CPCU 520 Practice Exam 1 Questions with 100

CPCU 520 Practice Exam 1 Questions with 100% Verified Correct Answers The expenses associated with adjusting claims are referred to as

Select one:

• Prospective loss costs.
• Loss adjustment expenses.
• Claims costs.
• Operating expenses. - Correct Answer 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:

• Insurer Y would have more capital surplus available than a larger insurer would have.
• Insurer Y can be more nimble, allowing it to respond quickly to an emerging trend or change.
• Because Insurer Y has a niche market, a larger insurer would not be able to compete on price due

to state rate regulation.

• Insurer Y is better able to invest in research and product development due to a more narrow

market focus. - Correct Answer 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:

• Some of the five ideal characteristics of rates conflict with others, and compromises are often

necessary.

• Rates are based on what consumers would be willing to pay for insurance coverage, which can be

difficult to determine.

• A rate can be adequate or it can be competitive, but it cannot be both adequate and competitive

at the same time. 1 / 3

• 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 Answer 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:

• Produce short-term profits while phasing out a product line or existing market.
• Seek efficiency in all areas of operation to build a competitive advantage.
• Accurately determine customers' preferences to develop products perceived as distinctive.
• Focus on one group of customers and offer a low-price product or service. - Correct Answer 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:

• Identifying internal strengths and weaknesses involves considering financial, physical, human, and

organizational assets.

• Managers use SWOT analysis to predict the future state of their companies.
• SWOT analysis considers a company's internal environment rather than the external environment.
• Customers are generally not considered in a SWOT analysis because the focus is on the assets an

organization owns. - Correct Answer 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:

• Psychographic
• Behavioristic
• Geographic
• Demographic - Correct Answer D. Demographic 2 / 3

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:

• Changing IT or business metrics
• An overly complex IT infrastructure
• IT professionals assured of their job security
• IT operating as a separate unit - Correct Answer C. IT professionals assured of their job security

An applicant for commercial property insurance is found unacceptable by an underwriter due to the nature of its operations and the construction of the building it occupies. If the applicant installs an automatic fire-extinguishing sprinkler system, the underwriter will approve the application. This type of underwriting modification is known as

Select one:

• Changing insurance rates, rating plans, or policy limits.
• Requiring risk control measures.
• Using facultative reinsurance.
• Amending the policy terms and conditions. - Correct Answer B. Requiring risk control measures

Which one of the following insurer performance goals is the most difficult to evaluate?

Select one:

• Meeting social responsibilities
• Meeting profitability goals
• Meeting customer needs
• Meeting legal requirements - Correct Answer A. Meeting social responsibilities

Which one of the following insurance consumer groups would have the most risk financing alternatives available to them?

Select one:

• Small business
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