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CPCU 520 EXAM/133 QUESTIONS AND ANSWERS
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CPCU 520 EXAM/133 QUESTIONS AND ANSWERS
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CPCU 520 EXAM/133 QUESTIONS ANDANSWERS
Which one of the following insurer goals creates a conflict between the profit
goal and customer needs goal? - -Comply with legal requirements
-Which one of the following statements is true with regard to the various
forms of ownership of property-casualty insurers? - -State and federal
governments provide insurance for exposures that are significant but not
commercially insurable.
-Insurer A is a proprietary insurer that acts as an insurance marketplace. Its
members underwrite any insurance or reinsurance purchased, and members
are primarily partnerships or corporations with limited liability. Insurer A
members belong to syndicates and delegate day-to-day operations to the
syndicate manager. Insurer A is which one of the following? - -An insurance
exchange
-Juan has a poor driving record and has been unable to obtain auto liability
coverage from private insurers. Auto liability coverage is mandatory in his
state. Since affordability is a concern, Juan wants auto liability coverage only.
Which one of the following is an option for Juan to obtain coverage? - -Obtain
coverage through his state's residual market
-Insurance pools operate either as a syndicate or through - -Reinsurance.
-Due to the possibility of an environmental pollution exposure resulting in
extensive losses, several insurers in a particular state have joined together
to insure the exposure. No single insurer was willing to insure the entire risk.
This insurance arrangement is typical of - -An insurance pool.
-Specific measures of an insurer's operational performance are the
investment income ratio, overall operating ratio, and the - -Return on equity
ratio.
-Consider the following information reported by an insurance company:
Incurred losses $8 million
Incurred Underwriting Expenses $2 million
Incurred Loss Adjustment Expenses $4 million
Net Written Premiums $24 million
Earned Premiums $16 million
Which one of the following is the company's trade basis-combined ratio? -
-.833 (The company's trade basis-combined ratio is .833, which is the loss
ratio plus the expense ratio. This is calculated by: (($8m + $4m) / $16m) +
($2m / $24m).
, -Which one of the following statements is correct? - -If insurers become
insolvent, future claims might not be paid and the insurance protection
already paid for might become worthless.
-The National Association of Insurance Commissioners (NAIC), has - -No
regulatory authority.
-Which one of the following precedes nearly all major insurer insolvencies? -
-Rapid premium growth
-Which one of the following statements is correct regarding discrimination
and insurance rating? - -Discrimination is essential to insurance rating.
-Which one of the following statements is correct regarding rate regulation?
- -An insurer does not know what its actual expenses will be when a policy is
sold.
-Which one of the following statements is correct regarding rate regulation?
- -The degree of rate variation among competing insurers can affect whether
or not rates are considered excessive.
-Which one of the following statements is correct with regard to the
regulation of insurance policies? - -Legislation might require that certain
standard mandatory policy provisions appear in certain types of insurance
policies.
-The state regulation of unfair trade practices concerning the business of
insurance is required under the - -McCarran Act.
-To prevent insurer insolvency and unfair discrimination against an
insurance consumer, insurance regulators do which one of the following? - -
Constrain insurers' ability to accept, modify, or decline applications for
insurance
-Which one of the following would likely be indicated by a notation next to a
specific classification in an insurer's underwriting guidelines? - -The need for
the underwriter to get management approval before proceeding
-Depending on the type of insurance, insurers use automated underwriting
systems to - -Encode underwriting guidelines.
-Which one of the following is determined by a company's underwriting
policy? - -Composition of the insurer's book of business
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