CPCU 520- Meeting Challenges Across
Insurance Operations EXAM 2026
Questions and Answers
Cost leadership - Correct answer-A business-level strategy through which a
company seeks cost efficiencies in all operational areas.
Underwriting - Correct answer-The process of selecting insureds, pricing coverage,
determining insurance policy terms and conditions, and then monitoring the
underwriting decisions made.
For underwriting to achieve its purpose, Insurers must minimize the effects of
adverse selection on the book of business
Loss ratio - Correct answer-A ratio that measures losses and loss adjustment
expenses against earned premiums and that reflects the percentage of premiums
being consumed by losses.
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,supply chain - Correct answer-a network of connections between each of the
entities (namely organizations) that are used throughout the process of bringing a
product or service to market—from suppliers to end users. A supply chain model is
used for identifying how reliant a business is on any point in the supply chain and
any potential weak links that could disrupt business.
value chain model - Correct answer-is used for analyzing the input activities a
single company performs to create marketable outputs for customers and for
identifying ways to maximize its competitive advantage.
Primary activities- Inbound Logistics, Operations, Outbound Logistics, Marketing
and Sales, and Service
Support activities- Infrastructure, Human Resources, Technology, and Procurement
three primary functions exist within the structure of a typical insurer - Correct
answer-marketing and distribution- Marketing and distribution involves
determining what products customers want and need, advertising those products
(communicating their value to customers), and delivering them to customers.
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,underwriting- The goal of the underwriting function is to help the insurer write
and maintain profitable business. This requires selecting insureds whose covered
losses are not likely to exceed the amount of losses the insurer anticipated when it
priced the insureds' coverage.
claims- An insurance policy is a promise by the insurer to make a payment to, or
on behalf of, the insured if an event covered under the policy occurs. The purpose
of the claims function is to fulfill this promise.
Support Activities - Correct answer-1) Risk control- can help marketing and sales
by proving to applicants and insureds that the insurer understands their business
operations and associated hazards and is prepared to help them protect their
interests
2) Premium auditing
3) Actuarial
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, 4) Reinsurance- Factors affecting a primary insurer's reinsurance limit selection are
most accurately listed as Maximum policy limit, extracontractual obligations, and
loss adjustment expenses
5) IT- a rapidly growing value chain support function that provides the backbone
that supports an insurer's communications, operations, marketing, underwriting,
investing, and claims handling
6) Investments- Insurers' operations frequently depend on investment earnings
because premiums are held competitively low to attract customers. As a result,
investment earnings are frequently relied on to off set high losses and rising costs.
7) Accounting and finance
8) Customer service
9) Legal and compliance
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Insurance Operations EXAM 2026
Questions and Answers
Cost leadership - Correct answer-A business-level strategy through which a
company seeks cost efficiencies in all operational areas.
Underwriting - Correct answer-The process of selecting insureds, pricing coverage,
determining insurance policy terms and conditions, and then monitoring the
underwriting decisions made.
For underwriting to achieve its purpose, Insurers must minimize the effects of
adverse selection on the book of business
Loss ratio - Correct answer-A ratio that measures losses and loss adjustment
expenses against earned premiums and that reflects the percentage of premiums
being consumed by losses.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,supply chain - Correct answer-a network of connections between each of the
entities (namely organizations) that are used throughout the process of bringing a
product or service to market—from suppliers to end users. A supply chain model is
used for identifying how reliant a business is on any point in the supply chain and
any potential weak links that could disrupt business.
value chain model - Correct answer-is used for analyzing the input activities a
single company performs to create marketable outputs for customers and for
identifying ways to maximize its competitive advantage.
Primary activities- Inbound Logistics, Operations, Outbound Logistics, Marketing
and Sales, and Service
Support activities- Infrastructure, Human Resources, Technology, and Procurement
three primary functions exist within the structure of a typical insurer - Correct
answer-marketing and distribution- Marketing and distribution involves
determining what products customers want and need, advertising those products
(communicating their value to customers), and delivering them to customers.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,underwriting- The goal of the underwriting function is to help the insurer write
and maintain profitable business. This requires selecting insureds whose covered
losses are not likely to exceed the amount of losses the insurer anticipated when it
priced the insureds' coverage.
claims- An insurance policy is a promise by the insurer to make a payment to, or
on behalf of, the insured if an event covered under the policy occurs. The purpose
of the claims function is to fulfill this promise.
Support Activities - Correct answer-1) Risk control- can help marketing and sales
by proving to applicants and insureds that the insurer understands their business
operations and associated hazards and is prepared to help them protect their
interests
2) Premium auditing
3) Actuarial
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, 4) Reinsurance- Factors affecting a primary insurer's reinsurance limit selection are
most accurately listed as Maximum policy limit, extracontractual obligations, and
loss adjustment expenses
5) IT- a rapidly growing value chain support function that provides the backbone
that supports an insurer's communications, operations, marketing, underwriting,
investing, and claims handling
6) Investments- Insurers' operations frequently depend on investment earnings
because premiums are held competitively low to attract customers. As a result,
investment earnings are frequently relied on to off set high losses and rising costs.
7) Accounting and finance
8) Customer service
9) Legal and compliance
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
