ARM 401 (ASSOCIATE IN RISK
MANAGEMENT) EXAM (2 VERSIONS) EXAM
2025 WITH ACTUAL CORRECT QUESTIONS
AND VERIFIED DETAILED ANSWERS
|FREQUENTLY TESTED QUESTIONS AND
SOLUTIONS |ALREADY GRADED
A+|NEWEST|LATEST UPDATE |GUARANTEED
PASS
Nancy, the general liability claims manager, is concerned about a significant rise in claim
frequency in the state of New Jersey during the past 18 months. She cannot identify the cause
of the increase and has asked James, a data analyst, to help. James decides to develop a model
to analyze the dataset of New Jersey claims, and see if any previously unknown grouping can be
identified for further analysis. Which one of the following data analysis techniques is James
using?
Cluster analysis
Technological advancements have led to access to unprecedented volumes and types of data.
Social media posts are an example of which one of the following types of data?
External unstructured data
Which one of the following is a way that insurers and risk managers can use data science to
improve their results through data-driven decision making?
Discovering new relationships in data
Tom, the regional manager at Westfork Mutual, has planned a community service day for all
employees. He has asked his two assistant managers, Julian and Leah, to spread the word to
other employees and encourage them to attend. Based on centrality measures of the
company's email traffic, Tom is confident that Julian will spread the word to more employees
1|Page
,more quickly through email than will Leah. Tom's confidence is based on Julian's high score in
which one of the following centrality measures?
Closeness
When examining a model's results, insurance and risk management professionals should defer
to
When examining a model's results, insurance and risk management professionals should defer
to
Big Data includes
Both structured and unstructured data
A predictive approach to data analytics involves
Providing a method to be used repeatedly to provide information
Which oneWhich one of the following is a data analysis technique that operates in a way similar
to the human brain?
neural networks
The predictive approach to data-driven decision making would be most appropriate for which
one of the following situations?
A transportation company is looking for a way to optimize routes and improve fuel efficiency.
If an insurer wants to determine the numerical value for a known target variable, it is most likely
to use
Regression
A risk manager for a grocery store wants to see if there is a correlation between the frequency
of customer slip and fall accidents, and the time of day. Which one of the following is a
relatively simple data analysis technique that the risk manager could use to determine this
correlation?
Bubble plot
A data analysis technique that an insurer would likely use to analyze claims adjusters' notes is
text mining
Which one of the following is a characteristic that differentiates big data from traditional data?
Velocity
2|Page
,Which one of the following is the first step in the text mining process?
Retrieve and prepare text with preprocessing techniques
In the context of a predictive model, a true positive results when the model
Correctly predicts a positive
Tania works in the fraud unit for Greatview Insurance. There is a claimant who appears to be
involved in multiple cases of insurance fraud. Tania decides to use social media to obtain
information that may be used to develop a profile of the claimant. Tania's use of social media is
an example of which one of the following types of data?
Unstructured external
Which one of the following descriptions best applies to Monte Carlo Simulation?
A computer-based method of analyzing possible outcomes based on a specific set of variables.
Which one of the following statements is correct with respect to continuous probability
distributions?
One way of presenting a continuous probability distribution is to divide the distribution into a
countable number of bins.
Which one of the following statements is true regarding event tree analysis?
Event tree analysis typically provides only two options, success or failure.
In Fred's large landscaping business, he knows that there is a point where equipment becomes
unsafe and difficult to maintain. Fred realizes that after 2,000 miles of use, his costs for
maintenance on his large mowers and sod busters dramatically rise. Using probability analysis
Fred can better know
When to replace equipment.
Which one of the following describes how probabilities are expressed?
Numerically, as a fraction, a percentage, or a decimal
Determining earnings-at-risk (EaR) entails modeling the influence of factors such as
Changes in the prices of products and production costs on an organization's earnings.
Every probability distribution includes the probability of
Every possible outcome
3|Page
, Which one of the following is the initiating event in an event tree analysis?
