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CPCU 520 TEST BANK 2025/2026 – COMPLETE EXAM
QUESTIONS AND ANSWERS | FREQUENTLY TESTED Qs |
EXPERT VERIFIED STUDY GUIDE | GUARANTEED PASS ||
AWARDED A+ ||
Which one of the following statements is correct with respect to premium
audits?
A.
Policyholders are required to present accounting information and other data
to the auditor in the specified form required by the manual rules.
B.
There is no strictly defined procedure for premium audits, and individual
auditors may consider different factors during an audit.
C.
Workers compensation insurance is the one line of commercial insurance
that is rarely subject to premium audit requirements.
D.
When a policy is written subject to audit, the exact exposure and premium
bases cannot be known until the end of the policy period. - ANSWER-D.
When a policy is written subject to audit, the exact exposure and premium
bases cannot be known until the end of the policy period.
Which one of the following statements is correct with respect to the
premium auditing process?
A.
The written audit report summarizes the results of the audit, but does not
document the process or the sources of the data used.
B.
Advisory organizations specify the amount of evidence required to
ascertain loss exposures and classifications with reasonable certainty.
C.
Once premium auditors have obtained the data necessary for calculating
the premium, they must decide whether the data are reasonable.
D.
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Premium auditors use rules, rather than judgment, when analyzing and
verifying premium data to ensure audit validity. - ANSWER-C.
Once premium auditors have obtained the data necessary for calculating
the premium, they must decide whether the data are reasonable.
Which one of the following statements about premium auditing is true?
A.
Premium auditors determine whether a given policy uses the correct rating
classification(s).
B.
Premium auditors exclude from the audit report any payroll that has been
improperly classified.
C.
Premium audits determine the estimated premium an insured must pay.
D.
Premium audits are conducted at the beginning of each policy period. -
ANSWER-A.
Premium auditors determine whether a given policy uses the correct rating
classification(s).
Which one of the following statements is correct with regard to the
importance of accurate premium audits?
A.
It is appropriate for premium auditors in one area of a state to classify a
particular industrial class differently than auditors in another area of the
state.
B.
Inconsistency or inaccuracy of classification and measurement of exposure
units effects individual premiums but generally not class rates.
C.
Premium audit errors can cause an insurer problems in customer retention,
goodwill, efficiency, and collections.
D.
Errors in premium auditing have implications for billing, but rarely other
departments within the insurer. - ANSWER-C.
Premium audit errors can cause an insurer problems in customer retention,
goodwill, efficiency, and collections.
Timely and correct premium audits can significantly benefit
A.
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The insurer's loss ratio.
B.
Employee relations.
C.
The insurer's assets.
D.
The insurer's collections. - ANSWER-D.
The insurer's collections.
In which one of the following ways are premium auditors most helpful to
claim representatives?
A.
By verifying the proper classification for new exposures
B.
By providing a comparison of anticipated loss exposures to actual loss
exposures
C.
By providing information on the desirability of an account
D.
By verifying the earnings of injured employees for workers compensation
claims - ANSWER-D.
By verifying the earnings of injured employees for workers compensation
claims
Martina, a premium auditor for Cintriell Insurance Company is conducting a
premium audit for Carolina's Cookies. Carolina mentioned to Martina that
she is opening a coffee shop at another location. By sharing this
information, Martina would provide a contribution to which one of the
following insurer functions?
A.
Claims
B.
Accounting
C.
Marketing
D.
Risk Control - ANSWER-C.
Marketing
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Which one of the following statements is correct with regard to the risk
control function of insurers?
A.
Risk control helps insurers meet profit goals by improving the quality of
underwriting decisions.
B.
Providing risk control services increases the chance of policyholders
making errors and omissions claims based on insurer negligence.
C.
Insurance regulation in all states prohibits insurers from selling unbundled
risk control to firms that self-insure.
D.
Insurance regulation in all states requires insurers to provide a minimal
level of risk control services to commercial policyholders. - ANSWER-A.
Risk control helps insurers meet profit goals by improving the quality of
underwriting decisions.
Many of Fredine Insurance Company's risk control activities help the
insurer reach its profit goals by reducing the frequency and severity of
covered losses that would detract from Fredine's profits. Which one of the
following activities provides an additional revenue source that contributes
directly to Fredine's profit goals?
A.
The quality of Fredine's risk control services helps retain policyholders.
B.
The underwriting information provided by Fredine's risk control
representatives leads to better underwriting decisions.
C.
Fredine risk control representatives identify unsafe conditions that
policyholders can correct.
D.
Fredine sells unbundled risk control services to self-insured companies. -
ANSWER-D.
Fredine sells unbundled risk control services to self-insured companies.
Which one of the following statements is correct regarding insurers'
involvement in safety management programs for insureds?
A.
Risk control consultants typically have authority to exercise a management
role in the insured's safety program.
