CPCU 520 PRACTICE TEST QUESTIONS EXAM STUDY MATERIALS
QUESTION AND ANSWERS (VERIFIED ANSWERS)
1. **Which department at Keithly can help Alex with an audit problem?**
- a) Claims Department
- b) Risk Control Department
- c) Special Investigation Unit
- d) Marketing Department
- **Answer:** c) Special Investigation Unit
2. **What is a FAIR plan and who does it cover?**
- a) A private insurance plan for high-risk individuals
- b) A state-run plan where costs are spread among private insurers
- c) A local insurance plan for small businesses
- d) A nationwide plan for international companies
- **Answer:** b) A state-run plan where costs are spread among private insurers
3. **Which department provides information to help underwriters select and rate risks?**
- a) Claims Department
- b) Marketing Department
- c) Risk Control Department
- d) Legal Department
- **Answer:** c) Risk Control Department
4. **What is the minimum obligation of an insurer to society?**
- a) Maximize profits
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- b) Expand market share
- c) Avoid causing any public harm
- d) Increase policy limits
- **Answer:** c) Avoid causing any public harm
5. **Which insurer function includes setting insurance rates and estimating loss reserves?**
- a) Claims Department
- b) Actuarial Department
- c) Risk Management Department
- d) Underwriting Department
- **Answer:** b) Actuarial Department
6. **How can property-casualty insurers be classified?**
- a) By the types of policies they offer
- b) By their size and financial strength
- c) By their licensing status
- d) By their market share
- **Answer:** c) By their licensing status
7. **What is true about an insurer's goals?**
- a) A mutual insurer must earn profits to operate.
- b) A proprietary insurer must earn competitive profits to raise capital.
- c) All insurers are non-profit organizations.
- d) A government insurer does not need to make a profit.
- **Answer:** b) A proprietary insurer must earn competitive profits to raise capital.
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