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CPCU 500 > CPCU 520 - Insurance Operations > Flashcards

CPCU 520 - Insurance Operations Flashcards

0
Q

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

A

Prevent destructive competition

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1
Q

The national association of insurance commissioners

A

Is a non profit corporation

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2
Q

Insurance trade organization

A

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

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3
Q

The duties of a typical insurance commissioner include:

A

Holding hearings on insurance issues.

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4
Q

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

A

The council of insurance agents and brokers

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5
Q

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

A

Proof of loss statement

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6
Q

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

A

Receiver ship

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7
Q

Domestic stock insurers must

A

Meet paid in surplus requirements and capital stock requirements

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8
Q

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

A

Solvency regulation

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9
Q

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

A

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

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10
Q

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

A

Executive branch

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11
Q

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

A

Renewing an existing book of business

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12
Q

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

A

The item basis

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13
Q

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

A

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

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14
Q

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

A

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

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15
Q

For underwriting to achieve it’s purpose,

A

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

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16
Q

The risk control departments needs claim information to

A

Direct loss control resources and efforts to crucial areas.

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17
Q

Risk control personnel can assist underwriters

A

In modifying a new applicants loss exposure to meet eligibility requirements

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18
Q

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

A

They must decided whether the data are reasonable

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19
Q

Premium auditors verify the

A

Earnings of injured employees for workers comp claims

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20
Q

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

A

Cannot be known until the end of the policy period

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21
Q

The need for a premium audit arises because

A

Some insurance policies have adjustable premiums

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22
Q

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

A

Special form coverage

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23
Q

Regulators sometimes require insurers to provide

A

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

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24
Q

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

A

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

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25
Q

Expense provision

A

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

26
Q

Ideal characteristic of rates

A

Promotion of loss control

27
Q

Charges to increase commercial liability insurance limits

A

Frequently exceed 100% of the charge for basic coverage limits

28
Q

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

A

Rates are based on incomplete loss experience.

29
Q

Limitation of the loss development method of estimating loss reserves

A

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

30
Q

U.S. Actuaries have several specialties including

A

Life insurance
Health
P & c
And pension

31
Q

The data fall into the 3 general categories

A

Paid and incurred losses
Expenses
Earned premium and/or exposure

32
Q

The reinsurance agreement indemnifies the:

A

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

33
Q

Reinsurance intermediaries:

A

Can often help secure high coverage limits and catastrophe coverage

34
Q

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

A

Co-participation provision

35
Q

A direct writing insurer

A

Is a reinsurer whose employees deal directly with primary insurers

36
Q

Competent business analysts who speak the languages of business and technology

A

Can help bridge any communication gap

37
Q

Multidimensional structure

A

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

38
Q

To be successful, the differentiation business-related strategy must

A

Acurrately determine customers’ preferences to develop products perceived as distinctive

39
Q

Strategic alliance

A

Is considered the simplest and carries the lowest degree of risk

40
Q

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

A

Insurance consumers have greater bargaining power in a soft market

41
Q

Strategic alliances

A

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

42
Q

SWOT analysis to analyze the competitive environment

A

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

43
Q

The item basis

A

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

44
Q

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

A

Rate making

45
Q

Artificial intelligence

A

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

46
Q

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

A
  • the loss ratio
  • the expense ratio
  • the trade basis combined ratio
47
Q

_____ supports the core functions of an insurance company

A

Reinsurance

48
Q

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

A

Risk control

49
Q

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 _____

A

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

50
Q

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

A

Soft cycles

51
Q

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

A

An insurance exchange

52
Q

Formula that calculates the return on equity

A

Net income divided by owners equity

53
Q

Fraud accounts for ___ percent of property-casualty losses

A

10%

54
Q

A goal of rate regulation requires that

A

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

55
Q

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

A
  • producer practices
  • claim practices
  • underwriting practices
56
Q

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

A

How quickly can inquiries and transactions be processed

57
Q

Direct bill

A

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

58
Q

Function all producers perform

A

Prospecting

59
Q

Generally paid a negotiated fee, rather than a fixed commission

A

National broker

60
Q

Regions broker

A

Sells insurance by representing customer rather than insurers

61
Q

Marketing plan for a typical insurance provider includes

A

Situational analysis of the current marketplace

62
Q

Marketing plan

A

Includes, Development of sales goals and projected outcomes is part

CPCU 500 (2 decks)

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