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CPCU 520 Second Midterm Exams Practice
2025-2026 Guide
CPCU 520 Second Midterm Exams Practice. 2025-2026 Guide The strategic management process involves three interdependent stages. Which of the following is NOT one of th tages? 10.3 Formulation Tmplementation Evaluation Data gathering The process insures to calculate insurance rates, which are a premium component is: 7.5 a. b. c. d. General damages Rate making Trending Rate Components Which of the following is NOT a function of the reinsurance process? 8.4 a. b. c. d. Increase large line capacity Provide catastrophe protection Stabilize loss experience Improve ability to develop rates The activities that provide the framework for handing all types of claims is as follows: 6.22 a. Acknowledging claims, setting reserves, contacting insureds, investigating claims, determine cause of loss, liability and loss payment b. Claims reporting. setting reserves. contacting insureds, investigating claims. determine cause of logs. liability and loss payment c. Claimsreporting, contacting insureds, setting reserves, determine cause of loss, investigating claims liability and logs payment. d. Acknowledging claims. contacting insureds, investigating claims. setting reserves. determining cause of loss, liability and loss payment. 5. Which ofthe following is NOT a goal of information technology: 9.3 Gaining competitive advantage Optimizing insured’ _s operations and resources Providing information to support strategy and decision making Facilitating governance, risk, and compliance initiatives 6. Reinsurance can be purchased from three sources. Which of the following isnota valid source of reinsurance? 8.10 Professional reinsurer Excess of loss reinsurer Direct. writing remsurer Reinsurance intermediary Which of the following is not a characteristic of ideal rates? 7.5 Stable Responsive Promote risk control Promote appropriate UW strategies Which is NOT true concerning the primary function of the claim function? 6.3 a. Complying with the contractual promise b. Supporting the insurer’ s financial goals c. Responding to first party and third party claimants d. Supporting the underwriting decisions on new risk submissions The skills, technologies, applications, and practices used to improve decision making insights and reinforce information integrity are called? 9.4 a. Business intelligence b. Niche market c. Tnsurance services Actuarial data mining . Which of the following is NOT a goal ofan insurance company’ srisk control proces Farming a profit, Meeting customer needs Fulfilling duty to society Complying with federal requirements Legal Requirements not federal) 11. Agreement in advance to cede to reinsurance 1s called? 8.14 a. Treaty reinsurance b. Facultari c. Pool reimsurance d. Quota share reinsurance 12. Customer, underwriting, and claims information are examples of what level of information needs? 9.13. a. Operational Managerial- c. Strategic d. ERM 13. The organizational area that uses claims incurred loss data to develop loss development. leading to rating is: 6.5 Actuarial statistical Accounting Accounts receivable d. Premium Accounting . The use of securities or financial instruments, such as stocks, bonds and commoditi finance an insurer’ $ exposure to catastrophic loss is called? 8.25 Catastrophic stop loss Pool Syndicate Securitization of risk The claim department must interact effectively with outside contacts. Which of the following is NOT a common contact. for claims representatives? 6.6 a. Claimants b. Consumer advocates c. Lawyers d. Tnsureds . Which of the following ig NOT a source of reinsurance? 8.11-.12 Pools Treaty reinsurance Professional and trade associations Professional reinsurers . Risk control activities provide support to other insurer functions. Which ofthe following is NOT an area where cooperation between risk control and the other function? 9.16. Technical support for underwriting Reducing claim payments Marketing support as risk ig more likely retamed Statistics for actuarial and reporting . Estimation of losses, delays in data collection and use, chan insurer’ s projected expenses are factors that affect? 7.9 Tnvestment income Underwriting profit Rate making Claims processi . Which of the following is NOT a common type of business information systems employed by most insurance companies? 8.17 a. Electronic filing system b. Transaction processing Database managemen d. Document management. systems einsurance obtained based on specific policy characteristics and exposures is called which one of the following? 8.17 Pro rata insurance Facultative 27. Common roles associated with the claims process include all but which of the following? 