CPCU 520 EXAM 1 Questions And Answers
Verified 100% Correct
Which one of the following represents one of the five competitive
forces Michael E. Porter describes in the Five Forces Model?
Select one:
A. Skill levels of staff
B. Financial resources of purchasers
C. Age of the industry
D. Threat of new entrants - ANSWER -D. Threat of new entrants
A primary insurer is able to obtain surplus relief through reinsurance
by
Select one:
A. Obtaining underwriting advice from a reinsurer to increase
underwriting profit.
B. Receiving ceding commissions to offset policy acquisition
expenses.
C. Minimizing fluctuations in retained losses from year to year.
D. Reducing large line capacity to minimize the ratio of net written
premium to policyholders' surplus. - ANSWER -B. Receiving ceding
commissions to offset policy acquisition expenses.
Which one of the following cases is an example of why insurance
needs to be regulated to maintain insurer solvency?
Select one:
,A. Lachlan, an agent for Gulford Insurance Company has sold Alex
a homeowners endorsement on other structures which he does not
need.
B. Lachlan, an agent for Gulford Insurance Company has kept
premium on several large Gulford accounts and has not transmitted
the funds to the company.
C. Gulford Insurance Company goes out of business because it did
not have enough surplus or reinsurance to cover its hurricane losses.
D. Gulford Insurance Company has discontinued its farm liability
product due to losses and there is a shortage of farm liability
coverage in the state. - ANSWER -C. Gulford Insurance Company
goes out of business because it did not have enough surplus or
reinsurance to cover its hurricane losses.
The principal method of determining a prospect's insurance needs is
through
Select one:
A. Asking the prospect what coverage they would like to purchase.
B. Determining how much the prospect is willing to pay for insurance
coverage.
C. Reviewing the prospect's current insurance policies.
D. Completing a risk management review for the prospect. - ANSWER
-D. Completing a risk management review for the prospect.
Which one of the following statements is correct with respect to pro
rata reinsurance?
Select one:
A. The primary insurer and the reinsurer do not typically use a
fixed percentage in sharing the amounts of insurance, premiums, and
losses.
,B. Pro rata reinsurance is available in five forms including per risk,
catastrophe, per policy, per occurrence, and aggregate excess. C.
These agreements generally share only loss amounts under covered
policies and exclude loss adjustment expenses related to the policies.
D. The reinsurer usually pays a ceding commission to reimburse the
primary insurer for acquisition costs associated with the underlying
policies. - ANSWER -D. The reinsurer usually pays a ceding
commission to reimburse the primary insurer for acquisition costs
associated with the underlying policies.
Which one of the following statements is correct regarding finite risk
reinsurance?
Select one:
A. Finite risk reinsurance agreements typically have a three to five
year term.
B. Finite risk reinsurance is designed to cover high frequency and
low severity loss exposures.
C. Finite risk reinsurance is less expensive than most traditional
types of reinsurance.
D. Finite risk reinsurance agreements generally allow the reinsurer
to assess additional premium if losses exceed premium. - ANSWER -
A. Finite risk reinsurance agreements typically have a three to five
year term.
Graydon Insurance is a regional insurer that is working hard to
manage a large database of information. Graydon relies on the
National Council of Compensation Insurance so the insurer can do
which one of the following?
Select one:
A. Producers can find information on personal lines customers'
risk retention and risk management efforts.
B. Claims representatives can confirm audio and video file
information very quickly.
, C. Accountants can compile internal billing and collection
information in a more efficient manner.
D. Underwriters can use its information that analyzes trends and
prepares workers compensation rate recommendations. - ANSWER D.
Underwriters can use its information that analyzes trends and
prepares workers compensation rate recommendations.
Independent agent networks are known as
Select one:
A. Agent forces.
B. Exclusive agents.
C. Direct writers.
D. Agent clusters. - ANSWER -D. Agent clusters.
Riko is an automobile claim representative who has been assigned a
claim submitted by John. John owns a Honda Civic, which is insured
in his name for liability, collision, and comprehensive coverage on a
Personal Auto Policy (PAP). He is the only named insured on the
policy. John lives with his parents and his sister, Carla. One Saturday,
while John is asleep, Carla borrows his car to run errands.
Unfortunately she backs into the concrete base of a sign at the mall,
damaging the vehicle. Riko confirms that the Honda is the covered
vehicle, that it is insured against collision, and that the loss occurred
during the policy period. Which one of the following will she most
likely determine next?
