CPCU 520 Exam Questions and Answers| New Update with 100% Correct Answers
Which one of the following insurer goals creates a conflict between the profit goal and
customer needs goal? Comply with legal requirements
Which one of the following statements is true with regard to the various forms of ownership of
property-casualty insurers? State and federal governments provide insurance for exposures
that are significant but not commercially insurable.
Insurer A is a proprietary insurer that acts as an insurance marketplace. Its members
underwrite any insurance or reinsurance purchased, and members are primarily partnerships or
corporations with limited liability. Insurer A members belong to syndicates and delegate day-to-
day operations to the syndicate manager. Insurer A is which one of the following? An
insurance exchange
Juan has a poor driving record and has been unable to obtain auto liability coverage from
private insurers. Auto liability coverage is mandatory in his state. Since affordability is a
concern, Juan wants auto liability coverage only. Which one of the following is an option for
Juan to obtain coverage? Obtain coverage through his state's residual market
Insurance pools operate either as a syndicate or through Reinsurance.
Due to the possibility of an environmental pollution exposure resulting in extensive losses,
several insurers in a particular state have joined together to insure the exposure. No single
insurer was willing to insure the entire risk. This insurance arrangement is typical of An
insurance pool.
Specific measures of an insurer's operational performance are the investment income ratio,
overall operating ratio, and the Return on equity ratio.
Consider the following information reported by an insurance company:
Incurred losses $8 million
,Incurred Underwriting Expenses $2 million
Incurred Loss Adjustment Expenses $4 million
Net Written Premiums $24 million
Earned Premiums $16 million
Which one of the following is the company's trade basis-combined ratio? .833 (The
company's trade basis-combined ratio is .833, which is the loss ratio plus the expense ratio. This
is calculated by: (($8m + $4m) / $16m) + ($2m / $24m).
Which one of the following statements is correct? If insurers become insolvent, future
claims might not be paid and the insurance protection already paid for might become
worthless.
The National Association of Insurance Commissioners (NAIC), has No regulatory authority.
Which one of the following precedes nearly all major insurer insolvencies? Rapid premium
growth
Which one of the following statements is correct regarding discrimination and insurance rating?
Discrimination is essential to insurance rating.
Which one of the following statements is correct regarding rate regulation? An insurer does
not know what its actual expenses will be when a policy is sold.
Which one of the following statements is correct regarding rate regulation? The degree of
rate variation among competing insurers can affect whether or not rates are considered
excessive.
Which one of the following statements is correct with regard to the regulation of insurance
policies? Legislation might require that certain standard mandatory policy provisions appear
in certain types of insurance policies.
, The state regulation of unfair trade practices concerning the business of insurance is required
under the McCarran Act.
To prevent insurer insolvency and unfair discrimination against an insurance consumer,
insurance regulators do which one of the following? Constrain insurers' ability to accept,
modify, or decline applications for insurance
Which one of the following would likely be indicated by a notation next to a specific
classification in an insurer's underwriting guidelines? The need for the underwriter to get
management approval before proceeding
Depending on the type of insurance, insurers use automated underwriting systems to
Encode underwriting guidelines.
Which one of the following is determined by a company's underwriting policy? Composition
of the insurer's book of business
Which one of the following is a major constraint of underwriting policy? Reinsurance
All of the following statements are true regarding the factors affecting the formation of an
insurer's underwriting policy, EXCEPT: The higher an insurer's premium-to-surplus ratio, the
greater its ability to expand premium writings.
Which one of the following statements is correct with regard to underwriting guidelines?
Compliance with underwriting guidelines ensures selection of loss exposures commensurate
with planned rate levels.
Rating agencies such as Dun & Bradstreet (D&B) provide Data on the applicant's financial
status.
Which one of the following insurer goals creates a conflict between the profit goal and
customer needs goal? Comply with legal requirements
Which one of the following statements is true with regard to the various forms of ownership of
property-casualty insurers? State and federal governments provide insurance for exposures
that are significant but not commercially insurable.
Insurer A is a proprietary insurer that acts as an insurance marketplace. Its members
underwrite any insurance or reinsurance purchased, and members are primarily partnerships or
corporations with limited liability. Insurer A members belong to syndicates and delegate day-to-
day operations to the syndicate manager. Insurer A is which one of the following? An
insurance exchange
Juan has a poor driving record and has been unable to obtain auto liability coverage from
private insurers. Auto liability coverage is mandatory in his state. Since affordability is a
concern, Juan wants auto liability coverage only. Which one of the following is an option for
Juan to obtain coverage? Obtain coverage through his state's residual market
Insurance pools operate either as a syndicate or through Reinsurance.
Due to the possibility of an environmental pollution exposure resulting in extensive losses,
several insurers in a particular state have joined together to insure the exposure. No single
insurer was willing to insure the entire risk. This insurance arrangement is typical of An
insurance pool.
Specific measures of an insurer's operational performance are the investment income ratio,
overall operating ratio, and the Return on equity ratio.
Consider the following information reported by an insurance company:
Incurred losses $8 million
,Incurred Underwriting Expenses $2 million
Incurred Loss Adjustment Expenses $4 million
Net Written Premiums $24 million
Earned Premiums $16 million
Which one of the following is the company's trade basis-combined ratio? .833 (The
company's trade basis-combined ratio is .833, which is the loss ratio plus the expense ratio. This
is calculated by: (($8m + $4m) / $16m) + ($2m / $24m).
Which one of the following statements is correct? If insurers become insolvent, future
claims might not be paid and the insurance protection already paid for might become
worthless.
The National Association of Insurance Commissioners (NAIC), has No regulatory authority.
Which one of the following precedes nearly all major insurer insolvencies? Rapid premium
growth
Which one of the following statements is correct regarding discrimination and insurance rating?
Discrimination is essential to insurance rating.
Which one of the following statements is correct regarding rate regulation? An insurer does
not know what its actual expenses will be when a policy is sold.
Which one of the following statements is correct regarding rate regulation? The degree of
rate variation among competing insurers can affect whether or not rates are considered
excessive.
Which one of the following statements is correct with regard to the regulation of insurance
policies? Legislation might require that certain standard mandatory policy provisions appear
in certain types of insurance policies.
, The state regulation of unfair trade practices concerning the business of insurance is required
under the McCarran Act.
To prevent insurer insolvency and unfair discrimination against an insurance consumer,
insurance regulators do which one of the following? Constrain insurers' ability to accept,
modify, or decline applications for insurance
Which one of the following would likely be indicated by a notation next to a specific
classification in an insurer's underwriting guidelines? The need for the underwriter to get
management approval before proceeding
Depending on the type of insurance, insurers use automated underwriting systems to
Encode underwriting guidelines.
Which one of the following is determined by a company's underwriting policy? Composition
of the insurer's book of business
Which one of the following is a major constraint of underwriting policy? Reinsurance
All of the following statements are true regarding the factors affecting the formation of an
insurer's underwriting policy, EXCEPT: The higher an insurer's premium-to-surplus ratio, the
greater its ability to expand premium writings.
Which one of the following statements is correct with regard to underwriting guidelines?
Compliance with underwriting guidelines ensures selection of loss exposures commensurate
with planned rate levels.
Rating agencies such as Dun & Bradstreet (D&B) provide Data on the applicant's financial
status.
