CPCU Ethics test questions and answers 2023 with
complete solution
Ethical behavior is based on
reasoned consideration of all issues surrounding a conflict
Morality is
universal and basic to human relationships
Maintaining high ethical standards is best associated with
knowledge of law and regulations
The Sarbanes-Oxley federal law requires that publicly traded companies identify
principal ethics officers, create anonymous hotlines for reporting unethical
behavior, and
establish codes of ethics.
Enforceable components of the CPCU Code of Professional Conduct are the
Guidelines and Rules.
Lloyd is a commercial property underwriter at Insurance Company (IC). Two years
ago, he completed his studies and obtained the CPCU designation. Due to recent
changes in workers compensation legislation in one of the states in which IC
operates, the insurer has arranged for a one-day seminar to explain the changes
and the impact they will have on underwriting and claim settlement. Considering
Lloyd's obligations under the Code of Professional Conduct (the Code), which
one of the following statements is correct?
Choose one answer.
A. Lloyd is required to complete any training made available by his employer.
B. Because Lloyd has his CPCU, further training is considered unnecessary.
C. The Code requires Lloyd to remain current on all changes in insurance
legislation.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to
attend.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend.
Ming is the chief actuary at ABC Insurance and a CPCU. Ming has developed a
new method for calculating incurred but not reported losses (IBNR). He has
tested the method over a number of years and has found it to be much more
accurate than the traditional method used by most actuaries. Because the new
method gives Ming more confidence in the accuracy of his rate-making data, it
allows ABC to charge lower rates than its competitors. This in turn gives ABC a
marketing advantage. Which one of the following best describes Ming's
obligations under Canon 5 of the Code of Professional Ethics regarding raising
,the professional standards of the insurance profession?
Choose one answer.
A. The new IBNR calculation method constitutes a trade secret and Ming is under
no obligation to divulge it.
B. Because the new method could benefit consumers in terms of lower rates,
Ming is required to share it with other insurers.
C. Canon 5 specifically prohibits CPCUs from divulging information about their
employers' business practices.
D. Ming should write a professional article in an actuarial trade journal describing
the new IBNR calculation method.
A. The new IBNR calculation method constitutes a trade secret and Ming is under no
obligation to divulge it.
Elin is a surety producer and a CPCU. She regularly deals with legal and
accounting information. She notices that certain financial information provided
by a contractor shows a deteriorating financial position. To best comply with Rule
6.1 of the Code of Professional Conduct as it concerns confidential information
needed by a professional, Elin should
Choose one answer.
A. Suggest that a competing contractor consider merging with the client.
B. Report the newest financial information to the surety.
C. Counsel the client as to methods to improve the financial position.
D. Do nothing as the information is proprietary.
B. Report the newest financial information to the surety.
Hugo is a CPCU and resident vice president and regional manager of an
insurance company. The state legislature is considering a bill that would alter
auto coverages and require insurers to reduce rates by 25 percent. Hugo is
, invited to be part of a roundtable discussion on the legislation by the state public
broadcasting affiliate. To best comply with Canon 7 of the Code of Professional
Conduct as it relates to helping to improve the public understanding of
insurance, Hugo should
Choose one answer.
A. Seek permission from his employer to present the position of his company.
B. Obtain and present the position of the insurance trade association to which his
employer belongs.
C. Present objective information on the pros and cons of the legislation without
taking a position.
D. Present his opinion on the legislation clearly noting it is his opinion and may
or may not be the position of his company.
C. Present objective information on the pros and cons of the legislation without taking a
position.
Daiki, a CPCU, has been underwriting a difficult account and has been working
with the proposed insured's risk manager. On two occasions, Daiki has received
letters from the risk manager with this typed below the risk manager's signature,
"Almost a CPCU." Daiki learns that the risk manager has only one more course to
pass to become a CPCU. Daiki's most appropriate action would be to
Choose one answer.