Lightning strikes a warehouse building while it is closed for the weekend
Global Reinsurance Company (GRC) is a European reinsurer that accepts risks from insurers
around the world. Financial managers at GRC would like to estimate profitability for next year
for their five primary risk areas: flood risk in Europe, earthquake risk in Japan, hurricane risk for
the Gulf Coast of the United States, California earthquake risk, and typhoon risk in Indian Ocean
nations. The financial managers entered event probabilities, loss payment estimates, retained
loss levels, premiums to be received, and other data into a computer. Then the computer was
programmed to select values for each variable and based on the data, to calculate net income.
The computer was programmed to repeat the calculation 500,000 times. The output from the
analysis was a distribution showing the probability of obtaining various profit levels. The
procedure GRC used is called
Computer simulation
In a normal distribution, fewer than 5% of outcomes are
Outside two standard deviations above or below the mean.
Magruder Company would like to estimate the number of workers compensation claims to
expect next year. Magruder's risk manager ran a regression analysis in which the number of
workers compensation claims was the dependent variable and the number of payroll hours
worked (in thousands) was the independent variable. The y-intercept from the regression was
3.8. The slope coefficient was 1.4. The risk manager believes that next year Magruder workers
will work 80,000 payroll hours. Based on this information, approximately how many workers
compensation claims should the risk manager expect next year?
116 (y = mx + b, payroll is the independent x axis and claims is the dependent y axis. y = 1.4 (80)
+ 3.8 = 115.8, rounded to 116 claims next year)
A main difference between decision trees and event trees is
That event trees analyze the consequences of accidental events rather than decisions
The theoretical probability of a head on a coin toss is 50%. Based on the law of large numbers,
which one of the following is the number of coin tosses most likely to result in an empirical
frequency of 50% receiving a head on a coin toss?
100 (As the number of samples increase, the empirical frequency of a head on a coin toss will
move closer and closer to 50%. Of the choices provided, the number of coin tosses most likely
to result in an empirical frequency of 50% receiving a head on a coin toss is 100.)
4|Page
MANAGEMENT) EXAM (2 VERSIONS) EXAM
2025 WITH ACTUAL CORRECT QUESTIONS
AND VERIFIED DETAILED ANSWERS
|FREQUENTLY TESTED QUESTIONS AND
SOLUTIONS |ALREADY GRADED
A+|NEWEST|LATEST UPDATE |GUARANTEED
PASS
Nancy, the general liability claims manager, is concerned about a significant rise in claim
frequency in the state of New Jersey during the past 18 months. She cannot identify the cause
of the increase and has asked James, a data analyst, to help. James decides to develop a model
to analyze the dataset of New Jersey claims, and see if any previously unknown grouping can be
identified for further analysis. Which one of the following data analysis techniques is James
using?
Cluster analysis
Technological advancements have led to access to unprecedented volumes and types of data.
Social media posts are an example of which one of the following types of data?
External unstructured data
Which one of the following is a way that insurers and risk managers can use data science to
improve their results through data-driven decision making?
Discovering new relationships in data
Tom, the regional manager at Westfork Mutual, has planned a community service day for all
employees. He has asked his two assistant managers, Julian and Leah, to spread the word to
other employees and encourage them to attend. Based on centrality measures of the
company's email traffic, Tom is confident that Julian will spread the word to more employees
1|Page
,more quickly through email than will Leah. Tom's confidence is based on Julian's high score in
which one of the following centrality measures?
Closeness
When examining a model's results, insurance and risk management professionals should defer
to
When examining a model's results, insurance and risk management professionals should defer
to
Big Data includes
Both structured and unstructured data
A predictive approach to data analytics involves
Providing a method to be used repeatedly to provide information
Which oneWhich one of the following is a data analysis technique that operates in a way similar
to the human brain?
neural networks
The predictive approach to data-driven decision making would be most appropriate for which
one of the following situations?
A transportation company is looking for a way to optimize routes and improve fuel efficiency.
