CPCU 520 Practice Exam 1

CPCU 520 Practice Exam 1 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. - 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. - 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. - 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. - 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. - A. Identifying