CPCU 520 UPDATED ACTUAL Questions And Correct Answers
C
Terms in this set (278)
Chapter 1
Proprietary insurers Insurer formed for the purpose of earning a profit for its owners.
Mutual insurer An insurer owned by its policyholders and incorporated to provide insurance for
them.
Reciprocal Insurance Exchange (interinsurance Insurer owned by policyholders, formed as unincorporated association to provide
exchange) insurance to members (called subscribers), and managed by an attorney-in-fact.
Members agree to mutually insure each other, with profits and losses shared in
proportion to amount of insurance purchased from the exchange by that owner.
Fair Access to Insurance Requirements (FAIR) plans An insurance pool through which private insurers collectively address an unmet
need for property insurance on urban properties, especially those susceptible to
loss by riot or civil commotion.
Residual Market The term referring collectively to insurers and other organizations that make
insurance available through a shared risk mechanism to those who cannot obtain
coverage in the admitted market.
Surplus lines broker A person or firm that places business with insurers not licensed (nonadmitted) in
the state in which the transaction occurs but that is permitted to write insurance
because coverage is not available through standard market insurers.
Independent agency and brokerage marketing system An insurance marketing system under which producers (agents or brokers) who
are independent contractors, sell insurance, usually as representatives of several
unrelated insurers.
Direct writer marketing system An insurance marketing system that uses sales agents (or sales representatives)
who are direct employees of the insurer.
Exclusive marketing system An insurance marketing system under which agents contract to sell insurance
exclusively for one insurer (or for an associated group of insurers).
Distribution channel The channel used by the producer of a product or service to transfer that product
or service to the ultimate customer.
Probable maximum loss (PML) The largest loss that an insured is likely to sustain.
Underwriting The process of selecting insureds, pricing coverage, determining insurance policy
terms and conditions, and then monitoring the underwriting decisions made.
, Book of business A group of policies with a common characteristic, such as territory or type of
coverage, or all policies written by a particular insurer or agency.
Underwriting guidelines (Underwriting guide) A written manual that communicates an insurer's underwriting policy and that
specifies the attributes of an account that an insurer is willing to insure.
Adverse selection In general, the tendency for people with the greatest probability of loss to be the
ones most likely to purchase insurance.
Chapter 2
National Association of Insurance Commissioners (NAIC) An association of insurance commissioners from the fifty U.S. states, the District of
Columbia, and the five U.S. territories and possessions, whose purpose is to
coordinate insurance regulation activities among various state insurance
departments.
Model law A document drafted by NAIC, in a style similar to a state statute, that reflects the
NAIC's proposed solution to a given problem or issue and provides a common
basis to the states for drafting laws that affect the insurance industry. Any state
may choose to adopt the bill or adopt it with modifications.
Model regulation A draft regulation that may be implemented by a state insurance department if the
model law is passed.
Domestic insurer An insurer doing business in the jurisdiction in which it is incorporated.
Foreign insurer An insurer licensed to operate in a state but incorporated in another state.
Alien insurer An insurer domiciled in a country other than the United States.
Capital stock A balance sheet value that represents the amount of funds that a corporation's
stockholders have contributed through the purchase of stock.
Paid-in surplus The amount stockholders paid in excess of the par value of the stock.
Reciprocal insurer An insurer owned by its policyholders, formed as an unincorporated association
for the purpose of providing insurance coverage to its members (called
subscribers), and managed by an attorney-in-fact. Members agree to mutually
insure each other, and they share profits and losses in the same proportion as the
amount of insurance purchased from the exchange by that member.
Insolvency A situation in which an entity's current liabilities (as opposed to its total liabilities)
exceed its current assets.
Guaranty fund A state-established fund that provides a system for the payment of some of the
unpaid claims of insolvent insurers licensed in that state, generally funded by
assessments collected from all insurers licensed in the state.
C
Terms in this set (278)
Chapter 1
Proprietary insurers Insurer formed for the purpose of earning a profit for its owners.
Mutual insurer An insurer owned by its policyholders and incorporated to provide insurance for
them.
Reciprocal Insurance Exchange (interinsurance Insurer owned by policyholders, formed as unincorporated association to provide
exchange) insurance to members (called subscribers), and managed by an attorney-in-fact.
Members agree to mutually insure each other, with profits and losses shared in
proportion to amount of insurance purchased from the exchange by that owner.
Fair Access to Insurance Requirements (FAIR) plans An insurance pool through which private insurers collectively address an unmet
need for property insurance on urban properties, especially those susceptible to
loss by riot or civil commotion.
Residual Market The term referring collectively to insurers and other organizations that make
insurance available through a shared risk mechanism to those who cannot obtain
coverage in the admitted market.
Surplus lines broker A person or firm that places business with insurers not licensed (nonadmitted) in
the state in which the transaction occurs but that is permitted to write insurance
because coverage is not available through standard market insurers.
Independent agency and brokerage marketing system An insurance marketing system under which producers (agents or brokers) who
are independent contractors, sell insurance, usually as representatives of several
unrelated insurers.
Direct writer marketing system An insurance marketing system that uses sales agents (or sales representatives)
who are direct employees of the insurer.
Exclusive marketing system An insurance marketing system under which agents contract to sell insurance
exclusively for one insurer (or for an associated group of insurers).
Distribution channel The channel used by the producer of a product or service to transfer that product
or service to the ultimate customer.
Probable maximum loss (PML) The largest loss that an insured is likely to sustain.
Underwriting The process of selecting insureds, pricing coverage, determining insurance policy
terms and conditions, and then monitoring the underwriting decisions made.
, Book of business A group of policies with a common characteristic, such as territory or type of
coverage, or all policies written by a particular insurer or agency.
Underwriting guidelines (Underwriting guide) A written manual that communicates an insurer's underwriting policy and that
specifies the attributes of an account that an insurer is willing to insure.
Adverse selection In general, the tendency for people with the greatest probability of loss to be the
ones most likely to purchase insurance.
Chapter 2
National Association of Insurance Commissioners (NAIC) An association of insurance commissioners from the fifty U.S. states, the District of
Columbia, and the five U.S. territories and possessions, whose purpose is to
coordinate insurance regulation activities among various state insurance
departments.
Model law A document drafted by NAIC, in a style similar to a state statute, that reflects the
NAIC's proposed solution to a given problem or issue and provides a common
basis to the states for drafting laws that affect the insurance industry. Any state
may choose to adopt the bill or adopt it with modifications.
Model regulation A draft regulation that may be implemented by a state insurance department if the
model law is passed.
Domestic insurer An insurer doing business in the jurisdiction in which it is incorporated.
Foreign insurer An insurer licensed to operate in a state but incorporated in another state.
Alien insurer An insurer domiciled in a country other than the United States.
Capital stock A balance sheet value that represents the amount of funds that a corporation's
stockholders have contributed through the purchase of stock.
Paid-in surplus The amount stockholders paid in excess of the par value of the stock.
Reciprocal insurer An insurer owned by its policyholders, formed as an unincorporated association
for the purpose of providing insurance coverage to its members (called
subscribers), and managed by an attorney-in-fact. Members agree to mutually
insure each other, and they share profits and losses in the same proportion as the
amount of insurance purchased from the exchange by that member.
Insolvency A situation in which an entity's current liabilities (as opposed to its total liabilities)
exceed its current assets.
Guaranty fund A state-established fund that provides a system for the payment of some of the
unpaid claims of insolvent insurers licensed in that state, generally funded by
assessments collected from all insurers licensed in the state.
