CPCU 520 EXAM Questions and Verified Answers 2025/2026

CPCU 520 EXAM Questions and Verified Answers 2025/2026 Chapter 1 Proprietary insurers - Answer -Insurer formed for the purpose of earning a profit for its owners. Mutual insurer - Answer -An insurer owned by its policyholders and incorporated to provide insurance for them. Reciprocal Insurance Exchange (interinsurance exchange) - Answer - Insurer owned by policyholders, formed as unincorporated association to provide insurance to members (called subscribers), and managed by an attorney-in-fact. Members agree to mutually insure each other, with profits and losses shared in proportion to amount of insurance purchased from the exchange by that owner. Fair Access to Insurance Requirements (FAIR) plans - Answer -An insurance pool through which private insurers collectively address an unmet need for property insurance on urban properties, especially those susceptible to loss by riot or civil commotion. Residual Market - Answer -The term referring collectively to insurers and other organizations that make insurance available through a shared risk mechanism to those who cannot obtain coverage in the admitted market.Surplus lines broker - Answer -A person or firm that places business with insurers not licensed (nonadmitted) in the state in which the transaction occurs but that is permitted to write insurance because coverage is not available through standard market insurers. Independent agency and brokerage marketing system - Answer -An insurance marketing system under which producers (agents or brokers) who are independent contractors, sell insurance, usually as representatives of several unrelated insurers. Direct writer marketing system - Answer -An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer. Exclusive marketing system - Answer -An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers). Distribution channel - Answer -The channel used by the producer of a product or service to transfer that product or service to the ultimate customer. Probable maximum loss (PML) - Answer -The largest loss that an insured is likely to sustain. Underwriting - Answer -The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made. Book of business - Answer -A group of policies with a common characteristic, such as territory or type of coverage, or all policies written by a particular insurer or agency.Underwriting guidelines (Underwriting guide) - Answer -A written manual that communicates an insurer's underwriting policy and that specifies the attributes of an account that an insurer is willing to insure. Adverse selection - Answer -In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance. Chapter 2 - Answer - National Association of Insurance Commissioners (NAIC) - Answer -An association of insurance commissioners from the fifty U