CPCU 520 Practice Exam 1 UPDATED
Study Guide QUESTIONS AND
CORRECT ANSWERS
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. - CORRECT ANSWERS 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. - CORRECT ANSWERS 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. - CORRECT ANSWERS 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. -
CORRECT ANSWERS 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. - CORRECT ANSWERS A.
Identifying internal strengths and weaknesses involves considering financial,
physical, human, and organizational assets.
Samuelson Insurance has developed special programs to market personal
insurance to members of college alumni and professional associations. This is
an example of which one of the following types of market segmentation?
Select one:
A. Psychographic
B. Behavioristic
C. Geographic
D. Demographic - CORRECT ANSWERS D. Demographic
All of the following are challenges that an insurer may face that can hinder a
complete alignment of information technology (IT) and business strategies,
EXCEPT:
Select one:
A. Changing IT or business metrics
B. An overly complex IT infrastructure
C. IT professionals assured of their job security
D. IT operating as a separate unit - CORRECT ANSWERS C. IT
professionals assured of their job security
Study Guide QUESTIONS AND
CORRECT ANSWERS
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. - CORRECT ANSWERS 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. - CORRECT ANSWERS 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. - CORRECT ANSWERS 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. -
CORRECT ANSWERS 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. - CORRECT ANSWERS A.
Identifying internal strengths and weaknesses involves considering financial,
physical, human, and organizational assets.
Samuelson Insurance has developed special programs to market personal
insurance to members of college alumni and professional associations. This is
an example of which one of the following types of market segmentation?
Select one:
A. Psychographic
B. Behavioristic
C. Geographic
D. Demographic - CORRECT ANSWERS D. Demographic
All of the following are challenges that an insurer may face that can hinder a
complete alignment of information technology (IT) and business strategies,
EXCEPT:
Select one:
A. Changing IT or business metrics
B. An overly complex IT infrastructure
C. IT professionals assured of their job security
D. IT operating as a separate unit - CORRECT ANSWERS C. IT
professionals assured of their job security
