CPCU 520 Practice Exam 1 – Questions
and Answers
The expenses associated with adjusting claims are referred to as
Select one:
A. Prospective loss costs.
B. Loss adjustment expenses.
C. Claims costs.
D. Operating expenses. - -B. Loss adjustment expenses.
-Insurer Y is small but has a specialty insurance market for high-value
vehicles. In competing with a larger insurer with a broader market, Insurer Y
is likely to have which one of the following advantages?
Select one:
A. Insurer Y would have more capital surplus available than a larger insurer
would have.
B. Insurer Y can be more nimble, allowing it to respond quickly to an
emerging trend or change.
C. Because Insurer Y has a niche market, a larger insurer would not be able
to compete on price due to state rate regulation.
D. Insurer Y is better able to invest in research and product development due
to a more narrow market focus. - -B. Insurer Y can be more nimble, allowing
it to respond quickly to an emerging trend or change.
-Which one of the following statements is correct?
Select one:
A. Some of the five ideal characteristics of rates conflict with others, and
compromises are often necessary.
B. Rates are based on what consumers would be willing to pay for insurance
coverage, which can be difficult to determine.
C. A rate can be adequate or it can be competitive, but it cannot be both
adequate and competitive at the same time.
D. From the insurer's perspective, the primary goal of ratemaking is to
implement the highest rates that regulators will allow so as to maximize
insurer profits. - -A. Some of the five ideal characteristics of rates conflict
with others, and compromises are often necessary.
-To be successful, the differentiation business-level strategy must
Select one:
,A. Produce short-term profits while phasing out a product line or existing
market.
B. Seek efficiency in all areas of operation to build a competitive advantage.
C. Accurately determine customers' preferences to develop products
perceived as distinctive.
D. Focus on one group of customers and offer a low-price product or service.
- -C. Accurately determine customers' preferences to develop products
perceived as distinctive.
-Which one of the following statements is correct with respect to SWOT
analysis?
Select one:
A. Identifying internal strengths and weaknesses involves considering
financial, physical, human, and organizational assets.
B. Managers use SWOT analysis to predict the future state of their
companies.
C. SWOT analysis considers a company's internal environment rather than
the external environment.
D. Customers are generally not considered in a SWOT analysis because the
focus is on the assets an organization owns. - -A. Identifying internal
strengths and weaknesses involves considering financial, physical, human,
and organizational assets.
-Samuelson Insurance has developed special programs to market personal
insurance to members of college alumni and professional associations. This
is an example of which one of the following types of market segmentation?
Select one:
A. Psychographic
B. Behavioristic
C. Geographic
D. Demographic - -D. Demographic
-All of the following are challenges that an insurer may face that can hinder
a complete alignment of information technology (IT) and business strategies,
EXCEPT:
Select one:
A. Changing IT or business metrics
B. An overly complex IT infrastructure
C. IT professionals assured of their job security
D. IT operating as a separate unit - -C. IT professionals assured of their job
security
, -An applicant for commercial property insurance is found unacceptable by
an underwriter due to the nature of its operations and the construction of the
building it occupies. If the applicant installs an automatic fire-extinguishing
sprinkler system, the underwriter will approve the application. This type of
underwriting modification is known as
Select one:
A. Changing insurance rates, rating plans, or policy limits.
B. Requiring risk control measures.
C. Using facultative reinsurance.
D. Amending the policy terms and conditions. - -B. Requiring risk control
measures
-Which one of the following insurer performance goals is the most difficult to
evaluate?
Select one:
A. Meeting social responsibilities
B. Meeting profitability goals
C. Meeting customer needs
D. Meeting legal requirements - -A. Meeting social responsibilities
-Which one of the following insurance consumer groups would have the
most risk financing alternatives available to them?
Select one:
A. Small business
B. Individuals
C. Middle markets
D. National accounts - -D. National accounts
-Information technology (IT) can help insurers increase operational
efficiency. Which one of the following would enable field claim
representatives at a storm site to access policy information, transmit claims
information, and settle losses or make partial payments immediately so that
displaced families could return to their homes as soon as possible?
Select one:
A. Internet of Things
B. Low cost mobile technology
C. Cloud computing and storage
D. Telematics - -B. Low cost mobile technology
-Which one of the following are shared by the primary insurer and the
reinsurer in pro rata reinsurance transactions?