A. Ignore the verbiage as the risk manager has only one CPCU part to pass.
B. Ask the risk manager to stop adding the verbiage.
C. Report the risk manager to the American Institute.
D. Notify the employer of the risk manager of the practice.
C. Report the risk manager to the American Institute.
An insurance customer has alleged that Jake, who is a producer and a CPCU, has
violated the Code of Professional Conduct. As a CPCU who is subject to a formal
complete solution
Ethical behavior is based on
reasoned consideration of all issues surrounding a conflict
Morality is
universal and basic to human relationships
Maintaining high ethical standards is best associated with
knowledge of law and regulations
The Sarbanes-Oxley federal law requires that publicly traded companies identify
principal ethics officers, create anonymous hotlines for reporting unethical
behavior, and
establish codes of ethics.
Enforceable components of the CPCU Code of Professional Conduct are the
Guidelines and Rules.
Lloyd is a commercial property underwriter at Insurance Company (IC). Two years
ago, he completed his studies and obtained the CPCU designation. Due to recent
changes in workers compensation legislation in one of the states in which IC
operates, the insurer has arranged for a one-day seminar to explain the changes
and the impact they will have on underwriting and claim settlement. Considering
Lloyd's obligations under the Code of Professional Conduct (the Code), which
one of the following statements is correct?
Choose one answer.
A. Lloyd is required to complete any training made available by his employer.
B. Because Lloyd has his CPCU, further training is considered unnecessary.
C. The Code requires Lloyd to remain current on all changes in insurance
legislation.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to
attend.
D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend.
Ming is the chief actuary at ABC Insurance and a CPCU. Ming has developed a
new method for calculating incurred but not reported losses (IBNR). He has
tested the method over a number of years and has found it to be much more
accurate than the traditional method used by most actuaries. Because the new
method gives Ming more confidence in the accuracy of his rate-making data, it
allows ABC to charge lower rates than its competitors. This in turn gives ABC a
marketing advantage. Which one of the following best describes Ming's
obligations under Canon 5 of the Code of Professional Ethics regarding raising
,the professional standards of the insurance profession?
Choose one answer.
A. The new IBNR calculation method constitutes a trade secret and Ming is under
no obligation to divulge it.
B. Because the new method could benefit consumers in terms of lower rates,
Ming is required to share it with other insurers.
C. Canon 5 specifically prohibits CPCUs from divulging information about their
employers' business practices.
D. Ming should write a professional article in an actuarial trade journal describing
the new IBNR calculation method.
A. The new IBNR calculation method constitutes a trade secret and Ming is under no
obligation to divulge it.
Elin is a surety producer and a CPCU. She regularly deals with legal and
accounting information. She notices that certain financial information provided
by a contractor shows a deteriorating financial position. To best comply with Rule
6.1 of the Code of Professional Conduct as it concerns confidential information
needed by a professional, Elin should
Choose one answer.
A. Suggest that a competing contractor consider merging with the client.
B. Report the newest financial information to the surety.
C. Counsel the client as to methods to improve the financial position.
D. Do nothing as the information is proprietary.
B. Report the newest financial information to the surety.
Hugo is a CPCU and resident vice president and regional manager of an
insurance company. The state legislature is considering a bill that would alter
auto coverages and require insurers to reduce rates by 25 percent. Hugo is
, invited to be part of a roundtable discussion on the legislation by the state public
broadcasting affiliate. To best comply with Canon 7 of the Code of Professional
Conduct as it relates to helping to improve the public understanding of
insurance, Hugo should
Choose one answer.
A. Seek permission from his employer to present the position of his company.
B. Obtain and present the position of the insurance trade association to which his
employer belongs.
C. Present objective information on the pros and cons of the legislation without
taking a position.
D. Present his opinion on the legislation clearly noting it is his opinion and may
or may not be the position of his company.
C. Present objective information on the pros and cons of the legislation without taking a
position.
Daiki, a CPCU, has been underwriting a difficult account and has been working
with the proposed insured's risk manager. On two occasions, Daiki has received
letters from the risk manager with this typed below the risk manager's signature,
"Almost a CPCU." Daiki learns that the risk manager has only one more course to
pass to become a CPCU. Daiki's most appropriate action would be to
Choose one answer.
A. Ignore the verbiage as the risk manager has only one CPCU part to pass.
B. Ask the risk manager to stop adding the verbiage.
C. Report the risk manager to the American Institute.
D. Notify the employer of the risk manager of the practice.
C. Report the risk manager to the American Institute.
An insurance customer has alleged that Jake, who is a producer and a CPCU, has
violated the Code of Professional Conduct. As a CPCU who is subject to a formal
