CPCU 410 Module 1 Test Bank

1. Which one of the following statements is correct regarding external constraints that may prevent an insurer from meeting their goals?

2. Which one of the following statements is correct regarding the insurer goal of earning a profit?

3. Which of the following represents one of the five major goals of an insurer?

4. Which one of the following statements is correct regarding the goals of an insurer?

5. Companies are obligated to fulfill their duty to society, which means that at a minimum, they should:

6. Diversifying risk is an insurer goal that also complements the goals of:

7. Complying with legal requirements can create expenses for the insurance company, which could increase the cost of insurance. When the cost of insurance increases, a conflict can be created between the insurer’s goals of:

8. In achieving their goals, insurers face numerous constraints, both internal and external. Which one of the following represents an internal constraint faced by an insurer?

9. To attract customers, an insurer must provide the products and services that those customers request. The insurer goal of meeting customers’ needs often conflicts with which one of the following goals?

10. ABC Insurance Company has written property-casualty insurance in Florida for over 20 years. Last year, they experienced a large volume of losses due to several tropical storms in Florida. The company started writing insurance in Texas to help offset the concentration of losses experienced in Florida. ABC Insurance Company, by writing policies in Texas, is attempting to accomplish the insurer goal of:

11. In achieving their goals, insurers face numerous constraints, both internal and external. Which one of the following represents an internal constraint faced by an insurer?

12. In achieving their goals, insurers face numerous constraints, both internal and external. Which one of the following represents an external constraint faced by an insurer?

13. Which one of the following statements is correct regarding the internal constraints of an insurer?

14. Size is an internal constraint faced by many insurers. An advantage of a small insurer over a large insurer is that a small insurer can:

15. Which one of the following statements is correct regarding external constraints faced by insurers?

16. ABC Insurance Company developed a new insurance policy designed specifically for the medical industry. The insurer expects profits to increase dramatically as a result of the new product. However, the policy form was not approved in time to meet the policy’s planned launch date. This represents the insurer constraint of:

17. The two major types of insurers by licensing status are:

18. The two major types of insurers by legal form of ownership are:

19. Which one of the following statements is correct regarding Fair Access to Insurance Requirements (FAIR) plans?

20. Which one of the following statements is correct regarding proprietary insurers?

21. Which one of the following represents a type of cooperative insurer?

22. Which one of the following statements is correct regarding cooperative insurers?

23. Which one of the following statements is correct regarding the different types of insurers?

24. An insurance marketing system that uses sales agents, who are the direct employees of the insurer, is referred to as a(n):

25. Which one of the following statements is correct regarding the Terrorism Risk Insurance Act (TRIA)?

26. Ronnie was unable to obtain auto insurance from a private insurer due to his poor driving record. To obtain auto insurance on his vehicle, Ronnie may be able to secure coverage through the state’s:

27. Which one of the following insurtech categories is characterized by firms using web-enabled interfaces and sensor technology to offer customized coverage to customers?

28. An insurance company is licensed to do business in its home state of Texas but is not licensed to do business in OklahomA.A. With respect to Oklahoma, the insurer is:

29. John is a subscriber in a cooperative insurer. The insurer was formed as an unincorporated association and is managed by an attorney-in-fact. John and the other subscribers have agreed to insure each other and share in profits and losses in proportion to the amount of insurance purchased. John has subscribed to a:

30. Which one of the following will most likely allow an insurer to expand operations?

31. Which one of the following statements is correct regarding insurer performance?

32. Which one of the following statements is correct regarding insurer profitability?

33. Which one of the following statements is correct regarding insurer profitability?

34. The combined ratio is calculated as the sum of the:

35. Which one of the following ratios is a particularly telling measure of customer satisfaction?

36. Which one of the following statements is correct regarding the auto and homeowners insurers satisfaction report published by Consumer Reports magazine?

37. A review of Robbins Insurance Company financial statements reveals the following:
• Incurred Losses - $16,000,000
• Earned Premiums - $25,000,000
• Incurred Underwriting Expenses - $7,000,000
• Written Premiums - $35,000,000
What is the expense ratio for Robbins Insurance Company?

38. A review of Woerhle Insurance Company financial statements reveals the following:

• Incurred Losses – $13,000,000
• Earned Premiums – $26,000,000
• Incurred Underwriting Expenses – $10,000,000
• Written Premiums – $40,000,000

What is the expense ratio for Woerhle Insurance Company?

39. A review of Woerhle Insurance Company financial statements reveals the following:

• Incurred Losses – $13,000,000
• Earned Premiums – $26,000,000
• Incurred Underwriting Expenses – $10,000,000
• Written Premiums – $40,000,000

What is the combined ratio for Woerhle Insurance Company?

40. A review of Woerhle Insurance Company financial statements reveals the following:

• Net Investment Income – $2,000,000
• Earned Premiums – $25,000,000
• Combined Ratio – 75%

What is the overall operating ratio for Woerhle Insurance Company?

41. Which one of the following insurers experienced an underwriting loss?

42. An insurance company has the following year-end financial results:

• Written premiums – $4,000,000
• Earned premiums – $3,600,000
• Underwriting expenses – $1,600,000
• Incurred losses and loss adjustment expenses – $3,000,000

What is the insurance company’s expense ratio?

43. An insurer has a combined ratio of 106 after dividends, and a net investment ratio of 7.5. What is the insurer’s operating ratio?

44. Which one of the following statements is correct regarding risk control supporting functions?

45. The core functions of an insurer are:

46. Which one of the following departments serves both the insurer and insurance purchaser by helping the insurer avoid adverse selection?

47. Which one of the following is a responsibility of the risk control function?

48. Which one of the following statements is correct regarding the functional view of insurance?

49. Which one of the following statements is correct regarding the functional view of insurance?

50. Which one of the following is enabled primarily by smart products that process data and communicate through the Internet of Things (IoT)?

51. The three fundamental building blocks of the digitization of insurance are:

52. In contrast with the internet, the Internet of Things allows for devices to interact:

53. Which one of the following is enabled primarily by smart products that process data and communicate through the Internet of Things (IoT)?

54. Which one of the following statements is correct regarding the blockchain?

55. ABC Insurer offers lower premiums to commercial insureds who install front-facing cameras in their trucks that communicate with a telematic device that applies the brakes when a vehicle has stopped directly in front of the truck. This is an example of:

56. Hall’s Limo is a limousine service that operates a fleet of four limousines and five town cars. They are revising their risk management plan to incorporate elements of big data and technology. Which of the following may be of particular interest to Hall’s Limo?