CPCU 520 PRACTICE EXAMS UPDATED QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔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 is the best example of an insurer's risk control activities
generating additional revenue for the insurer? - ✔✔An insurer provides industrial
hygiene services to a self-insured firm for a fee.
✔✔The risk control service of conducting a physical survey consists of - ✔✔Collecting
underwriting information on a customer's loss exposures.
✔✔Which one of the following statements is true concerning risk control? - ✔✔Risk
control can assist marketing by providing advice on improving safety.
✔✔Which one of the following statements is correct with respect to the premium
auditing process? - ✔✔Once premium auditors have obtained the data necessary for
calculating the premium, they must decide whether the data are reasonable.
✔✔Which one of the following statements is correct with respect to premium auditing? -
✔✔NCCI rules specify audit requirements and restrict classification changes.
, ✔✔A crucial responsibility of the premium auditing function is to classify insured
exposures correctly. Underwriting must establish the classifications - ✔✔When the
policy is issued.
✔✔Most insurers give some producers the authority to pay claims up to a certain
amount. In this role, producers function much like an - ✔✔Inside claim representative.
✔✔Supervisors and managers often use a diary or suspense when handling claims as -
✔✔Reminder systems to review claim files.
✔✔Liability policies cover insureds for compensatory damages an insured owes to a
third party. Compensatory damages normally covered by the policy include - ✔✔Pain
and suffering and out-of-pocket expenses claimed up to the policy limit.
✔✔To determine if a person is a named "insured" under a policy, the claims
representative would generally need to review - ✔✔The Declarations section and
Definitions section.
✔✔Benjamin has his home insured with Westfork Mutual under an HO-3 policy for
$100,000. He is the named insured on the policy. There are three other residents of the
home: Maria, Benjamin's mother; Daniel, his nephew; and Cian, a family friend. An
accidental fire causes damage to the home and to personal property of all four
occupants. Benjamin reports the loss to Westfork and Fatima, a claim representative, is
assigned the claim. Which one of the following will most likely be Fatima's principal
concern when analyzing coverage for the loss? - ✔✔Whether Maria's, Daniel's, and
Cian's property would be covered
✔✔Which one of the following statements is correct regarding actuarial services? -
✔✔Regulators sometimes require insurers to provide a consulting actuary's opinion
verifying the accuracy and reasonableness of the staff actuaries' work.
✔✔Given the following data and using the loss ratio ratemaking method, calculate the
insurance rate change (rounded).
Expected loss ratio63% Actual loss ratio55% Incurred losses$600,000 Earned
premium$1,250,000 Expenses45% - ✔✔The insurance rate change is -13 percent,
equal to (the actual loss ratio - expected loss ratio) / expected loss ratio. (55-63)/63 = -
13%
✔✔As a key step in the process of developing insurance rates, actuaries adjust the
premium and loss data that they have collected from past years. Which one of the
following statements concerning this adjustment process is true? - ✔✔Loss
development factors reflect growth in incurred reported losses and in incurred by not
reported (IBNR).
ANSWERS GUARANTEE A+
✔✔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 is the best example of an insurer's risk control activities
generating additional revenue for the insurer? - ✔✔An insurer provides industrial
hygiene services to a self-insured firm for a fee.
✔✔The risk control service of conducting a physical survey consists of - ✔✔Collecting
underwriting information on a customer's loss exposures.
✔✔Which one of the following statements is true concerning risk control? - ✔✔Risk
control can assist marketing by providing advice on improving safety.
✔✔Which one of the following statements is correct with respect to the premium
auditing process? - ✔✔Once premium auditors have obtained the data necessary for
calculating the premium, they must decide whether the data are reasonable.
✔✔Which one of the following statements is correct with respect to premium auditing? -
✔✔NCCI rules specify audit requirements and restrict classification changes.
, ✔✔A crucial responsibility of the premium auditing function is to classify insured
exposures correctly. Underwriting must establish the classifications - ✔✔When the
policy is issued.
✔✔Most insurers give some producers the authority to pay claims up to a certain
amount. In this role, producers function much like an - ✔✔Inside claim representative.
✔✔Supervisors and managers often use a diary or suspense when handling claims as -
✔✔Reminder systems to review claim files.
✔✔Liability policies cover insureds for compensatory damages an insured owes to a
third party. Compensatory damages normally covered by the policy include - ✔✔Pain
and suffering and out-of-pocket expenses claimed up to the policy limit.
✔✔To determine if a person is a named "insured" under a policy, the claims
representative would generally need to review - ✔✔The Declarations section and
Definitions section.
✔✔Benjamin has his home insured with Westfork Mutual under an HO-3 policy for
$100,000. He is the named insured on the policy. There are three other residents of the
home: Maria, Benjamin's mother; Daniel, his nephew; and Cian, a family friend. An
accidental fire causes damage to the home and to personal property of all four
occupants. Benjamin reports the loss to Westfork and Fatima, a claim representative, is
assigned the claim. Which one of the following will most likely be Fatima's principal
concern when analyzing coverage for the loss? - ✔✔Whether Maria's, Daniel's, and
Cian's property would be covered
✔✔Which one of the following statements is correct regarding actuarial services? -
✔✔Regulators sometimes require insurers to provide a consulting actuary's opinion
verifying the accuracy and reasonableness of the staff actuaries' work.
✔✔Given the following data and using the loss ratio ratemaking method, calculate the
insurance rate change (rounded).
Expected loss ratio63% Actual loss ratio55% Incurred losses$600,000 Earned
premium$1,250,000 Expenses45% - ✔✔The insurance rate change is -13 percent,
equal to (the actual loss ratio - expected loss ratio) / expected loss ratio. (55-63)/63 = -
13%
✔✔As a key step in the process of developing insurance rates, actuaries adjust the
premium and loss data that they have collected from past years. Which one of the
following statements concerning this adjustment process is true? - ✔✔Loss
development factors reflect growth in incurred reported losses and in incurred by not
reported (IBNR).
