actuaries. Because the new method gives Ming more confidence in the accuracy of his rate-
making data, it allows ABC to charge lower rates than its competitors. This in turn gives ABC a
marketing advantage. Which one of the following best describes Ming's obligations under Canon
5 of the Code of Professional Ethics regarding raising the professional standards of the insurance
profession?
Choose one answer.
A. The new IBNR calculation method constitutes a trade secret and Ming is under no obligation
to divulge it.
B. Because the new method could benefit consumers in terms of lower rates, Ming is required to
share it with other insurers. - CORRECT ANSWER - A. The new IBNR calculation
method constitutes a trade secret and Ming is under no obligation to divulge it.
Elin is a surety producer and a CPCU. She regularly deals with legal and accounting information.
She notices that certain financial information provided by a contractor shows a deteriorating
financial position. To best comply with Rule 6.1 of the Code of Professional Conduct as it
concerns confidential information needed by a professional, Elin should
, Choose one answer.
A. Suggest that a competing contractor consider merging with the client.
B. Report the newest financial information to the surety.
C. Counsel the client as to methods to improve the financial position.
D. Do nothing as the information is proprietary. - CORRECT ANSWER - B. Report the
newest financial information to the surety.
Hugo is a CPCU and resident vice president and regional manager of an insurance company. The
state legislature is considering a bill that would alter auto coverages and require insurers to
reduce rates by 25 percent. Hugo is invited to be part of a roundtable discussion on the
legislation by the state public broadcasting affiliate. To best comply with Canon 7 of the Code of
Professional Conduct as it relates to helping to improve the public understanding of insurance,
Hugo should
Choose one answer.
A. Seek permission from his employer to present the position of his company.
Exam Questions and CORRECT Answers
Ethical behavior is based on - CORRECT ANSWER - reasoned consideration of all issues
surrounding a conflict
Morality is - CORRECT ANSWER - universal and basic to human relationships
Maintaining high ethical standards is best associated with - CORRECT ANSWER -
knowledge of law and regulations
The Sarbanes-Oxley federal law requires that publicly traded companies identify principal ethics
officers, create anonymous hotlines for reporting unethical behavior, and - CORRECT
ANSWER - establish codes of ethics.
Enforceable components of the CPCU Code of Professional Conduct are the - CORRECT
ANSWER - Guidelines and Rules.
Lloyd is a commercial property underwriter at Insurance Company (IC). Two years ago, he
completed his studies and obtained the CPCU designation. Due to recent changes in workers
compensation legislation in one of the states in which IC operates, the insurer has arranged for a
one-day seminar to explain the changes and the impact they will have on underwriting and claim
settlement. Considering Lloyd's obligations under the Code of Professional Conduct (the Code),
which one of the following statements is correct?
Choose one answer.
A. Lloyd is required to complete any training made available by his employer.
B. Because Lloyd has his CPCU, further training is considered unnecessary.
,C. The Code requires Lloyd to remain current on all changes in insurance legislation.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend. -
CORRECT ANSWER - D. Because the seminar is not directly related to Lloyd's job, he is
not obliged to attend.
Ming is the chief actuary at ABC Insurance and a CPCU. Ming has developed a new method for
calculating incurred but not reported losses (IBNR). He has tested the method over a number of
years and has found it to be much more accurate than the traditional method used by most
actuaries. Because the new method gives Ming more confidence in the accuracy of his rate-
making data, it allows ABC to charge lower rates than its competitors. This in turn gives ABC a
marketing advantage. Which one of the following best describes Ming's obligations under Canon
5 of the Code of Professional Ethics regarding raising the professional standards of the insurance
profession?
Choose one answer.
A. The new IBNR calculation method constitutes a trade secret and Ming is under no obligation
to divulge it.
B. Because the new method could benefit consumers in terms of lower rates, Ming is required to
share it with other insurers. - CORRECT ANSWER - A. The new IBNR calculation
method constitutes a trade secret and Ming is under no obligation to divulge it.
Elin is a surety producer and a CPCU. She regularly deals with legal and accounting information.
She notices that certain financial information provided by a contractor shows a deteriorating
financial position. To best comply with Rule 6.1 of the Code of Professional Conduct as it
concerns confidential information needed by a professional, Elin should
, Choose one answer.
A. Suggest that a competing contractor consider merging with the client.
B. Report the newest financial information to the surety.
C. Counsel the client as to methods to improve the financial position.
D. Do nothing as the information is proprietary. - CORRECT ANSWER - B. Report the
newest financial information to the surety.
Hugo is a CPCU and resident vice president and regional manager of an insurance company. The
state legislature is considering a bill that would alter auto coverages and require insurers to
reduce rates by 25 percent. Hugo is invited to be part of a roundtable discussion on the
legislation by the state public broadcasting affiliate. To best comply with Canon 7 of the Code of
Professional Conduct as it relates to helping to improve the public understanding of insurance,
Hugo should
Choose one answer.
A. Seek permission from his employer to present the position of his company.
