CPCU 540: Contributing to Financial
Performance Exam Questions and
Answers
In the claim function, how is supporting the insurer's profit goal
accomplished? - -through controlling expenses
- What is an insurer's line influenced by? - -the maximum amount of
insurance or limit of liability allowed by insurance regulations
- Loss Ratio Formula - -
- What do line underwriters do - -· Select insureds
· Classify and price accounts
· Recommend coverage
· Manage a book of business
· Support producers and insureds
· Support marketing
- What do staff underwriters do - -· Research market
· Formulate underwriting policy
· Revise underwriting guidelines
· Evaluate loss experience
· Research and develop coverage forms
· Review rates
· Arrange reinsurance
· Assist others
· Conduct audits
· Educate and train
- Am I a line or staff underwriter - -line
- What are the three specific ratios use to measure an insurer's underwriting
performance - -loss ratio
expense ratio
combined ratio
- What are unfair underwriting practices - -o Discriminating unfairly when
selecting loss exposure
o Misclassifying loss exposures
o Cancelling or nonrenewing policies contrary to statutes, rules, and policy
provisions
,o Using underwriting rules or rates that are not state approved
o Failing to apply newly implemented underwriting and rating factors to
renewals
- What are unfair claim and settlement practices - -o Knowingly
misrepresenting important facts or policy provisions
o Failing to properly investigate and settle claims
o Failing to make good-faith effort to pay claims when liability is reasonably
clear
o Settling a claim for less than what a reasonable person expects, based on
advertising
- What is the focus of finance activities - -obtaining and managing an
organization's capital
- Will policyholders' surplus be over or understated if insurer loss reserves
are too low? - -overstated
- What three factors does an insurer's profitability depend on - -revenue
expenditures
ability to absorb risk
- What are an insurer's primary sources of revenue - -premiums
investment income
revenue from the sale of ancillary risk management services
- An insurer's ability to absorb risk is largely dependent on what - -surplus
loss reserve adequacy
investment performance
- To be help be a risk management partner for a customer, what must
insurers do - -help customers identify, avoid, and minimize losses rather
than just provide coverage for them
- What factors can gauge how well insurers are meeting customer
expectations - -reviews
customer satisfaction data
retention ratio and lapse ratio
,insurer-producer relationships
- What are some unfair underwriting practices - -discriminating unfairly
when selecting loss exposures
misclassifying loss exposures
cancelling or nonrenewing policies contrary to statutes, rules, and policy
provisions
failing to apply newly implemented underwriting and rating factors to
renewals
- What are some unfair claims settlement practices - -knowingly
misrepresenting important facts or policy provisions
failing to properly investigate and settle claims
failing to make a good-faith effort to pay claims when liability is reasonably
clear
settling a claim for less than what a reasonable person expects, based on
advertising
failing to approve or deny coverage within a reasonable period
- When estimating profitability, an insurer should consider whether growth
resulted from: - -a competitive advantage
relaxed underwriting
inadequate insurance rates
combination of above factors
- What are two economic trends that are particularly relevant to insurers - -
inflation and the availability of capital
- What factors effect inflation - -supply chain efficiency
consumer demand
public perceptions of the economy
, - Reinsurance helps insurers achieve several business goals: - -increase
large-line capacity
provide catastrophe protection
stabilize loss experience
obtain surplus relief
- What are increases in loss expenses often spurred by - -inflation
unanticipated losses
supply chain issues
other macroeconomic factors
- How might insurers attempt to reel in loss expenses - -streamlining claims
adjusting processes
closely managing litigation expenses
implementing other cost-containment practices
- Pricing and availability of insurance products fluctuate based on what - -
the amount of capital available to the industry
- What drives underwriting cycles (such as hard and soft markets) - -pricing
and availability of capital
- What might regulatory changes be in response to - -technological
innovation
requests from consumer advocates or insurers
catastrophic events
societal shifts
- What are the components of the combined ratio - -losses due to claims
loss adjustment expenses
