American Institutes Insurance CPCU 500 Exam
Questions and Answers 100% Verified
Question:
For public entities such as cities, counties and public utilities, which one of the following is
normally the most important post-loss risk management goal? Choose one answer. A.
Growth B. Profitability C. Continuity of operations D. Earnings stability
Answer:
C. Continuity of operations
Question:
Which one of the following is the goal of enterprise-wide risk management (ERM)? Choose
one answer. A. Coordinate loss reduction efforts B. Reduce risk management costs C.
Decentralize control of business decisions D. Maximize the organization's value
Answer:
D. Maximize the organization's value
,Question:
A risk management program must be monitored and periodically revised, and that revision
involves four steps. Which one of the following is one of those four steps? Choose one
answer. A. Establish results-based rather than activity-based standards of acceptable
performance. B. Compare actual results with the established performance standards. C.
Reduce any performance standards that have not been achieved by the actual results. D.
Return to the first step in the risk management process to identify new loss exposures.
Answer:
B. Compare actual results with the established performance standards.
Question:
Risk can be classified as subjective or objective. Which one of the following statements is
correct with respect to these risk classifications? Choose one answer. A. Subjective risk is
risk associated with individuals; objective risk is risk associated with objects or things. B. Risk
managers focus on objective risk and attempt to avoid allowing subjective risk to affect their
decisions. C. Subjective risk can exist even where objective risk does not. D. Individuals'
subjective perception of risk in a given set of circumstances is typically much higher than the
objective risk.
Answer:
C. Subjective risk can exist even where objective risk does not.
,Question:
JNL Construction is a general contractor. As the risk management professional for JNL,
Marie should be aware of the company's contractual obligations, as well as the contractual
obligations that others owe JNL. This knowledge is necessary for Marie to meet which one of
the following pre-loss risk management goals? Choose one answer. A. Legality B. Social
responsibility C. Tolerable uncertainty D. Continuity of operations
Answer:
A. Legality
Question:
Residual uncertainty is the level of risk that remains after organizations implement their risk
management plans. Which one of the following statements is correct with respect to residual
uncertainty? Choose one answer. A. Residual uncertainty is an objective measure,
independent of an organization's subjective view of the risks to which it is exposed. B. The
cost of residual uncertainty is relatively easy to calculate and comprises an important part of
any cost of risk study. C. Residual uncertainty can be minimized, but doing so is costly
because more has to be spent on attempts to control or finance the risks involved. D. Cost of
residual uncertainty is a factor only in the case of speculative risk; it is not a consideration
where pure risk is concerned.
Answer:
C. Residual uncertainty can be minimized, but doing so is costly because more has to be
spent on attempts to control or finance the risks involved.
, Question:
Tania has been unemployed for six months, and her unpaid bills are mounting. She recently
damaged the front fender of her vehicle after running off the road. When seeking repairs to
the vehicle, she convinced the auto body shop to include damages from previous incidents in
the estimate. This would allow her to collect extra money from her insurer. From an
insurance and risk management perspective, Tania's behavior is indicative of a Choose one
answer. A. Legal hazard. B. Moral hazard. C. Morale hazard. D. Physical hazard.
Answer:
B. Moral hazard.
Question:
Which one of the following describes how an effective risk management program should
support an organization's pre-loss operational goals? Choose one answer. A. It should
ensure that risk management costs are kept to a minimum. B. It should eliminate uncertainty
by identifying and managing loss exposures. C. It should help ensure that the organization's
legal obligations are satisfied. D. It should ensure that no conflicts exist among the pre-loss
goals.
Answer:
C. It should help ensure that the organization's legal obligations are satisfied.
Questions and Answers 100% Verified
Question:
For public entities such as cities, counties and public utilities, which one of the following is
normally the most important post-loss risk management goal? Choose one answer. A.
Growth B. Profitability C. Continuity of operations D. Earnings stability
Answer:
C. Continuity of operations
Question:
Which one of the following is the goal of enterprise-wide risk management (ERM)? Choose
one answer. A. Coordinate loss reduction efforts B. Reduce risk management costs C.
Decentralize control of business decisions D. Maximize the organization's value
Answer:
D. Maximize the organization's value
,Question:
A risk management program must be monitored and periodically revised, and that revision
involves four steps. Which one of the following is one of those four steps? Choose one
answer. A. Establish results-based rather than activity-based standards of acceptable
performance. B. Compare actual results with the established performance standards. C.
Reduce any performance standards that have not been achieved by the actual results. D.
Return to the first step in the risk management process to identify new loss exposures.
Answer:
B. Compare actual results with the established performance standards.
Question:
Risk can be classified as subjective or objective. Which one of the following statements is
correct with respect to these risk classifications? Choose one answer. A. Subjective risk is
risk associated with individuals; objective risk is risk associated with objects or things. B. Risk
managers focus on objective risk and attempt to avoid allowing subjective risk to affect their
decisions. C. Subjective risk can exist even where objective risk does not. D. Individuals'
subjective perception of risk in a given set of circumstances is typically much higher than the
objective risk.
Answer:
C. Subjective risk can exist even where objective risk does not.
,Question:
JNL Construction is a general contractor. As the risk management professional for JNL,
Marie should be aware of the company's contractual obligations, as well as the contractual
obligations that others owe JNL. This knowledge is necessary for Marie to meet which one of
the following pre-loss risk management goals? Choose one answer. A. Legality B. Social
responsibility C. Tolerable uncertainty D. Continuity of operations
Answer:
A. Legality
Question:
Residual uncertainty is the level of risk that remains after organizations implement their risk
management plans. Which one of the following statements is correct with respect to residual
uncertainty? Choose one answer. A. Residual uncertainty is an objective measure,
independent of an organization's subjective view of the risks to which it is exposed. B. The
cost of residual uncertainty is relatively easy to calculate and comprises an important part of
any cost of risk study. C. Residual uncertainty can be minimized, but doing so is costly
because more has to be spent on attempts to control or finance the risks involved. D. Cost of
residual uncertainty is a factor only in the case of speculative risk; it is not a consideration
where pure risk is concerned.
Answer:
C. Residual uncertainty can be minimized, but doing so is costly because more has to be
spent on attempts to control or finance the risks involved.
, Question:
Tania has been unemployed for six months, and her unpaid bills are mounting. She recently
damaged the front fender of her vehicle after running off the road. When seeking repairs to
the vehicle, she convinced the auto body shop to include damages from previous incidents in
the estimate. This would allow her to collect extra money from her insurer. From an
insurance and risk management perspective, Tania's behavior is indicative of a Choose one
answer. A. Legal hazard. B. Moral hazard. C. Morale hazard. D. Physical hazard.
Answer:
B. Moral hazard.
Question:
Which one of the following describes how an effective risk management program should
support an organization's pre-loss operational goals? Choose one answer. A. It should
ensure that risk management costs are kept to a minimum. B. It should eliminate uncertainty
by identifying and managing loss exposures. C. It should help ensure that the organization's
legal obligations are satisfied. D. It should ensure that no conflicts exist among the pre-loss
goals.
Answer:
C. It should help ensure that the organization's legal obligations are satisfied.