Select one:
A. Is Carla covered as a driver of the damaged vehicle?
B. Is the mall parking lot a covered location?
Verified 100% Correct
Which one of the following represents one of the five competitive
forces Michael E. Porter describes in the Five Forces Model?
Select one:
A. Skill levels of staff
B. Financial resources of purchasers
C. Age of the industry
D. Threat of new entrants - ANSWER -D. Threat of new entrants
A primary insurer is able to obtain surplus relief through reinsurance
by
Select one:
A. Obtaining underwriting advice from a reinsurer to increase
underwriting profit.
B. Receiving ceding commissions to offset policy acquisition
expenses.
C. Minimizing fluctuations in retained losses from year to year.
D. Reducing large line capacity to minimize the ratio of net written
premium to policyholders' surplus. - ANSWER -B. Receiving ceding
commissions to offset policy acquisition expenses.
Which one of the following cases is an example of why insurance
needs to be regulated to maintain insurer solvency?
Select one:
,A. Lachlan, an agent for Gulford Insurance Company has sold Alex
a homeowners endorsement on other structures which he does not
need.
B. Lachlan, an agent for Gulford Insurance Company has kept
premium on several large Gulford accounts and has not transmitted
the funds to the company.
C. Gulford Insurance Company goes out of business because it did
not have enough surplus or reinsurance to cover its hurricane losses.
D. Gulford Insurance Company has discontinued its farm liability
product due to losses and there is a shortage of farm liability
coverage in the state. - ANSWER -C. Gulford Insurance Company
goes out of business because it did not have enough surplus or
reinsurance to cover its hurricane losses.
The principal method of determining a prospect's insurance needs is
through
Select one:
A. Asking the prospect what coverage they would like to purchase.
B. Determining how much the prospect is willing to pay for insurance
coverage.
C. Reviewing the prospect's current insurance policies.
D. Completing a risk management review for the prospect. - ANSWER
-D. Completing a risk management review for the prospect.
Which one of the following statements is correct with respect to pro
rata reinsurance?
Select one:
A. The primary insurer and the reinsurer do not typically use a
fixed percentage in sharing the amounts of insurance, premiums, and
losses.
,B. Pro rata reinsurance is available in five forms including per risk,
catastrophe, per policy, per occurrence, and aggregate excess. C.
These agreements generally share only loss amounts under covered
policies and exclude loss adjustment expenses related to the policies.
D. The reinsurer usually pays a ceding commission to reimburse the
primary insurer for acquisition costs associated with the underlying
policies. - ANSWER -D. The reinsurer usually pays a ceding
commission to reimburse the primary insurer for acquisition costs
associated with the underlying policies.
Which one of the following statements is correct regarding finite risk
reinsurance?
Select one:
A. Finite risk reinsurance agreements typically have a three to five
year term.
B. Finite risk reinsurance is designed to cover high frequency and
low severity loss exposures.
C. Finite risk reinsurance is less expensive than most traditional
types of reinsurance.
D. Finite risk reinsurance agreements generally allow the reinsurer
to assess additional premium if losses exceed premium. - ANSWER -
A. Finite risk reinsurance agreements typically have a three to five
year term.
Graydon Insurance is a regional insurer that is working hard to
manage a large database of information. Graydon relies on the
National Council of Compensation Insurance so the insurer can do
which one of the following?
Select one:
A. Producers can find information on personal lines customers'
risk retention and risk management efforts.
B. Claims representatives can confirm audio and video file
information very quickly.
, C. Accountants can compile internal billing and collection
information in a more efficient manner.
D. Underwriters can use its information that analyzes trends and
prepares workers compensation rate recommendations. - ANSWER D.
Underwriters can use its information that analyzes trends and
prepares workers compensation rate recommendations.
Independent agent networks are known as
Select one:
A. Agent forces.
B. Exclusive agents.
C. Direct writers.
D. Agent clusters. - ANSWER -D. Agent clusters.
Riko is an automobile claim representative who has been assigned a
claim submitted by John. John owns a Honda Civic, which is insured
in his name for liability, collision, and comprehensive coverage on a
Personal Auto Policy (PAP). He is the only named insured on the
policy. John lives with his parents and his sister, Carla. One Saturday,
while John is asleep, Carla borrows his car to run errands.
Unfortunately she backs into the concrete base of a sign at the mall,
damaging the vehicle. Riko confirms that the Honda is the covered
vehicle, that it is insured against collision, and that the loss occurred
during the policy period. Which one of the following will she most
likely determine next?
Select one:
A. Is Carla covered as a driver of the damaged vehicle?
B. Is the mall parking lot a covered location?
