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CPCU 500 Exam Study Guide questions answered 100% correct
In the context of risk, the chance of being injured while driving to and from work, loading a truck at work, moving furniture at home, or falling in an icy... [Show More] parking lot at the mall are all examples of A. Possibilities. B. Uncertainties. C. Probabilities. D. Losses. A. Possibilities. The statement, "There is a five percent chance that John will be injured in an automobile accident while driving to work tomorrow," is an example of A. Quantifying risk. B. Verifying risk. C. Quantifying loss exposures. D. Identifying hazards. A. Quantifying risk. Which one of the following is measurable and quantifies risk? A. Probability B. Possibility C. Uncertainty D. Feasibility A. Probability One of the elements of risk is uncertainty. Which one of the following best describes the uncertainty that risk involves? A. Uncertainty as to how to manage potential losses B. Uncertainty as to whether a negative outcome is possible C. Uncertainty as to the type and timing of an outcome D. Uncertainty as to whether insurance is available C. Uncertainty as to the type and timing of an outcome Hardware Store has been able to control its prices and inventory since it has no competitors. A new highway currently being constructed is going to allow increased competition for Hardware Store. According to the quadrants of risk, this risk of increased competition falls into the category of A. Strategic risk. B. Hazard risk. C. Operational risk. D. Financial risk. A. Strategic risk. Company G is a manufacturer of high profile golf equipment. The risk management professional for Company G is concerned about loss of business related to product design. Failing to respond to changing customer demand and preferences in the design of golf clubs could cost Company G significant market share. Categorized according to the quadrants of risk, this exposure to loss would be classified as a(n) A. Strategic risk. B. Financial risk. C. Operational risk. D. Hazard risk. A. Strategic risk. George has received an inheritance and is deciding what to do with the money. He has limited his options to four choices: donate all the money to his favorite charity, use the entire inheritance to buy a yacht, invest the inheritance in a small rental property, or use the entire amount to purchase T-bills. Which one of the following statements is true regarding the risk involved in George's options? A. Donating his inheritance to charity is a pure risk; there is no uncertainty that the money will be gone and George will have no chance of profit. B. Buying a boat is a nondiversifiable risk because George can only afford to purchase a single yacht. C. The rental property presents both pure and speculative risk; property values may increase, and the building could burn down. D. Purchasing T-bills is a pure risk because the interest rate payable is known, and the chance of loss is minimal. C. The rental property presents both pure and speculative risk; property values may increase, and the building could burn down. Risk can be classified as pure or speculative. Which one of the following is the best example of a speculative risk? A. Acquiring a new television B. Investing in shares of stock C. Buying a new personal vehicle D. Purchasing an insurance policy B. Investing in shares of stock Which one of the following statements is true regarding enterprise risk management (ERM)? A. ERM is concerned with an organization's pure risk, primarily hazard risk. B. The ERM framework encompasses all stakeholders in the organization. C. In ERM, the risk management function is the responsibility of the safety manager. D. ERM requires less communication than traditional risk management. B. The ERM framework encompasses all stakeholders in the organization. A risk management plan that considers all of the risks that an organization faces, including operational, financial, and strategic risks, is called A. An enterprise risk management plan. B. An open-perils risk management plan. C. A protected cell risk management plan. D. A hazard risk management plan. A. An enterprise risk management plan. The single largest impediment to successful implementation of an enterprise risk management (ERM) program is Select one: A. Traditional organizational culture with entrenched risk silos. B. Lack of required skills to effectively implement an ERM program. C. Lack of vision by the management team that leads to under-performance of the ERM plan and early termination. D. Opposition from stakeholders—employees, stockholders, customers, and suppliers. A. Traditional organizational culture with entrenched risk silos. The consensus process by which the veracity of data is confirmed and verified is known as Select one: A. Telematics. B. Machine learning. C. The Internet of Things. D. Mining. D. Mining. Which one of the following is a virtual ledger of data that has been verified, timestamped, encrypted, and protected against tampering? Select one: A. Artificial intelligence B. The Internet of Things C. Closed-loop system D. Blockchain D. Blockchain Which one of the following is the network through which sensors and other smart products capture and transmit data? Select one: A. Blockchain B. Cloud C. Artificial intelligence D. Internet of Things D. Internet of Things Insurers and risk managers can use the large volumes of