CPCU 520 SIMULATED EXAM
QUESTIONS AND ANSWERS
Which one of the following statements is true regarding claim department contacts?
Select one:
A. Insurer claim departments perform market conduct investigations as part of their
normal activities.
B. Uniform legislation exists for licensing of insurance claim adjusters.
C. Consumer complaints are investigated by the state insurance departments.
D. Attorney representation guarantees a faster claim settlement. - ANSWER-C
During advance audits or pre-audit surveys, the premium auditor can classify and
observe the operations as well as
Select one:
A. Verify the estimated premium base.
B. Estimate individual claim reserves.
C. Initiate a risk control strategy.
D. Recommend additional insurance products. - ANSWER-A
The only unincorporated insurers permitted in most states are
Select one:
A. Captive insurers.
B. Lloyds associations.
C. Alien insurers.
D. Reciprocal insurance exchanges. - ANSWER-D
Surplus share reinsurance
Select one:
A. Covers policies with amounts of insurance less than the line.
B. Is typically used only with property insurance.
C. Requires primary insurers to share loss exposures that they could safely retain.
D. Is designed to split losses according to a set percentage. - ANSWER-B
Workers compensation insurance benefits are established by statute. If legislation or
a court decision changes these benefits, past losses must be adjusted to
Select one:
A. Mandatory minimum benefit requirements.
B. Current benefit levels.
C. A state specific percentage of benefits level.
D. Current inflation levels. - ANSWER-B
Which one of the following statements is correct?
Select one:
A. Underwriting managers usually supervise ratemaking activities.
B. An actuary is a person who puts a price on risk.
C. Every insurance company employs one or more staff actuaries.
D. Insurers rarely use the services of outside actuarial consultants. - ANSWER-B
, All states attempt to ensure that continuous auto insurance coverage is available to
consumers by
Select one:
A. Mandating affordable rates for auto insurance premiums.
B. Educating politicians and lawmakers to create an awareness that insurance is a
personal need rather than a disposable commodity.
C. Restricting the rights of insurers to cancel or nonrenew personal auto insurance
policies.
D. Suggesting policyholders carry minimum amounts of insurance coverage. -
ANSWER-C
Insurance pools operate either as a syndicate or through
Select one:
A. Stock insurers.
B. Reinsurance.
C. Surplus lines insurers.
D. Reciprocal insurers. - ANSWER-B
Which one of the following primary insurers would most likely use a catastrophe risk
exchange as an alternative to traditional reinsurance?
Select one:
A. A primary insurer seeking access to a prearranged line of credit
B. A primary insurer looking for coverage in the event of an industry-wide loss
C. A primary insurer in need of additional capital to expand into a new market
D. A primary insurer with a geographic concentration of loss exposures - ANSWER-
D
Which one of the following statements is correct regarding rate regulation?
Select one:
A. Rates should be high enough to pay all claims and expenses related to those
rates.
B. Rate regulation guarantees that insurance rates are adequate.
C. Insurers know when a policy is sold what their expenses for that policy will be.
D. Insurers do not intentionally charge inadequate rates to retain market share. -
ANSWER-A
The source from which data was collected or derived, its timeliness or historical
value, and its independence from other data are all traits to determine whether data
is
Select one:
A. Reasonable.
B. Appropriate.
C. Comprehensive.
D. Adequate. - ANSWER-B
Angus, a claim representative for Premium Insurance Company, is adjusting a
liability claim where his insured, Josephine, lost control of her brother Horace's car
and caused $1,500 in damage to a grocery store. Horace has auto coverage with
Upland Insurance Company. Seeking to determine whether other coverage applies,
QUESTIONS AND ANSWERS
Which one of the following statements is true regarding claim department contacts?
Select one:
A. Insurer claim departments perform market conduct investigations as part of their
normal activities.
B. Uniform legislation exists for licensing of insurance claim adjusters.
C. Consumer complaints are investigated by the state insurance departments.
D. Attorney representation guarantees a faster claim settlement. - ANSWER-C
During advance audits or pre-audit surveys, the premium auditor can classify and
observe the operations as well as
Select one:
A. Verify the estimated premium base.
B. Estimate individual claim reserves.
C. Initiate a risk control strategy.
D. Recommend additional insurance products. - ANSWER-A
The only unincorporated insurers permitted in most states are
Select one:
A. Captive insurers.
B. Lloyds associations.
C. Alien insurers.
D. Reciprocal insurance exchanges. - ANSWER-D
Surplus share reinsurance
Select one:
A. Covers policies with amounts of insurance less than the line.
B. Is typically used only with property insurance.
C. Requires primary insurers to share loss exposures that they could safely retain.
D. Is designed to split losses according to a set percentage. - ANSWER-B
Workers compensation insurance benefits are established by statute. If legislation or
a court decision changes these benefits, past losses must be adjusted to
Select one:
A. Mandatory minimum benefit requirements.
B. Current benefit levels.
C. A state specific percentage of benefits level.
D. Current inflation levels. - ANSWER-B
Which one of the following statements is correct?
Select one:
A. Underwriting managers usually supervise ratemaking activities.
B. An actuary is a person who puts a price on risk.
C. Every insurance company employs one or more staff actuaries.
D. Insurers rarely use the services of outside actuarial consultants. - ANSWER-B
, All states attempt to ensure that continuous auto insurance coverage is available to
consumers by
Select one:
A. Mandating affordable rates for auto insurance premiums.
B. Educating politicians and lawmakers to create an awareness that insurance is a
personal need rather than a disposable commodity.
C. Restricting the rights of insurers to cancel or nonrenew personal auto insurance
policies.
D. Suggesting policyholders carry minimum amounts of insurance coverage. -
ANSWER-C
Insurance pools operate either as a syndicate or through
Select one:
A. Stock insurers.
B. Reinsurance.
C. Surplus lines insurers.
D. Reciprocal insurers. - ANSWER-B
Which one of the following primary insurers would most likely use a catastrophe risk
exchange as an alternative to traditional reinsurance?
Select one:
A. A primary insurer seeking access to a prearranged line of credit
B. A primary insurer looking for coverage in the event of an industry-wide loss
C. A primary insurer in need of additional capital to expand into a new market
D. A primary insurer with a geographic concentration of loss exposures - ANSWER-
D
Which one of the following statements is correct regarding rate regulation?
Select one:
A. Rates should be high enough to pay all claims and expenses related to those
rates.
B. Rate regulation guarantees that insurance rates are adequate.
C. Insurers know when a policy is sold what their expenses for that policy will be.
D. Insurers do not intentionally charge inadequate rates to retain market share. -
ANSWER-A
The source from which data was collected or derived, its timeliness or historical
value, and its independence from other data are all traits to determine whether data
is
Select one:
A. Reasonable.
B. Appropriate.
C. Comprehensive.
D. Adequate. - ANSWER-B
Angus, a claim representative for Premium Insurance Company, is adjusting a
liability claim where his insured, Josephine, lost control of her brother Horace's car
and caused $1,500 in damage to a grocery store. Horace has auto coverage with
Upland Insurance Company. Seeking to determine whether other coverage applies,
