CPCU 520 - Insurance Operations

Question 0

They insurance industry is regulated primarily to protect consumers, maintain insurer solvency, and to

Answer 0

Prevent destructive competition

Question 1

The national association of insurance commissioners

Answer 1

Is a non profit corporation

Question 2

Insurance trade organization

Answer 2

Provide insurers with personnel for lobbying purposes or allow them to influence pending legislation

Question 3

The duties of a typical insurance commissioner include:

Answer 3

Holding hearings on insurance issues.

Question 4

____ would be best able to assist an insurer with providing informed and timely responses to industry issues that affect its customers

Answer 4

The council of insurance agents and brokers

Question 5

Unfair claims practices require an insurer to approve or deny coverage of a claim within a reasons period after the completion of

Answer 5

Proof of loss statement

Question 6

If an insurer is insolvent, the state insurance places the insurer in

Answer 6

Receiver ship

Question 7

Domestic stock insurers must

Answer 7

Meet paid in surplus requirements and capital stock requirements

Question 8

As part of the peer review process, the NAIC ACCREDITATION program subjects state insurance regulators to a comprehensive review to determine whether the state has met minimum baseline standards of

Answer 8

Solvency regulation

Question 9

Part of the solvency core principle of exiting the market and receivership

Answer 9

Solvency is defined and a receivership scheme established to ensure the payment of insured obligations of insolvent insurers subject to appropriate restrictions and limitations

Question 10

Day to day regulation of the insurance business falls within the ______ of each state government

Answer 10

Executive branch

Question 11

The most difficult time for an insurer to change distribution systems is when

Answer 11

Renewing an existing book of business

Question 12

An agency bill process in which the producer is usually not required to pay the insurer until the premium is collected from the Policyholder

Answer 12

The item basis

Question 13

Though marketing plans are varied, they all serve the same fundamental purpose of

Answer 13

Providing the roadmap necessary to profitably and effectively acquaint sellers with potential buyers

Question 14

A profitability ratio that indicates whether an insurer has made an underwriting loss or gain.

Answer 14

Combined ratio - lower combined ratio reflects a higher level of profitability for an insurer

Question 15

For underwriting to achieve it’s purpose,

Answer 15

Insurers must minimize the effects of adverse selection on the books of business

Question 16

The risk control departments needs claim information to

Answer 16

Direct loss control resources and efforts to crucial areas.

Question 17

Risk control personnel can assist underwriters

Answer 17

In modifying a new applicants loss exposure to meet eligibility requirements

Question 18

Once premium auditors have obtained the data necessary for calculating the premium ,

Answer 18

They must decided whether the data are reasonable

Question 19

Premium auditors verify the

Answer 19

Earnings of injured employees for workers comp claims

Question 20

When a Policy is written subject to audit, The exact exposure and premium bases :

Answer 20

Cannot be known until the end of the policy period

Question 21

The need for a premium audit arises because

Answer 21

Some insurance policies have adjustable premiums

Question 22

Insurance that covers every cause of direct physical loss or damage that is not specifically excluded is referred to as

Answer 22

Special form coverage

Question 23

Regulators sometimes require insurers to provide

Answer 23

A consulting actuary’s opinion verifying the accuracy and reasonableness of the staff actuaries’ work.

Question 24

Using the pure premium rate making method, the rate per exposure unit equals

Answer 24

The pure premiums plus the expense per exposure unit, divided by 1 minutes the profit and contingencies factor

Question 25

Expense provision

Answer 25

The amount needed to pay future expenses, such as acquisition expenses, overhead, and premium taxes.

Question 26

Ideal characteristic of rates

Answer 26

Promotion of loss control

Question 27

Charges to increase commercial liability insurance limits

Answer 27

Frequently exceed 100% of the charge for basic coverage limits

Question 28

With respect to estimating losses for use in the rate making process

Answer 28

Rates are based on incomplete loss experience.

