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 insure...
CPCU 520 Questions and Answers
Which one of the following insurer goals creates a conflict between the profit goal and
customer needs goal? - answer Comply with legal requirements
Which one of the following statements is true with regard to the various forms of
ownership of property-casualty insurers? - answer State and federal governments
provide insurance for exposures that are significant but not commercially insurable.
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? - answer 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? - answer Obtain coverage through his state's
residual market
Insurance pools operate either as a syndicate or through - answer 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 - answer An insurance pool.
Specific measures of an insurer's operational performance are the investment income
ratio, overall operating ratio, and the - answer 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? -
answer .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? - answer 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 - answer No
regulatory authority.
Which one of the following precedes nearly all major insurer insolvencies? - answer
Rapid premium growth
Which one of the following statements is correct regarding discrimination and insurance
rating? - answer Discrimination is essential to insurance rating.
Which one of the following statements is correct regarding rate regulation? - answer
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? - answer
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? - answer 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 - answer McCarran Act.
To prevent insurer insolvency and unfair discrimination against an insurance consumer,
insurance regulators do which one of the following? - answer 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? - answer The need for the
underwriter to get management approval before proceeding
Depending on the type of insurance, insurers use automated underwriting systems to -
answer Encode underwriting guidelines.
Which one of the following is determined by a company's underwriting policy? - answer
Composition of the insurer's book of business
Which one of the following is a major constraint of underwriting policy? - answer
Reinsurance
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