CPCU 520 Practice Exam 1 Questions With Verified Answers
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Course
CPCU 520
Institution
CPCU 520
CPCU 520 Practice Exam 1 Questions With
Verified Answers
The expenses associated with adjusting claims are referred to as
Select one:
A. Prospective loss costs.
B. Loss adjustment expenses.
C. Claims costs.
D. Operating expenses. - answerB. Loss adjustment expenses.
Insurer Y is small but h...
CPCU 520 Practice Exam 1 Questions With
Verified Answers
The expenses associated with adjusting claims are referred to as
Select one:
A. Prospective loss costs.
B. Loss adjustment expenses.
C. Claims costs.
D. Operating expenses. - answer✔B. Loss adjustment expenses.
Insurer Y is small but has a specialty insurance market for high-value vehicles. In competing
with a larger insurer with a broader market, Insurer Y is likely to have which one of the
following advantages?
Select one:
A. Insurer Y would have more capital surplus available than a larger insurer would have.
B. Insurer Y can be more nimble, allowing it to respond quickly to an emerging trend or change.
C. Because Insurer Y has a niche market, a larger insurer would not be able to compete on price
due to state rate regulation.
D. Insurer Y is better able to invest in research and product development due to a more narrow
market focus. - answer✔B. Insurer Y can be more nimble, allowing it to respond quickly to an
emerging trend or change.
Which one of the following statements is correct?
Select one:
A. Some of the five ideal characteristics of rates conflict with others, and compromises are often
necessary.
B. Rates are based on what consumers would be willing to pay for insurance coverage, which
can be difficult to determine.
C. A rate can be adequate or it can be competitive, but it cannot be both adequate and
competitive at the same time.
D. From the insurer's perspective, the primary goal of ratemaking is to implement the highest
rates that regulators will allow so as to maximize insurer profits. - answer✔A. Some of the five
ideal characteristics of rates conflict with others, and compromises are often necessary.
To be successful, the differentiation business-level strategy must
Select one:
A. Produce short-term profits while phasing out a product line or existing market.
B. Seek efficiency in all areas of operation to build a competitive advantage.
C. Accurately determine customers' preferences to develop products perceived as distinctive.
D. Focus on one group of customers and offer a low-price product or service. - answer✔C.
Accurately determine customers' preferences to develop products perceived as distinctive.
Which one of the following statements is correct with respect to SWOT analysis?
Select one:
A. Identifying internal strengths and weaknesses involves considering financial, physical,
human, and organizational assets.
B. Managers use SWOT analysis to predict the future state of their companies.
C. SWOT analysis considers a company's internal environment rather than the external
environment.
D. Customers are generally not considered in a SWOT analysis because the focus is on the assets
an organization owns. - answer✔A. Identifying internal strengths and weaknesses involves
considering financial, physical, human, and organizational assets.
Samuelson Insurance has developed special programs to market personal insurance to members
of college alumni and professional associations. This is an example of which one of the
following types of market segmentation?
D. Demographic - answer✔D. Demographic
All of the following are challenges that an insurer may face that can hinder a complete alignment
of information technology (IT) and business strategies, EXCEPT:
Select one:
A. Changing IT or business metrics
B. An overly complex IT infrastructure
C. IT professionals assured of their job security
D. IT operating as a separate unit - answer✔C. IT professionals assured of their job security
An applicant for commercial property insurance is found unacceptable by an underwriter due to
the nature of its operations and the construction of the building it occupies. If the applicant
installs an automatic fire-extinguishing sprinkler system, the underwriter will approve the
application. This type of underwriting modification is known as
Select one:
A. Changing insurance rates, rating plans, or policy limits.
B. Requiring risk control measures.
C. Using facultative reinsurance.
D. Amending the policy terms and conditions. - answer✔B. Requiring risk control measures
Which one of the following insurer performance goals is the most difficult to evaluate?
Select one:
A. Meeting social responsibilities
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