data collected and organized through telematics to help improve results for which one of the following types of insurance? Select one: A. Health B. Workers compensation C. Automobile D. Property C. Automobile Organizations find it difficult to establish a benchmark against which the performance of their risk management program can be assessed because it is difficult to assign a specific value to the Select one: A. Cost of implementing and administering risk management. B. Cost of measures to prevent or reduce the size of potential losses. C. Cost of residual uncertainty. D. Cost of losses not reimbursed by insurance. C. Cost of residual uncertainty. The two benefits of risk management affecting individuals, organizations, and society are: it preserves financial resources by reducing expected losses and it Select one: A. Reduces the residual uncertainty associated with risk. B. Increases productivity within the economy and improves overall standard of living. C. Increases the attractiveness to investors. D. Improves the allocation of productive resources. A. Reduces the residual uncertainty associated with risk. Which one of the following statements is true regarding risk management efforts on the part of individuals, organizations, and society in general? Select one: A. Organizations tend to exhibit a greater degree of risk aversion than do individuals. B. The benefits that risk management efforts provide to individuals and organizations are not felt by society in general. C. Risk management makes those who own or run an organization more willing to undertake risky activities. D. Risk management tends to increase the deterrence effect of risk in organizations. C. Risk management makes those who own or run an organization more willing to undertake risky activities. Risk management programs should Select one: A. Operate economically and efficiently. B. Incur substantial costs for slight benefits. C. Be an autonomous part of the organization. D. Not use benchmarking to compare costs. A. Operate economically and efficiently. Which of the following risk management program goals is an essential goal for all public entities? Select one: A. Growth B. Continuity of operations C. Earning stability D. Survival B. Continuity of operations Aligning risks with the organization's risk appetite defines Select one: A. Compliance. B. Tolerable uncertainty. C. Social responsibility. D. Value at risk. B. Tolerable uncertainty. The second step in the risk management process is analyzing loss exposures. Which one of the following is true regarding this step? Select one: A. Loss exposures are analyzed based on loss frequency, loss severity, total dollar losses, and timing in this step. B. Loss exposures that could interfere with the achievement of the organization's goals are identified in this step. C. A weakness of loss exposure analysis is that it is useful only for those types of losses that an organization has suffered in the past. D. A major strength of loss exposure analysis is that the process is generally inexpensive. A. Loss exposures are analyzed based on loss frequency, loss severity, total dollar losses, and timing in this step. [Show Less]
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CPCU 552 questions and answers 2023
Which one of these is not an example of a coverage that is excluded under Coverage A of the CGL coverage form because it is insured under another policy? ... [Show More] Liquor liability (Liquor liability is not an example of a coverage that is excluded under Coverage A of the CGL coverage form because it is insured under another policy. An endorsement that eliminates the liquor liability exclusion and provides coverage for organizations in the business of selling or serving alcoholic beverages is an example of which type of endorsement? Miscellaneous coverage amendment endorsement ( Which one of the following is true regarding the Commercial General Liability's (CGL's) unmanned aircraft coverage endorsements? Premium for these endorsements is on a "refer to company" basis. Jill, who is the named insured on an unendorsed Business Auto Coverage Form (BACF), hired Jimmy to assist in her business. Jill asked Jimmy to purchase some business supplies. While he was driving his own car, Jimmy's vehicle was hit by an uninsured motorist. Jimmy's medical expenses were $2,000, and the damage to his car was $4,000. Which one of the following correctly indicates how much Jill's auto insurer will pay Jimmy for his losses? $0 (An employee of the insured is not an insured if the covered auto is owned by the employee. An auto dealer advertises that a new vehicle is available for $18,000 with no down payment and an interest rate of 1 percent. A customer attempts to purchase the vehicle, but is told that the price is now $21,000 and the interest rate is 9 percent. The customer files suit, alleging false advertisement of prices and failure to comply with the Truth in Lending Act. Which one of the following correctly describes coverage for this claim under the Auto Dealers Coverage Form? There will be coverage for the failure to comply with the Truth in Lending Act, but not for the false advertisement of prices. (There will be coverage for the failure to comply with the Truth in Lending Act, but not for the false advertisement of prices. A claim representative is handling a claim for an auto dealership insured under the Auto Dealers Coverage