6.11 Actuaries Independent adiusters Staff claims representatives Third party administrators 28. Which of the following is NOT a method for development of rates? 7.14 Pure premium method Lass ratio method Judgment method d. Average value method 29. Determining correct premium, acquiring rate making data, and meeting regulatory requirements are reasons why insurance companies conduct: 3.20 a. Claimsreviews b. T.ass control surveys c. Premium Auditing Market conduct exams 30. Growth plans, insurer size, geographic spread and management’ s tolerance torisk are mples of : 8.27 Factors affect reinsurance needs Factors affecting growth initiatives Factors impacting marketing plans Factors impacting adverse selection of risks 31. This method of ratemaking uses the comparison of two loss ratios to indicate ifthe rate needs to be adjusted upward or downward. Which of the following isthe correct formula for the Loss Ratio Ratemaking Method? 7.17 Actual Loss Ratio- Expected loss ratio Actual loss ratio b. Expected loss ratio- actual loss ratio Expected lass ratio c. Actual Loss Ratio- Expected loss d. Expected lossratio- actual lossratio Actual loss ratio 32. Security risks are an important aspect ofan insurance company’s information s Which of the following is NOT an example of a security risk and appropriate responiges to the risk? 9.29 Accessing personal information- passwords Viruses from internet anti-scan programs Employee sabotage- requiring revised passwords every 90 days Disgruntled ex- employee- revoking access . Premium audits must be accurate. Why is audit accuracy important for the insured a. Impacts experience mods b. Tmprov sh flow c. Requirement for claims process d. Meets insurers legal recuirements . Ratemaking can vary widely by type of insurance. Which ofthe following are the major ssociated with the various lines of insurance that impact rate making? 7.24 Credibility, loss costs, expense constants Experience period, trending, large loss limitations Trending. credibility, and decreased limit Experience rating, policy term, credibility . Property reserving, accurate evaluation of insured’ liability, proper releases taken, and good negotiation skills are examples of: 6.14 a. Actuarial rate making b. Underwriting Claims handling Auditing method of setting reserves based on the claims circumstances and the claim representative’ s experience in handling similar claims is the: 6.24 a. Roundtable method b. Expert system method c. Formula method d. Individual case method . The primary purpose of loss reserves includes all but which of the following? 7.28 a. Meet statutory requirements b. Provide a complete picture of financial status c. Set aside premium for future losses d. Develop UW profit figures . Common types of investigations used by claims protessionals includes all but which of the following? 6.26 Medical investigations Insured management assessment Prior claim investigation Claimant investigations . The process by which an insurer, can, after it has paid a loss, recover the amount paid from another party is called: 6.27 a. Reservation of rights b. Subrogation ce. Coinsurance d. Mediation . Which of the following is NOT a function of the actuarial department? 7.3.4 Book reinsurance Develop factors applied to loss costs Estimation of unpaid liabilities Data mining . Factor applied in ratemaking to adjust for the predictive value of loss data and used to minimize the variations in the rates that result from purely change variations in losses is called? 7.25 Catastrophe model Credibility factor Risk Charge On- level factor . The insurer that assumes some or all of the potential costs of insured loss exposures of the primary insurer, ig a: 8.3 Reinsurer Contractor . Atype of unsecured debt instrument, issued only by insurers, that has characteristics of both conventional equity and debt securities and is classified as policy holders’ surplus rather than a liability on the insurer’ statutory balance sheet is called? 8.26 a. Strike price b. Surplus note c. Per loss occurrence d. Finite risk . The strategic management process involves three independent stages. Which of the following is NOT a stage in the process? 10.3 Strategy data mining Strategy formulation Strategy implementation Strategy evaluation 1. Asan actuary for O & V insurance company, you are tasked with developing rates for the auto line of business. Using the pure premium method, develop rates using the following data: 7.15- 16 Tnsured losses: S10M UW Expenses S2M Earned car years: 10,000 Profit & Contingencie The pure premium component for the rates is (10 M/10,000) 
