CPCU 500 EXAM STUDY GUIDE QUESTIONS AND ANSWERS 2025
Economy of Operations - (ANSWER)increase departmental and organizational efficiency, pre-loss risk
mgmt goal
Toerable uncertainty - (ANSWER)provide an awareness of potential losses and an assurance of their
effective management keeping the worry of accidental loss at a tolerable level (pre-loss risk mgmt goal)
Survival - (ANSWER)resume operations eventually (post loss risk mgmt goal)
Continuity of operations - (ANSWER)resume operations quickly (post loss risk mgmt goal)
Profitability - (ANSWER)maintain at least a minimum profit level NO MATTER WHAT accident occurs.
Post loss risk mgmt goals
Earnings stability - (ANSWER)maintain a specified earnings level from year to year post loss rm goal
Minimize the effects of loss on society for moral and good public reasons - (ANSWER)social responsibility
maintain the pre-loss growth pattern - (ANSWER)growth post loss rm goal
6 STEPS OF THE RM PROCESS - (ANSWER)1) IDENTIFY EXPOSURES
2) ANALYZE (MEASURE) LOSS EXPOSURES
3) EVALUATE ALTERNATIVE RM EXPOSURE TREATMENT TECHNIQUES
4) SELECT THE BEST COMBINATION OF RM TECHNIQUES
5) IMPLEMENT DECISION
6) MONITOR THE PROGRAM
4 methods of loss exposure identification - (ANSWER)1) Document analysis
2) Compliance review
3) Personal inspections
,CPCU 500 EXAM STUDY GUIDE QUESTIONS AND ANSWERS 2025
4) Experts
Hazard analysis - (ANSWER)under the experts method of loss exposures identification, reveals potential
losses by IDing conditions that increase expected loss frequency and/or severity
Probability - (ANSWER)measures the expected frequency of an event over time in a stable environment
Impossible events have a probability of - (ANSWER)0
Certain events have a probability of - (ANSWER)1
Theoretical probability - (ANSWER)theoretical and constant, calculated without actual trials (coin toss)
Empirical probability - (ANSWER)practical and changeable, the law of large numbers applies
Empirical probability - (ANSWER)computed from historical data from study samples (mortality rates)
Factors that improve the reliability of empirical probabilities: - (ANSWER)use of a large number of data,
an organization with stable operations and loss patterns
The smaller the standard deviation, - (ANSWER)the smaller the degree of dispersion and the greater the
accuracy of predictions.
Risk managers use standard deviation to measure - (ANSWER)the confidence in projecting losses
Coefficient of variation - (ANSWER)compares the degree of dispersion between 2 data sets w/
substantially different means
equals the std dev/mean
, CPCU 500 EXAM STUDY GUIDE QUESTIONS AND ANSWERS 2025
2 dimensions of timing - (ANSWER)when losses occur
when payments are made
The Prouty Approach - (ANSWER)method of jointly analyzing the frequency and severity of a loss
exposure
evaluates the significance of a particular loss exposure in terms of possible combinations of expected
loss frequency and severity
Prouty's 4 categories of loss frequency - (ANSWER)1) Almost nil- extremely unlikely to occur
2) Slight- could occur, but hasn't
3) Moderate- occurs occasionally
4) Definite- occurs regularly
Prouty's 3 categories of loss severity - (ANSWER)1) slight- losses that can be retained easily
2) significant- part of the loss must be transferred
3) severe- the organization's survival depends on the transfer of loss
5 loss exposure treatment methods - (ANSWER)1) avoidance
2) retention
3) transfer
4) prevention
5) control (reduce or prevent a loss)
Total claims distribution - (ANSWER)1 of 2 methods of jointly analyzing the frequency and severity of a
loss exposure
Economy of Operations - (ANSWER)increase departmental and organizational efficiency, pre-loss risk
mgmt goal
Toerable uncertainty - (ANSWER)provide an awareness of potential losses and an assurance of their
effective management keeping the worry of accidental loss at a tolerable level (pre-loss risk mgmt goal)
Survival - (ANSWER)resume operations eventually (post loss risk mgmt goal)
Continuity of operations - (ANSWER)resume operations quickly (post loss risk mgmt goal)
Profitability - (ANSWER)maintain at least a minimum profit level NO MATTER WHAT accident occurs.
Post loss risk mgmt goals
Earnings stability - (ANSWER)maintain a specified earnings level from year to year post loss rm goal
Minimize the effects of loss on society for moral and good public reasons - (ANSWER)social responsibility
maintain the pre-loss growth pattern - (ANSWER)growth post loss rm goal
6 STEPS OF THE RM PROCESS - (ANSWER)1) IDENTIFY EXPOSURES
2) ANALYZE (MEASURE) LOSS EXPOSURES
3) EVALUATE ALTERNATIVE RM EXPOSURE TREATMENT TECHNIQUES
4) SELECT THE BEST COMBINATION OF RM TECHNIQUES
5) IMPLEMENT DECISION
6) MONITOR THE PROGRAM
4 methods of loss exposure identification - (ANSWER)1) Document analysis
2) Compliance review
3) Personal inspections
,CPCU 500 EXAM STUDY GUIDE QUESTIONS AND ANSWERS 2025
4) Experts
Hazard analysis - (ANSWER)under the experts method of loss exposures identification, reveals potential
losses by IDing conditions that increase expected loss frequency and/or severity
Probability - (ANSWER)measures the expected frequency of an event over time in a stable environment
Impossible events have a probability of - (ANSWER)0
Certain events have a probability of - (ANSWER)1
Theoretical probability - (ANSWER)theoretical and constant, calculated without actual trials (coin toss)
Empirical probability - (ANSWER)practical and changeable, the law of large numbers applies
Empirical probability - (ANSWER)computed from historical data from study samples (mortality rates)
Factors that improve the reliability of empirical probabilities: - (ANSWER)use of a large number of data,
an organization with stable operations and loss patterns
The smaller the standard deviation, - (ANSWER)the smaller the degree of dispersion and the greater the
accuracy of predictions.
Risk managers use standard deviation to measure - (ANSWER)the confidence in projecting losses
Coefficient of variation - (ANSWER)compares the degree of dispersion between 2 data sets w/
substantially different means
equals the std dev/mean
, CPCU 500 EXAM STUDY GUIDE QUESTIONS AND ANSWERS 2025
2 dimensions of timing - (ANSWER)when losses occur
when payments are made
The Prouty Approach - (ANSWER)method of jointly analyzing the frequency and severity of a loss
exposure
evaluates the significance of a particular loss exposure in terms of possible combinations of expected
loss frequency and severity
Prouty's 4 categories of loss frequency - (ANSWER)1) Almost nil- extremely unlikely to occur
2) Slight- could occur, but hasn't
3) Moderate- occurs occasionally
4) Definite- occurs regularly
Prouty's 3 categories of loss severity - (ANSWER)1) slight- losses that can be retained easily
2) significant- part of the loss must be transferred
3) severe- the organization's survival depends on the transfer of loss
5 loss exposure treatment methods - (ANSWER)1) avoidance
2) retention
3) transfer
4) prevention
5) control (reduce or prevent a loss)
Total claims distribution - (ANSWER)1 of 2 methods of jointly analyzing the frequency and severity of a
loss exposure