Form (ADCF). Several new autos and autos left for service by customers were damaged when a fire started in the service building. The representative has verified that the loss occurred to the named insured at an insured location during the policy period; that Sections I and II of the ADCF apply to the losses and that the autos qualify as covered autos. The next step that the representative should take in determining whether coverage applies is to Review the policy conditions to determine whether they preclude coverage at the time of loss. (The next step that the representative should take in determining whether coverage applies is to review the policy conditions to determine whether they preclude coverage at the time of loss. The Motor Carrier Coverage Form (MCCF) covers owners and lessors of autos hired by the named insured, subject to conditions. When the hired auto is a trailer, the owner, or anyone else from whom the named insured hires or borrows a covered trailer, is an insured while the trailer is connected to a power unit that is a covered auto or while the trailer is Not connected to a power unit but is being used exclusively in the named insured's business. (The owner is an insured while the trailer is connected to a power unit that is a covered auto or while the trailer is not connected to a power unit but is being used exclusively in the named insured's business. Which one of the following would always be excluded under employers liability insurance? An employee files a claim for depression resulting from harassment at work. Bill's Premium Packing (BPP) operates a fruit and vegetable canning operation. It purchases its produce from growers in three states in the Northeast. As a result, its operations are seasonal and during peak periods it depends on large numbers of casual laborers who are exempt from coverage under the applicable state workers compensation laws. Therefore, the company has purchased a Voluntary Compensation and Employers Liability Endorsement for its Workers Compensation and Employers Liability Insurance (WC&EL) Policy. When a casual laborer is badly injured on the job, the worker launches a lawsuit against BPP, alleging negligence. Which one of the following best describes how BPP's WC&EL insurer would respond? The insurer would defend the insured against the employee's suit and pay any settlement awarded, subject to the stipulated limits of liability. Some organizations such as school boards, municipalities, and non-profit organizations carry a special type of directors and officers (D&O) liability policy. What is the name given to this type of D&O coverage? Occupation-specific An unendorsed securities brokers professional liability policy will insure the firm and registered representatives for claims alleging negligence committed on the firm's behalf in which one of the following capacities? Selling life insurance products (An unendorsed securities brokers professional liability policy will insure the firm and registered representatives for claims alleging negligence committed on the firm's behalf while selling life insurance products. Concerning environmental liability, any organization can cause an intentional tort by Making loud noises. (Concerning environmental liability, any organization can cause an intentional tort by making loud noises. A vessel valued at $40 million is carrying cargo for two customers. One customer's cargo consists of $6 million of handheld electronic games. The other customer's cargo consists of $4 million of designer shoes. During a storm, the crew throws overboard $1.5 million in cargo to prevent the vessel from sinking. What is the contribution to general average for the customer who owns the shoes? $120,000 (The contribution to general average for the customer who owns the shoes is $120,000. $4M/$50M = .08; .08 x $1.5M = $120,000 Which one of the following events would normally trigger the automatic termination provisions of a marine policy and cancel the hull coverage on a cargo vessel? The ship is chartered by a third party on a bareboat basis. (War risk coverage is excluded, but the policy would remain in force; a bareboat charter would terminate the policy. Which one of the following property damage-type coverages under a Protection and Indemnity policy covers only cargo of other vessels due to the insured's negligence? Damage to cargo of others (Damage to cargo of others is a property damage-type coverage that covers only cargo of other vessels due to the insureds negligence. XYZ repairs personal pleasure boats at its service facility on Lake Sinclair. XYZ often has to keep the boats in its shop for a few days, and thus XYZ has a bailee liability exposure while the boats are in its care, custody and control. Which one of the following marine insurance policies would best protect XYZ from its bailee liability exposure? Marina operators liability insurance policy A component parts schedule would be attached to an aircraft policy when underwriting which one of the following in particular? A very old aircraft or one of relatively low value (A component parts schedule would be attached to an aircraft policy when underwriting a very old aircraft or one of relatively low value. Which one of the following is true regarding disclosures and endorsements pertaining to the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA 2015)? The endorsements define an insured loss as any loss resulting from an act of terrorism, and for purposes of workers compensation coverage, the endorsements include acts of war. (Endorsements pertaining to TRIPRA 2015 define an insured loss as any loss resulting from an act of terrorism, and for purposes of workers compensation coverage, the endorsements include acts of war. A large scrap metal dealer sends product to its warehouse in Mexico before it is sold to manufacturers of automobile parts. The scrap metal dealer is headquartered in the United States and covers its foreign risk exposures by using an international package policy. The insurer that issues the policy is most likely domiciled in The United States. [Show Less]
