CPCU 500 Questions and Answers

CPCU 500 Questions and Answers insurtech the use of emerging technologies in the insurance industry connected ecosystem The emerging technologies applied to risk assessment and control link the physical domain to the virtual domain. Together, these domains linked by the emerging technologies create a Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:15 Full screen Brainpower Read More mechanical sensors pressure sensors, flow sensors, motion detectors biochemical sensors home diagnostic tests, wearable fitness monitors, diabetes test strips/meters/patches thermal sensors smoke detectors, heat sensors, computer hardware sensors radiant sensors optical sensors, radar, radio frequency identification (RFID) tags transducer A device that converts energy from one form to another actuator mechanical device that turns energy into motion or otherwise effectuates a change in position or rotation using a signal and energy source accelerometer A device that measures acceleration, motion, and tilt risk management framework focus applying the RM process throughout the organization pure risk a risk that presents the chance of loss but no opportunity for gain speculative risk a chance of loss, no loss, or gain subjective risk the perceived amount of risk based on an individual's or organizations opinion objective risk the measurable variation in uncertain outcomes based on facts and data Quadrant: Hazard Risk Which quadrant? Arise from property, liability, or personnel loss exposures and are generally the subject of insurance. This is a pure risk. Quadrant: Operational Risk Which quadrant? arise from people or a failure in processes, systems, or controls, including those involving information technology. This is a pure risk. Quadrant: Financial Risk Which quadrant? arise from the effect of market forces on financial assets or liabilities and include market risk, credit risk, liquidity risk, and price risk. This is speculative risk. Quadrant: Strategic Risk Which quadrant? arise from trends in the economy and society, including changes in the economic, political, and competitive environments, as well as from demographic shifts. This is speculative risk. Value at risk (VaR) a technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time facilitated workshops neutral party administers discussion. brainstorming with diverse groups in the organization to achieve goal Delphi Technique opinions of select group of experts to identify risks, survey inquiry. repeated until consensus is reached scenario analysis identify risks and predict the potential consequences of those risks. cross-functional team works through different possibilities HAZOP Comprehensive review of a process or system. A team of appropriate experts and stakeholders identifies the risks associated with a given process and recommends a solution. Primarily used to design complex, scientific systems such as those used in engineering, chemical, mechanical, electronic, and computer operations. SWOT analysis Internal: Strengths, Weaknesses External: Opportunities, Threats risk control A conscious act or decision not to act that reduces the frequency and/or severity of losses or makes losses more predictable. Sequence of Events (Domino Theory) chain of events that lead in succession to the resulting accident or injury Energy transfer theory An approach to accident causation that views accidents as energy that is released and that affects objects, including living things, in amounts or at rates that the objects cannot tolerate. Technique of operations review views the cause of accidents to be a result of management's shortcomings change analysis An analysis that projects the effects a given system change is likely to have on an existing system. job safety analysis an analysis that dissects a repetitive task, whether performed by a person or machine, to determine potential hazards if each action is not performed causal factors the agents that directly result in one event causing another residual risk level of risk remaining after actions are taken to alter the level of risk loss prevention refers to measures that reduce the frequency of a particular loss loss reduction A risk control technique that reduces the severity of a particular loss. hedging A financial transaction in which one asset is held to offset the risk associated with another asset. derivative financial instrument whose value derives from other commodities or financial instruments noninsurance transfers methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party, such as leases, contracts, and purchase agreements exculpatory clause a contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act hold-harmless agreement A contractual provision that obligates one of the parties to assume the legal liability of another party. large deductible plan an organization's motive for this is to reduce its cost of risk. In addition, allows insured organization to benefit from the cash flow available on their reserves for retained losses SIR insured organization is responsible for adjusting and paying its own losses up to the defined amount life safety The portion of fire safety that focuses on the minimum building design, construction, operation, and maintenance requirements necessary to assure occupants of a safe exit from the burning portion of the building. book value historical cost minus accumulated depreciation functional replacement cost The cost of replacing damaged property with similar property that performs the same function but might not be identical to the damaged property. market value the price at which property could be sold on the open market by an unrelated buyer and seller economic value the amount that property is worth based on the ability of the property to produce income fiduciary duty The duty to act in the best interests of another. key risk indicator A tool used by an organization to measure the uncertainty of meeting a strategic business objective; leading not lagging exposure indicator a metric used to identify risk inherent to an organization's operations control indicator A metric used to identify an organization's management of risk counterparty risk the risk that the other party to an agreement will default price risk The potential for a change in revenue or cost because of an increase or a decrease in the price of a product or an input Balance Sheet Equation Assets = Liabilities + Net Worth Working Capital current assets - current liabilities