If an insurer wants to determine the numerical value for a known target variable, it is most likely
to use
Regression
A risk manager for a grocery store wants to see if there is a correlation between the frequency
of customer slip and fall accidents, and the time of day. Which one of the following is a
relatively simple data analysis technique that the risk manager could use to determine this
correlation?
Bubble plot
A data analysis technique that an insurer would likely use to analyze claims adjusters' notes is
text mining
Which one of the following is a characteristic that differentiates big data from traditional data?
Velocity
2|Page
,Which one of the following is the first step in the text mining process?
Retrieve and prepare text with preprocessing techniques
In the context of a predictive model, a true positive results when the model
Correctly predicts a positive
Tania works in the fraud unit for Greatview Insurance. There is a claimant who appears to be
involved in multiple cases of insurance fraud. Tania decides to use social media to obtain
information that may be used to develop a profile of the claimant. Tania's use of social media is
an example of which one of the following types of data?
Unstructured external
Which one of the following descriptions best applies to Monte Carlo Simulation?
A computer-based method of analyzing possible outcomes based on a specific set of variables.
Which one of the following statements is correct with respect to continuous probability
distributions?
One way of presenting a continuous probability distribution is to divide the distribution into a
countable number of bins.
Which one of the following statements is true regarding event tree analysis?
Event tree analysis typically provides only two options, success or failure.
In Fred's large landscaping business, he knows that there is a point where equipment becomes
unsafe and difficult to maintain. Fred realizes that after 2,000 miles of use, his costs for
maintenance on his large mowers and sod busters dramatically rise. Using probability analysis
Fred can better know
When to replace equipment.
Which one of the following describes how probabilities are expressed?
Numerically, as a fraction, a percentage, or a decimal
Determining earnings-at-risk (EaR) entails modeling the influence of factors such as
Changes in the prices of products and production costs on an organization's earnings.
Every probability distribution includes the probability of
Every possible outcome
3|Page
, Which one of the following is the initiating event in an event tree analysis?
Lightning strikes a warehouse building while it is closed for the weekend
Global Reinsurance Company (GRC) is a European reinsurer that accepts risks from insurers
around the world. Financial managers at GRC would like to estimate profitability for next year
for their five primary risk areas: flood risk in Europe, earthquake risk in Japan, hurricane risk for
the Gulf Coast of the United States, California earthquake risk, and typhoon risk in Indian Ocean
nations. The financial managers entered event probabilities, loss payment estimates, retained
loss levels, premiums to be received, and other data into a computer. Then the computer was
programmed to select values for each variable and based on the data, to calculate net income.
The computer was programmed to repeat the calculation 500,000 times. The output from the
analysis was a distribution showing the probability of obtaining various profit levels. The
procedure GRC used is called
Computer simulation
In a normal distribution, fewer than 5% of outcomes are
Outside two standard deviations above or below the mean.
Magruder Company would like to estimate the number of workers compensation claims to
expect next year. Magruder's risk manager ran a regression analysis in which the number of
workers compensation claims was the dependent variable and the number of payroll hours
worked (in thousands) was the independent variable. The y-intercept from the regression was
3.8. The slope coefficient was 1.4. The risk manager believes that next year Magruder workers
will work 80,000 payroll hours. Based on this information, approximately how many workers
compensation claims should the risk manager expect next year?
116 (y = mx + b, payroll is the independent x axis and claims is the dependent y axis. y = 1.4 (80)
+ 3.8 = 115.8, rounded to 116 claims next year)
A main difference between decision trees and event trees is
That event trees analyze the consequences of accidental events rather than decisions
The theoretical probability of a head on a coin toss is 50%. Based on the law of large numbers,
which one of the following is the number of coin tosses most likely to result in an empirical
frequency of 50% receiving a head on a coin toss?
100 (As the number of samples increase, the empirical frequency of a head on a coin toss will
move closer and closer to 50%. Of the choices provided, the number of coin tosses most likely
to result in an empirical frequency of 50% receiving a head on a coin toss is 100.)
4|Page