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CPCU 551 Full questions and answers graded A+
Commercial Package Policy (CPP) 1-1 Policy that covers two or more lines of business by combining ISO's commercial lines coverage parts Businessown... [Show More] ers Policy (BOP) 1-2 A package policy that combines most of the property and liability coverages needed by small and medium-sized businesses Output Policy 1-3 A policy that combines, in one form and associated endorsements, all or most of the commercial property coverages that the insured organization needs, and uses a flexible rating plan Commercial Property Conditions 1-4 A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms Policy Condition 1-5 Any provision that qualifies an otherwise enforceable promise made in the policy Actual Cash Value (ACV) 1-6 Cost to replace property with new property of like kind and quality less depreciation Replacement Cost 1-7 Cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation Fixture 2-1 Any personal property affixed to real property in such a way as to become part of the real property Trade Fixtures 2-2 Fixtures and equipment that may be attached to a building during a tenant's occupancy, with the intention that they be removed when the tenant leaves Improvements and Betterments 2-3 Alterations or additions made to the building at the expense of the insured who does not own the building and who cannot legally remove them Commercial Bailment 2-4 The temporary possession by one party (the bailee) of personal property of another party (the bailor) for a specific purpose beneficial to both parties Agreed Value Optional Coverage 2-5 Optional coverage that suspends the Coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and the insured Inflation Guard Optional Coverage 2-6 Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations Replacement Cost Optional Coverage 2-7 Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of an actual cash value basis Causes of Loss - Basic Form 3-1 Form that covers Fire, Lightning, Explosion, Windstorm, Hail, Smoke, Aircraft, Vehicles, Riot, Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole Collapse, and Volcanic Action Causes of Loss - Broad Form 3-2 Form that covers basic form perils, plus Falling Objects; Weight of Snow, Ice, or sleet; Water Damage; and (as additional coverage) Collapse caused by certain perils Manufacturer's Selling Price (Finished ""Stock"" Only) Endorsement 4-1 A commercial property endorsement that values finished stock manufactured by the insured at selling price, less any discounts and expenses that the insured would have otherwise had. Functional Building Valuation Endorsement 4-2 A commercial property endorsement that provides modified replacement cost coverage on buildings; may be appropriate when insuring a building with a replacement cost far in excess of its market value Specific Insurance 4-3 Insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance Blanket Insurance 4-4 Insurance that covers either of the following with one limit of insurance: 1) one type of property in one or more separately rated buildings, or 2) two or more types of property in one or more separately rated buildings" Peak Season Limit of Insurance Endorsement 4-5 Endorsement that covers the fluctuating values of business in personal property by providing differing amounts of insurance for certain time periods during the policy period Value Reporting Form 4-6 A commercial property form that bases the insured's premium for business personal property on the values that the insured reports to the insurer periodically during the policy period Ordinance or Law Coverage Endorsement 4-7 Endorsement that covers three types of losses resulting from the enforcement of building ordinances or laws: 1) the value of the undamaged portion of a building that must be demolished 2) the cost to demolish the building's undamaged portion and remove its debris 3) the increase cost to rebuild the property Utility Services - Direct Damage Endorsement 4-8 A commercial property endorsement that covers damage to covered property caused by the interruption of utility services (water, communications , or power) to the insured premises. Spoilage Coverage Endorsement 4-9 Endorsement that covers damage to perishable stock due to power outages; on-premises breakdown; or contamination of the insured's refrigeration, cooling, or humidity control equipment Radioactive Contamination Endorsement 4-10 A commercial property endorsement for organizations that have a radioactive contamination exposure on their premises, other than a nuclear reactor or fuel for a nuclear reactor; covers physical loss to covered property caused by sudden and accidental