Question 29

Limitation of the loss development method of estimating loss reserves

Answer 29

Large one time events such as catastrophe would disrupt the historical pattern of development

Question 30

U.S. Actuaries have several specialties including

Answer 30

Life insurance Health P & c And pension

Question 31

The data fall into the 3 general categories

Answer 31

Paid and incurred losses Expenses Earned premium and/or exposure

Question 32

The reinsurance agreement indemnifies the:

Answer 32

Policy , groups of policies , or other categories of insurance that are included in the agreement

Question 33

Reinsurance intermediaries:

Answer 33

Can often help secure high coverage limits and catastrophe coverage

Question 34

A factor affecting the selection of a retention by a primary insurer in its reinsurance program

Answer 34

Co-participation provision

Question 35

A direct writing insurer

Answer 35

Is a reinsurer whose employees deal directly with primary insurers

Question 36

Competent business analysts who speak the languages of business and technology

Answer 36

Can help bridge any communication gap

Question 37

Multidimensional structure

Answer 37

Is an organization structure in which groups are organized into seperate profit centers

Question 38

To be successful, the differentiation business-related strategy must

Answer 38

Acurrately determine customers' preferences to develop products perceived as distinctive

Question 39

Strategic alliance

Answer 39

Is considered the simplest and carries the lowest degree of risk

Question 40

following statements is correct with regard to assessing the external environment under the 5 forces model

Answer 40

Insurance consumers have greater bargaining power in a soft market

Question 41

Strategic alliances

Answer 41

Provide a low-risk approach to quickly entering a new market

Question 42

SWOT analysis to analyze the competitive environment

Answer 42

Identifying internal strengths and weaknesses involves considering financial, physical, Human, and organizational assets.

Question 43

The item basis

Answer 43

An agency bill process in which the producer is usually not required to pay the insurer until the premium is collected from the policy holder

Question 44

The most prominent actuarial functions for an insurer involve estimation of unpaid liabilities and adequacy of loss reserves as well as

Answer 44

Rate making

Question 45

Artificial intelligence

Answer 45

Is a computer processing or output that stimulates human reasoning or knowledge

Question 46

3 specific ratios used to measure an insurer's underwriting performance:

Answer 46

- the loss ratio - the expense ratio - the trade basis combined ratio

Question 47

_____ supports the core functions of an insurance company

Answer 47

Reinsurance

Question 48

An insurer's ______ department provided information to the underwriting department to assist in selecting and rating risks.

Answer 48

Risk control

Question 49

The insurance industry is highly regulated, and the expense associated with compliance can be substantial. To the extent that these expenses increase the cost of insurance, they create a conflict between ___ goal and the insurer's goal of _____

Answer 49

The insurer's profit goals and the insurer's goal of meeting customer's needs.

Question 50

In ___ cycles, excessive competition can entice some insurers to bend the rules, making insurers unable to attain their legal and regulatory goals

Answer 50

Soft cycles

Question 51

Proprietary insurer's that acts as an insurance marketplace. It's members underwrite any insurance or reinsurance purchased, and members are primarily partnerships or corporations with limited liability

Answer 51

An insurance exchange

Question 52

Formula that calculates the return on equity

Answer 52

Net income divided by owners equity

Question 53

Fraud accounts for ___ percent of property-casualty losses

Answer 53

10%

Question 54

A goal of rate regulation requires that

Answer 54

Loss exposures that are roughly similar regarding expected losses and expenses should be charged substantially similar rates

Question 55

3 key areas of market conduct, insurance regulators have traditionally monitored:

Answer 55

- producer practices - claim practices - underwriting practices

Question 56

An important questions for an insurer to ask when examining customers' need and characteristics to select a distribution channel is

Answer 56

How quickly can inquiries and transactions be processed

Question 57

Direct bill

Answer 57

Method of premium collection generally used for personal insurance policies and small commercial accounts

Question 58

Function all producers perform

Answer 58

Prospecting

Question 59

Generally paid a negotiated fee, rather than a fixed commission

Answer 59

National broker

Question 60

Regions broker

Answer 60

Sells insurance by representing customer rather than insurers

Question 61

Marketing plan for a typical insurance provider includes

Answer 61

Situational analysis of the current marketplace

Question 62

Marketing plan

Answer 62

Includes, Development of sales goals and projected outcomes is part