Select one:
and Answers
The expenses associated with adjusting claims are referred to as
Select one:
A. Prospective loss costs.
B. Loss adjustment expenses.
C. Claims costs.
D. Operating expenses. - -B. Loss adjustment expenses.
-Insurer Y is small but has a specialty insurance market for high-value
vehicles. In competing with a larger insurer with a broader market, Insurer Y
is likely to have which one of the following advantages?
Select one:
A. Insurer Y would have more capital surplus available than a larger insurer
would have.
B. Insurer Y can be more nimble, allowing it to respond quickly to an
emerging trend or change.
C. Because Insurer Y has a niche market, a larger insurer would not be able
to compete on price due to state rate regulation.
D. Insurer Y is better able to invest in research and product development due
to a more narrow market focus. - -B. Insurer Y can be more nimble, allowing
it to respond quickly to an emerging trend or change.
-Which one of the following statements is correct?
Select one:
A. Some of the five ideal characteristics of rates conflict with others, and
compromises are often necessary.
B. Rates are based on what consumers would be willing to pay for insurance
coverage, which can be difficult to determine.
C. A rate can be adequate or it can be competitive, but it cannot be both
adequate and competitive at the same time.
D. From the insurer's perspective, the primary goal of ratemaking is to
implement the highest rates that regulators will allow so as to maximize
insurer profits. - -A. Some of the five ideal characteristics of rates conflict
with others, and compromises are often necessary.
-To be successful, the differentiation business-level strategy must
Select one:
,A. Produce short-term profits while phasing out a product line or existing
market.
B. Seek efficiency in all areas of operation to build a competitive advantage.
C. Accurately determine customers' preferences to develop products
perceived as distinctive.
D. Focus on one group of customers and offer a low-price product or service.
- -C. Accurately determine customers' preferences to develop products
perceived as distinctive.
-Which one of the following statements is correct with respect to SWOT
analysis?
Select one:
A. Identifying internal strengths and weaknesses involves considering
financial, physical, human, and organizational assets.
B. Managers use SWOT analysis to predict the future state of their
companies.
C. SWOT analysis considers a company's internal environment rather than
the external environment.
D. Customers are generally not considered in a SWOT analysis because the
focus is on the assets an organization owns. - -A. Identifying internal
strengths and weaknesses involves considering financial, physical, human,
and organizational assets.
-Samuelson Insurance has developed special programs to market personal
insurance to members of college alumni and professional associations. This
is an example of which one of the following types of market segmentation?
Select one:
A. Psychographic
B. Behavioristic
C. Geographic
D. Demographic - -D. Demographic
-All of the following are challenges that an insurer may face that can hinder
a complete alignment of information technology (IT) and business strategies,
EXCEPT:
Select one:
A. Changing IT or business metrics
B. An overly complex IT infrastructure
C. IT professionals assured of their job security
D. IT operating as a separate unit - -C. IT professionals assured of their job
security
, -An applicant for commercial property insurance is found unacceptable by
an underwriter due to the nature of its operations and the construction of the
building it occupies. If the applicant installs an automatic fire-extinguishing
sprinkler system, the underwriter will approve the application. This type of
underwriting modification is known as
Select one:
A. Changing insurance rates, rating plans, or policy limits.
B. Requiring risk control measures.
C. Using facultative reinsurance.
D. Amending the policy terms and conditions. - -B. Requiring risk control
measures
-Which one of the following insurer performance goals is the most difficult to
evaluate?
Select one:
A. Meeting social responsibilities
B. Meeting profitability goals
C. Meeting customer needs
D. Meeting legal requirements - -A. Meeting social responsibilities
-Which one of the following insurance consumer groups would have the
most risk financing alternatives available to them?
Select one:
A. Small business
B. Individuals
C. Middle markets
D. National accounts - -D. National accounts
-Information technology (IT) can help insurers increase operational
efficiency. Which one of the following would enable field claim
representatives at a storm site to access policy information, transmit claims
information, and settle losses or make partial payments immediately so that
displaced families could return to their homes as soon as possible?
Select one:
A. Internet of Things
B. Low cost mobile technology
C. Cloud computing and storage
D. Telematics - -B. Low cost mobile technology
-Which one of the following are shared by the primary insurer and the
reinsurer in pro rata reinsurance transactions?
Select one:
