CPCU 520 Questions and Answers

CPCU 520 Questions and Answers 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. Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:15 Full screen Brainpower Read More 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 Which one of the following is a major constraint of underwriting policy? Reinsurance All of the following statements are true regarding the factors affecting the formation of an insurer's underwriting policy, EXCEPT: The higher an insurer's premium-to-surplus ratio, the greater its ability to expand premium writings. Which one of the following statements is correct with regard to underwriting guidelines? Compliance with underwriting guidelines ensures selection of loss exposures commensurate with planned rate levels. Rating agencies such as Dun & Bradstreet (D&B) provide Data on the applicant's financial status. Which one of the following is the best example of an insurer's risk control activities generating additional revenue for the insurer? An insurer provides industrial hygiene services to a self-insured firm for a fee. The risk control service of conducting a physical survey consists of Collecting underwriting information on a customer's loss exposures. Which one of the following statements is true concerning risk control? Risk control can assist marketing by providing advice on improving safety. Which one of the following statements is correct with respect to the premium auditing process? 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 is correct with respect to premium auditing? NCCI rules specify audit requirements and restrict classification changes. A crucial responsibility of the premium auditing function is to classify insured exposures correctly. Underwriting must establish the classifications When the policy is issued. Most insurers give some producers the authority to pay claims up to a certain amount. In this role, producers function much like an Inside claim representative. Supervisors and managers often use a diary or suspense when handling claims as Reminder systems to review claim files. Liability policies cover insureds for compensatory damages an insured owes to a third party. Compensatory damages normally covered by the policy include Pain and suffering and out-of-pocket expenses claimed up to the policy limit. To determine if a person is a named "insured" under a policy, the claims representative would generally need to review The Declarations section and Definitions section.