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CPCU 500- Becoming a Leader in Risk Management and Insurance exam with answers
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CPCU 500- Becoming a Leader in Risk Managementand Insurance exam with answers
Risk |- |correct |answer |-uncertainty |of |outcomes
The |insurance |industry |is |evolving |as |a |result |of |two |key, |overarching |factors |that |are |influencing |
virtually |every |aspect |of |the |insurance |value |chain: |- |correct |answer |-the |growing |demand |for |risk |
management |consulting
new |technology |that's |helping |organizations |predict |and |prevent |losses
Examples |of |Technology |Used |to |Predict |and |Prevent |Losses |- |correct |answer |-Telematics- |has |greatly |
influenced |vehicle |and |driver |safety
Wearables
IoT |Sensors
Smartphones
Cloud |Storage
Predictive |Models
Artificial |Intelligence
Law |of |Large |Numbers |- |correct |answer |-A |mathematical |principle |stating |that |as |the |number |of |
similar |but |independent |exposure |units |increases, |the |relative |accuracy |of |predictions |about |future |
outcomes |(losses) |also |increases.
,Oscar's |custom-built |vehicle |looks |like |a |sausage |sandwich |on |wheels. |He |plans |to |drive |it |to |special |
events |at |schools |around |the |country |where |it |will |serve |as |a |mobile |billboard |to |promote |his |
product. |Oscar |is |surprised |to |learn |that |insurers |are |reluctant |to |insure |his |vehicle |because |it |fails |to |
meet |one |of |the |ideal |characteristics |of |an |insurable |risk. |Which |characteristic |is |Oscar's |vehicle |least |
likely |to |meet?
Smart |Product |- |correct |answer |-An |innovative |item |that |uses |sensors; |wireless |sensor |networks; |and |
data |collection, |transmission, |and |analysis |to |further |enable |the |item |to |be |faster, |more |useful, |or |
otherwise |improved.
Sensor |- |correct |answer |-A |device |that |detects |and |measures |stimuli |in |its |environment.
Wireless |sensor |network |(WSN) |- |correct |answer |-A |wireless |network |consisting |of |individual |sensors |
placed |at |various |locations |to |exchange |data.
Big |data |- |correct |answer |-Sets |of |data |that |are |too |large |to |be |gathered |and |analyzed |by |traditional |
methods.
Internet |of |Things |(IoT) |- |correct |answer |-A |network |of |objects |that |transmit |data |to |computers.
Predictive |analytics |- |correct |answer |-Statistical |and |analytical |techniques |used |to |develop |models |
that |predict |future |events |or |behaviors.
Data |science |- |correct |answer |-An |interdisciplinary |field |involving |the |design |and |use |of |techniques |to
|process |very |large |amounts |of |data |from |a |variety |of |sources |and |to |provide |knowledge |based |on |
the |data.
These |decisions |can |have |far-reaching |effects |across |the |insurance |value |chain: |- |correct |answer |-
Determining |the |appropriate |coverage |limits |for |an |individual |policy
Choosing |whether |to |have |a |prospective |customer |elaborate |on |information |provided |in |an |insurance
|application
,Deciding |what |data |to |include |in |a |predictive |model |and |where |it |should |come |from
Determining |whether |a |claim |shows |signs |of |fraud |and |should |be |reported |to |the |special |investigation
|unit |(SIU)
Deciding |the |best |way |to |respond |empathetically |to |a |customer's |claim
Determining |how |to |describe |your |ideal |job |candidate |for |an |open |position |to |a |recruiter |or |hiring |
manager
What's |the |difference |between |occurrence |and |claims-made |coverage |- |correct |answer |-Under |an |
occurrence |policy, |coverage |is |triggered |for |losses |that |happen |within |the |policy |period, |even |if |the |
policy |has |expired. |Under |a |claims-made |policy, |coverage |is |triggered |for |claims |that |occur |after |the |
policy's |coverage |began |(the |retroactive |date) |and |are |reported |within |the |policy's |reporting |period.
social |inflation |- |correct |answer |-The |increasing |of |insurance |losses |caused |by |higher |jury |awards, |
increase |in |liberal |treatment |of |claims |by |workers |compensation |boards, |legislated |rises |in |
compensation |benefit |levels |(in |some |cases |retroactively), |and |new |concepts |of |tort |and |negligence, |
among |others.
These |are |some |of |the |most |common |risk |classifications |- |correct |answer |-Pure |and |speculative |risk
Subjective |and |objective |risk
Diversifiable |and |nondiversifiable |risk
Quadrants |of |risk |(hazard, |operational, |financial, |and |strategic)
Several |factors |can |affect |speculative |risk |- |correct |answer |-Price |risk—Uncertainty |about |cash |flows |
resulting |from |possible |changes |in |the |cost |of |raw |materials |and |other |inputs |(such |as |lumber, |gas, |or
|electricity), |as |well |as |cost-related |changes |in |the |market |for |completed |products |and |other |outputs. |
, EXAMPLE- |Four |Grains |Cereal |Company |signed |a |contract |to |deliver |250,000 |boxes |of |cereal |to |a |
national |supermarket |chain |at |a |specified |price |per |box |of |cereal |six |months |from |today. |Between |
now |and |when |the |grain |to |make |the |cereal |is |purchased, |the |cost |of |the |grain |may |increase. |If |the |
cost |of |this |important |ingredient |increases, |the |profitability |of |the |transaction |will |be |altered. |This |
financial |risk |that |Four |Grains |faces |is
Input |Price- |Uncertainty |of |the |price |of |the |resources |used |to |produce |an |organization's |product
Output |Price- |Uncertainty |regarding |the |price |an |organization |can |charge |for |its |product
Credit |risk- |risk |that |customers |or |other |creditors |will |fail |to |make |promised |payments |as |they |come |
due.—Although |a |credit |risk |is |particularly |significant |for |banks |and |other |financial |institutions, |it |can |
also |be |relevant |to |any |organization |with |accounts |receivable.
Subjective |and |objective |risks |can |differ |in |other |ways |as |well: |- |correct |answer |-Familiarity |and |
control
Consequences |over |likelihood
Risk |awareness
Quadrants |of |Risk |- |correct |answer |-Hazard |risks—These |arise |from |property, |liability, |or |personnel |
loss |exposures |and |are |generally |the |subject |of |insurance.
Operational |risks—These |fall |outside |the |hazard |risk |category |and |arise |from |people |or |a |failure |in |
processes, |systems, |or |controls, |including |those |involving |information |technology. |
EXAMPLE- |Jean |is |the |Risk |Manager |for |a |Fortune |1000 |company. |Her |CFO |has |tasked |her |to |analyze |
vulnerabilities |in |the |firm's |supply |chain. |The |adequacy |of |suppliers |to |meet |an |organization's |needs |
would |be |an |example |of |which |one |of |the |following |types |of |risk?
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