CPCU 500 UPDATED EXAM TEST PAPER
QUESTIONS AND ANSWERS SURE A+
✔✔Similarities between pooling and insurance - ✔✔1. Reduce each participants risk
2. Requires a large number of participants with similar risks
3. pay participants losses
4. Incur expenses for marketing, administration, underwriting and claims
5. Experience delays between loss occurrence and loss payment
6. Require participants to make payments that reflect their share of the losses
✔✔Difference between pools and insurance - ✔✔1. Insurance transfers risk from the
insured to the insurer in exchange for the premium payment. In pooling, losses are
shared by pool members
2. The insurer provides additional resources to ensure that funds are available after a
loss.
✔✔Benefits of insurance - ✔✔1. Indemnification for loss
2. Reduction in cash flow uncertainty
3. Compliance with legal requirements
4. Loss control
5. Efficient use of resources
6. Support for credit
7. Source of investment funds
, 8. Reduction of social burden
✔✔Characteristics of an ideally insurable loss exposure - ✔✔1. Pure risk
2. Fortuitous loss
3. Definite and measurable
4. A large number of similar insured exposures
5. Independent and not catastrophic
6. Economic feasibility
✔✔Government insurance programs vary based on - ✔✔1. their purpose
2. the level of government involvement
3. whether the program is run at the federal or at the state level.
✔✔Reasons for government insurance programs - ✔✔1. To fill unmet insurance needs
2. To create efficiencies and provide convenience
3. To force people to buy certain types of insurance
4. To achieve social goals.
✔✔Possible Levels of Government Involvement - ✔✔1. Exclusive insurer
2. Partner with private insurers
3. Competitor with private insurers
✔✔Property-Liability Insurance Offered by the Federal Government - ✔✔1. National
Flood Insurance Program
2. Terrorism Risk Insurance Program
3. Federal Crop Insurance
✔✔Property-Liability Insurance Offered by State Governments - ✔✔1. Fair Access to
Insurance Requirements (FAIR) plans.
2. Workers' compensation insurance
3. Beach and windstorm plans
4. Residual auto plans
✔✔Enterprise Risk Management Encompasses - ✔✔1. Pure Risk
2. Speculative Risk
✔✔Significant differences between ERM and Traditional RM - ✔✔1. Risks considered
2. Strategic integration
3. Performance Measurement
4. Organizational Structure
✔✔Steps to integrate ERM into Strategic planning - ✔✔1. Identify Risk
2. Analyze and prioritize critical risk
3. Treat Critical Risks
4. Monitor and Review Critical Risks
QUESTIONS AND ANSWERS SURE A+
✔✔Similarities between pooling and insurance - ✔✔1. Reduce each participants risk
2. Requires a large number of participants with similar risks
3. pay participants losses
4. Incur expenses for marketing, administration, underwriting and claims
5. Experience delays between loss occurrence and loss payment
6. Require participants to make payments that reflect their share of the losses
✔✔Difference between pools and insurance - ✔✔1. Insurance transfers risk from the
insured to the insurer in exchange for the premium payment. In pooling, losses are
shared by pool members
2. The insurer provides additional resources to ensure that funds are available after a
loss.
✔✔Benefits of insurance - ✔✔1. Indemnification for loss
2. Reduction in cash flow uncertainty
3. Compliance with legal requirements
4. Loss control
5. Efficient use of resources
6. Support for credit
7. Source of investment funds
, 8. Reduction of social burden
✔✔Characteristics of an ideally insurable loss exposure - ✔✔1. Pure risk
2. Fortuitous loss
3. Definite and measurable
4. A large number of similar insured exposures
5. Independent and not catastrophic
6. Economic feasibility
✔✔Government insurance programs vary based on - ✔✔1. their purpose
2. the level of government involvement
3. whether the program is run at the federal or at the state level.
✔✔Reasons for government insurance programs - ✔✔1. To fill unmet insurance needs
2. To create efficiencies and provide convenience
3. To force people to buy certain types of insurance
4. To achieve social goals.
✔✔Possible Levels of Government Involvement - ✔✔1. Exclusive insurer
2. Partner with private insurers
3. Competitor with private insurers
✔✔Property-Liability Insurance Offered by the Federal Government - ✔✔1. National
Flood Insurance Program
2. Terrorism Risk Insurance Program
3. Federal Crop Insurance
✔✔Property-Liability Insurance Offered by State Governments - ✔✔1. Fair Access to
Insurance Requirements (FAIR) plans.
2. Workers' compensation insurance
3. Beach and windstorm plans
4. Residual auto plans
✔✔Enterprise Risk Management Encompasses - ✔✔1. Pure Risk
2. Speculative Risk
✔✔Significant differences between ERM and Traditional RM - ✔✔1. Risks considered
2. Strategic integration
3. Performance Measurement
4. Organizational Structure
✔✔Steps to integrate ERM into Strategic planning - ✔✔1. Identify Risk
2. Analyze and prioritize critical risk
3. Treat Critical Risks
4. Monitor and Review Critical Risks