CPCU 520 TEST BANK 2025/2026 – COMPLETE EXAM
QUESTIONS AND ANSWERS | FREQUENTLY TESTED Qs |
EXPERT VERIFIED STUDY GUIDE | GUARANTEED PASS ||
AWARDED A+ ||
Which one of the following statements is correct with respect to premium
audits?
A.
Policyholders are required to present accounting information and other data
to the auditor in the specified form required by the manual rules.
B.
There is no strictly defined procedure for premium audits, and individual
auditors may consider different factors during an audit.
C.
Workers compensation insurance is the one line of commercial insurance
that is rarely subject to premium audit requirements.
D.
When a policy is written subject to audit, the exact exposure and premium
bases cannot be known until the end of the policy period. - ANSWER-D.
When a policy is written subject to audit, the exact exposure and premium
bases cannot be known until the end of the policy period.
Which one of the following statements is correct with respect to the
premium auditing process?
A.
The written audit report summarizes the results of the audit, but does not
document the process or the sources of the data used.
B.
Advisory organizations specify the amount of evidence required to
ascertain loss exposures and classifications with reasonable certainty.
C.
Once premium auditors have obtained the data necessary for calculating
the premium, they must decide whether the data are reasonable.
D.
,2|Page
Premium auditors use rules, rather than judgment, when analyzing and
verifying premium data to ensure audit validity. - ANSWER-C.
Once premium auditors have obtained the data necessary for calculating
the premium, they must decide whether the data are reasonable.
Which one of the following statements about premium auditing is true?
A.
Premium auditors determine whether a given policy uses the correct rating
classification(s).
B.
Premium auditors exclude from the audit report any payroll that has been
improperly classified.
C.
Premium audits determine the estimated premium an insured must pay.
D.
Premium audits are conducted at the beginning of each policy period. -
ANSWER-A.
Premium auditors determine whether a given policy uses the correct rating
classification(s).
Which one of the following statements is correct with regard to the
importance of accurate premium audits?
A.
It is appropriate for premium auditors in one area of a state to classify a
particular industrial class differently than auditors in another area of the
state.
B.
Inconsistency or inaccuracy of classification and measurement of exposure
units effects individual premiums but generally not class rates.
C.
Premium audit errors can cause an insurer problems in customer retention,
goodwill, efficiency, and collections.
D.
Errors in premium auditing have implications for billing, but rarely other
departments within the insurer. - ANSWER-C.
Premium audit errors can cause an insurer problems in customer retention,
goodwill, efficiency, and collections.
Timely and correct premium audits can significantly benefit
A.
,3|Page
The insurer's loss ratio.
B.
Employee relations.
C.
The insurer's assets.
D.
The insurer's collections. - ANSWER-D.
The insurer's collections.
In which one of the following ways are premium auditors most helpful to
claim representatives?
A.
By verifying the proper classification for new exposures
B.
By providing a comparison of anticipated loss exposures to actual loss
exposures
C.
By providing information on the desirability of an account
D.
By verifying the earnings of injured employees for workers compensation
claims - ANSWER-D.
By verifying the earnings of injured employees for workers compensation
claims
Martina, a premium auditor for Cintriell Insurance Company is conducting a
premium audit for Carolina's Cookies. Carolina mentioned to Martina that
she is opening a coffee shop at another location. By sharing this
information, Martina would provide a contribution to which one of the
following insurer functions?
A.
Claims
B.
Accounting
C.
Marketing
D.
Risk Control - ANSWER-C.
Marketing
, 4|Page
Which one of the following statements is correct with regard to the risk
control function of insurers?
A.
Risk control helps insurers meet profit goals by improving the quality of
underwriting decisions.
B.
Providing risk control services increases the chance of policyholders
making errors and omissions claims based on insurer negligence.
C.
Insurance regulation in all states prohibits insurers from selling unbundled
risk control to firms that self-insure.
D.
Insurance regulation in all states requires insurers to provide a minimal
level of risk control services to commercial policyholders. - ANSWER-A.
Risk control helps insurers meet profit goals by improving the quality of
underwriting decisions.
Many of Fredine Insurance Company's risk control activities help the
insurer reach its profit goals by reducing the frequency and severity of
covered losses that would detract from Fredine's profits. Which one of the
following activities provides an additional revenue source that contributes
directly to Fredine's profit goals?
A.
The quality of Fredine's risk control services helps retain policyholders.
B.
The underwriting information provided by Fredine's risk control
representatives leads to better underwriting decisions.
C.
Fredine risk control representatives identify unsafe conditions that
policyholders can correct.
D.
Fredine sells unbundled risk control services to self-insured companies. -
ANSWER-D.
Fredine sells unbundled risk control services to self-insured companies.
Which one of the following statements is correct regarding insurers'
involvement in safety management programs for insureds?
A.
Risk control consultants typically have authority to exercise a management
role in the insured's safety program.