operating expenses
Performance Exam Questions and
Answers
In the claim function, how is supporting the insurer's profit goal
accomplished? - -through controlling expenses
- What is an insurer's line influenced by? - -the maximum amount of
insurance or limit of liability allowed by insurance regulations
- Loss Ratio Formula - -
- What do line underwriters do - -· Select insureds
· Classify and price accounts
· Recommend coverage
· Manage a book of business
· Support producers and insureds
· Support marketing
- What do staff underwriters do - -· Research market
· Formulate underwriting policy
· Revise underwriting guidelines
· Evaluate loss experience
· Research and develop coverage forms
· Review rates
· Arrange reinsurance
· Assist others
· Conduct audits
· Educate and train
- Am I a line or staff underwriter - -line
- What are the three specific ratios use to measure an insurer's underwriting
performance - -loss ratio
expense ratio
combined ratio
- What are unfair underwriting practices - -o Discriminating unfairly when
selecting loss exposure
o Misclassifying loss exposures
o Cancelling or nonrenewing policies contrary to statutes, rules, and policy
provisions
,o Using underwriting rules or rates that are not state approved
o Failing to apply newly implemented underwriting and rating factors to
renewals
- What are unfair claim and settlement practices - -o Knowingly
misrepresenting important facts or policy provisions
o Failing to properly investigate and settle claims
o Failing to make good-faith effort to pay claims when liability is reasonably
clear
o Settling a claim for less than what a reasonable person expects, based on
advertising
- What is the focus of finance activities - -obtaining and managing an
organization's capital
- Will policyholders' surplus be over or understated if insurer loss reserves
are too low? - -overstated
- What three factors does an insurer's profitability depend on - -revenue
expenditures
ability to absorb risk
- What are an insurer's primary sources of revenue - -premiums
investment income
revenue from the sale of ancillary risk management services
- An insurer's ability to absorb risk is largely dependent on what - -surplus
loss reserve adequacy
investment performance
- To be help be a risk management partner for a customer, what must
insurers do - -help customers identify, avoid, and minimize losses rather
than just provide coverage for them
- What factors can gauge how well insurers are meeting customer
expectations - -reviews
customer satisfaction data
retention ratio and lapse ratio
,insurer-producer relationships
- What are some unfair underwriting practices - -discriminating unfairly
when selecting loss exposures
misclassifying loss exposures
cancelling or nonrenewing policies contrary to statutes, rules, and policy
provisions
failing to apply newly implemented underwriting and rating factors to
renewals
- What are some unfair claims settlement practices - -knowingly
misrepresenting important facts or policy provisions
failing to properly investigate and settle claims
failing to make a good-faith effort to pay claims when liability is reasonably
clear
settling a claim for less than what a reasonable person expects, based on
advertising
failing to approve or deny coverage within a reasonable period
- When estimating profitability, an insurer should consider whether growth
resulted from: - -a competitive advantage
relaxed underwriting
inadequate insurance rates
combination of above factors
- What are two economic trends that are particularly relevant to insurers - -
inflation and the availability of capital
- What factors effect inflation - -supply chain efficiency
consumer demand
public perceptions of the economy
, - Reinsurance helps insurers achieve several business goals: - -increase
large-line capacity
provide catastrophe protection
stabilize loss experience
obtain surplus relief
- What are increases in loss expenses often spurred by - -inflation
unanticipated losses
supply chain issues
other macroeconomic factors
- How might insurers attempt to reel in loss expenses - -streamlining claims
adjusting processes
closely managing litigation expenses
implementing other cost-containment practices
- Pricing and availability of insurance products fluctuate based on what - -
the amount of capital available to the industry
- What drives underwriting cycles (such as hard and soft markets) - -pricing
and availability of capital
- What might regulatory changes be in response to - -technological
innovation
requests from consumer advocates or insurers
catastrophic events
societal shifts
- What are the components of the combined ratio - -losses due to claims
loss adjustment expenses
operating expenses
