CPCU 520 Chapter 1 Exam Questions with Answers

CPCU 520 Chapter 1 Exam Questions with
Answers
4 ways to classify insurers - -1. legal form of ownership (proprietary,
cooperative, other)
2. place of incorporation (domestic, foreign, alien)
3. licensing status (admitted, non admitted)
4. distribution systems and channels (independent agency, direct writers,
exclusive agency)

- 5 major goals of insurers - -1. earn a profit
2. meet customer needs
3. comply with legal requirements
4. diversify risk
5. fulfill their duty to society

- 5 internal constraints - -1. efficiency
2. expertise
3. size
4. financial resources
5. other (lack of brand recognition, damaged reputation)

- external constraints - -1. regulation
2. rating agencies
3. public opinion
4. competition
5. economic conditions
6. insurance marketing and distribution
7. other (cats., legal changes)

- measuring insurer performance - -1. meeting profitability goals
2. meeting customer needs
3. meeting legal requirements
4. meeting social responsibilities

- net u/w gain or loss - -earned prem - (incd loss + expenses)

- combined ratio - -(incd loss + LAE)/EP +(incd exp)/WP

- Overall operating ratio - -combined ratio - investment income ratio (inv
inc/EP)

- 3 core functions - -1. marketing and distribution
2. underwriting
3. claims