CPCU 410 EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS GRADED A++ LATEST UPDATE
Proprietary insurer
An insurer formed for the purpose of earning a profit for its owners.
Cooperative insurer
An insurer owned by its policyholders and usually formed to provide insurance
protection to policyholders at minimum cost. Mutual insurance companies, reciprocal
exchanges, and fraternal organizations are examples of cooperative insurers.
Mutual insurer
An insurer that is owned by its policyholders and formed as a corporation for the
purpose of providing insurance to them.
Reciprocal insurance exchange (interinsurance exchange)
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.
Captive insurer
An insurance company formed primarily to cover the loss exposures of its owner(s) or
members.
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.
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 agency marketing system
An insurance marketing system under which agents contract to sell insurance
exclusively for one insurer (or for an associated group of insurers).
Underwriting
The process of selecting insureds, pricing coverage, determining insurance policy terms
and conditions, and then monitoring the underwriting decisions made.
Adverse selection
In general, the tendency for people with the greatest probability of loss to be the ones
most likely to purchase insurance.
,Internet of Things (IoT)
A network of objects that transmit data to each other and to central hubs through the
internet.
Underwriter
An insurer employee who evaluates applicants for insurance, selects those that are
acceptable to the insurer, prices coverage, and determines policy terms and conditions.
Underwriting submission
Underwriting information for an initial application, or a substantive policy midterm or
renewal change.
Loss exposure
Any condition or situation that presents a possibility of loss, whether or not an actual
loss occurs.
Hazard
A condition that increases the frequency or severity of a loss.
Information efficiency
The balance that underwriters must maintain between the hazards presented by the
account and the information needed to underwrite it.
Premium audit
Methodical examination of a policyholder's operations, records, and books of account to
determine the actual exposure units and premium for insurance coverages already
provided.
Counteroffer
, A proposal an offeree makes to an offeror that varies in some material way from the
original offer, resulting in rejection of the original offer and constituting a new offer.
Rating plan
A set of directions that specify criteria of the exposure base, the exposure unit, and rate
per exposure unit to determine premiums for a particular line of insurance.
Treaty reinsurance
A reinsurance agreement that covers an entire class or portfolio of loss exposures and
provides that the primary insurer's individual loss exposures that fall within the treaty are
automatically reinsured.
Mix of business
The distribution of individual policies that compose the book of business of a producer,
territory, state, or region among the various lines and classifications.
Loss costs
The portion of the rate that covers projected claim payments and loss adjusting
expenses.
Reservation of rights letter
An insurer's letter that specifies coverage issues and informs the insured that the
insurer is handling a claim with the understanding that the insurer may later deny
coverage should the facts warrant it.
Nonwaiver agreement
A signed agreement indicating that during the course of investigation, neither the insurer
nor the insured waives rights under the policy.
Diary
SOLUTIONS GRADED A++ LATEST UPDATE
Proprietary insurer
An insurer formed for the purpose of earning a profit for its owners.
Cooperative insurer
An insurer owned by its policyholders and usually formed to provide insurance
protection to policyholders at minimum cost. Mutual insurance companies, reciprocal
exchanges, and fraternal organizations are examples of cooperative insurers.
Mutual insurer
An insurer that is owned by its policyholders and formed as a corporation for the
purpose of providing insurance to them.
Reciprocal insurance exchange (interinsurance exchange)
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.
Captive insurer
An insurance company formed primarily to cover the loss exposures of its owner(s) or
members.
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.
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 agency marketing system
An insurance marketing system under which agents contract to sell insurance
exclusively for one insurer (or for an associated group of insurers).
Underwriting
The process of selecting insureds, pricing coverage, determining insurance policy terms
and conditions, and then monitoring the underwriting decisions made.
Adverse selection
In general, the tendency for people with the greatest probability of loss to be the ones
most likely to purchase insurance.
,Internet of Things (IoT)
A network of objects that transmit data to each other and to central hubs through the
internet.
Underwriter
An insurer employee who evaluates applicants for insurance, selects those that are
acceptable to the insurer, prices coverage, and determines policy terms and conditions.
Underwriting submission
Underwriting information for an initial application, or a substantive policy midterm or
renewal change.
Loss exposure
Any condition or situation that presents a possibility of loss, whether or not an actual
loss occurs.
Hazard
A condition that increases the frequency or severity of a loss.
Information efficiency
The balance that underwriters must maintain between the hazards presented by the
account and the information needed to underwrite it.
Premium audit
Methodical examination of a policyholder's operations, records, and books of account to
determine the actual exposure units and premium for insurance coverages already
provided.
Counteroffer
, A proposal an offeree makes to an offeror that varies in some material way from the
original offer, resulting in rejection of the original offer and constituting a new offer.
Rating plan
A set of directions that specify criteria of the exposure base, the exposure unit, and rate
per exposure unit to determine premiums for a particular line of insurance.
Treaty reinsurance
A reinsurance agreement that covers an entire class or portfolio of loss exposures and
provides that the primary insurer's individual loss exposures that fall within the treaty are
automatically reinsured.
Mix of business
The distribution of individual policies that compose the book of business of a producer,
territory, state, or region among the various lines and classifications.
Loss costs
The portion of the rate that covers projected claim payments and loss adjusting
expenses.
Reservation of rights letter
An insurer's letter that specifies coverage issues and informs the insured that the
insurer is handling a claim with the understanding that the insurer may later deny
coverage should the facts warrant it.
Nonwaiver agreement
A signed agreement indicating that during the course of investigation, neither the insurer
nor the insured waives rights under the policy.
Diary