radioactive contamination Condominium 5-1 A real estate development consisting of a group of units, in which the air space within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners. Condominium Unit 5-2 The portion of a condominium that is owned solely by a unit owner Condominium Association 5-3 The entity composed of the unit owners in a condominium to manage the condominium and to own the common elements Common Elements 5-4 Areas of a condominium that are jointly owned by all unit owners, including the land on which the building is located Condominium Association Agreement 5-5 A document that describes what each condo owner has purchased, and clarifies the rights and responsibilies of the unit owners and the association Bare-Walls Concept 5-6 A concept of condo ownership in which the association has no ownership interest within the bare walls of each unit Single-Entity Concept (original specifications coverage) 5-7 A concept of condo ownership in which the association is considered to be the owner fo all property contained in the unit as sold to the original purchaser or replacements of such property if the replacements are of like kind and quality. All-in Concept (additional installations coverage) 5-8 A concept of condo ownerhsip that is similar to the single-entity concept except that the all-in concept includes improvements made by the unit owner, not just the original installations or replacements of like kind and quality Cooperative Corporation 5-9 A form of real property ownership in which the real property is owned by a corporation whose shareholders are the tenants of the property. [Show Less]
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CPCU Ethics test questions and answers 100% correct
Ethical behavior is based on reasoned consideration of all issues surrounding a conflict Morality is universal and basic to human relationships ... [Show More] Maintaining high ethical standards is best associated with knowledge of law and regulations The Sarbanes-Oxley federal law requires that publicly traded companies identify principal ethics officers, create anonymous hotlines for reporting unethical behavior, and establish codes of ethics. Enforceable components of the CPCU Code of Professional Conduct are the Guidelines and Rules. Lloyd is a commercial property underwriter at Insurance Company (IC). Two years ago, he completed his studies and obtained the CPCU designation. Due to recent changes in workers compensation legislation in one of the states in which IC operates, the insurer has arranged for a one-day seminar to explain the changes and the impact they will have on underwriting and claim settlement. Considering Lloyd's obligations under the Code of Professional Conduct (the Code), which one of the following statements is correct? Choose one answer. A. Lloyd is required to complete any training made available by his employer. B. Because Lloyd has his CPCU, further training is considered unnecessary. C. The Code requires Lloyd to remain current on all changes in insurance legislation. D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend. D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend. Ming is the chief actuary at ABC Insurance and a CPCU. Ming has developed a new method for calculating incurred but not reported losses (IBNR). He has tested the method over a number of years and has found it to be much more accurate than the traditional method used by most actuaries. Because the new method gives Ming more confidence in the accuracy of his rate-making data, it allows ABC to charge lower rates than its competitors. This in turn gives ABC a marketing advantage. Which one of the following best describes Ming's obligations under Canon 5 of the Code of Professional Ethics regarding raising the professional standards of the insurance profession? Choose one answer. A. The new IBNR calculation method constitutes a trade secret and Ming is under no obligation to divulge it. B. Because the new method could benefit consumers in terms of lower rates, Ming is required to share it with other insurers. C. Canon 5 specifically prohibits CPCUs from divulging information about their employers' business practices. D. Ming should write a professional article in an actuarial trade journal describing the new IBNR calculation method. A. The new IBNR calculation method constitutes a trade secret and Ming is under no obligation to divulge it. Elin is a surety producer and a CPCU. She regularly deals with legal and accounting information. She notices that certain financial information provided by a contractor shows a deteriorating financial position. To best comply with Rule 6.1 of the Code of Professional Conduct as it concerns confidential information needed by a professional, Elin should Choose one answer. A. Suggest that a competing contractor consider merging with the client. B. Report the newest financial information to the surety. C. Counsel the client as to methods to improve the financial position. D. Do nothing as the information is proprietary. B. Report the newest financial information to the surety. Hugo is a CPCU and resident vice president and regional manager of an insurance company. The state legislature is considering a bill that would alter auto coverages and require insurers to reduce rates by 25 percent. Hugo is invited to be part of a roundtable discussion on the legislation by the state public broadcasting affiliate. To best comply with Canon 7 of the Code of Professional Conduct as it relates to helping to improve the public understanding of insurance, Hugo should Choose one answer. A. Seek permission from his employer to present the position of his company. B. Obtain and present the position of the insurance trade association to which his employer belongs. C. Present objective information on the pros and cons of the legislation without taking a position. D. Present his opinion on the legislation clearly noting it is his opinion and may or may not be the position of his company. C. Present objective information on the pros and cons of the legislation without taking a position. Daiki, a CPCU, has been underwriting a difficult account and has been working with the proposed insured's risk manager. On two occasions, Daiki has received letters from the risk manager with this typed below the risk manager's signature, "Almost a CPCU." Daiki learns that the risk manager has only one more course to pass to become a CPCU. Daiki's most appropriate action would be to Choose one answer. A. Ignore the verbiage as the risk manager has only one CPCU part to pass. B. Ask the risk manager to stop adding the verbiage. C. Report the risk manager to the American Institute. D. Notify the employer of the risk manager of the practice. C. Report the risk manager to the American Institute. An insurance customer has alleged that Jake, who is a producer and a CPCU, has violated the Code of Professional Conduct. As a CPCU who is subject to a formal disciplinary proceeding before a Hearing Panel of the Board of Ethical Inquiry, Jake is entitled Choose one answer. A. To a hearing before a jury of his or her professional peers. B. To the same due process rights as a criminal defendant. C. To a hearing before the local court of common pleas. D. To be heard in person and be represented by counsel. D. To be heard in person and be represented by counsel. Which one of the following statements is correct? Choose one answer. A. Business ethics are critical when an organization is threatened or faces fundamental change. B. Ethical insurance professionals always do what is required by their employer. C. Contradictory laws or societal norms set up conflicts that cannot be resolved ethically. D. Ethical decisions are best made based on feelings rather than on reason or logic. A. Business ethics are critical when an organization is threatened or faces fundamental change. Which one of the following statements is correct? Choose one answer. A. When an insurance practitioner aspires to develop the traits of a professional, clients are unlikely to recognize the effort. B. Insurance practitioners who are perceived as professionals will gain an advantage over other practitioners. C. Awards based exclusively on monetary accomplishments recognize an insurance practitioner's professionalism. D. The perception of professionalism is important for insurance practitioners only in terms of the public view. B. Insurance practitioners who are perceived as professionals will gain an advantage over other practitioners. Which one of the following statements is correct? Choose one answer. A. A standard of "utmost good faith" exists for many practitioners who work on behalf of insurers. B. High ethical standards are not required in all professions. C. In insurance, high ethical standards are only required of insurers. D. An insurance professional should avoid being overly candid with insureds and claimants. A. A standard of "utmost good faith" exists for many practitioners who work on behalf of insurers. Which one of the following statements is correct? Choose one answer. A. Continuous pursuit of knowledge, utmost good faith in all dealings, and adherence to standards and regulations all contribute to professionalism. B. Aspiring to be a professional need not require much personal sacrifice or time away from family or recreational pursuits. C. Support of family, friends, and colleagues is irrelevant to achieving the status of a professional in the insurance industry. D. Unfortunately, practitioners committed to professionalism often have difficulty adapting to changes in the global marketplace. A. Continuous pursuit of knowledge, utmost good faith in all dealings, and adherence to standards and regulations all contribute to professionalism. Which one of the following statements is correct? Choose one answer. A. An ethical insurance professional need not maintain knowledge of current regulatory issues. B. Laws have no ability to help keep competition fair. C. Adherence to ethical standards does not build consumers' trust in the insurance industry. D. A pursuit of continuing education in laws and regulations helps insurance professionals avoid allegations of impropriety. D. A pursuit of continuing education in laws and regulations helps insurance professionals avoid allegations of impropriety. Which one of the following statements is correct? Choose one answer. A. Social responsibility expectations are in conflict with an insurer's goals of long-term survival and sustained growth. B. In the modern world, attention to social responsibility has become a relatively low priority for most commercial businesses. C. The primary purpose of insurance continues to be to generate profits for owners and shareholders. D. Many insurance products have evolved from the identification of a social need and the industry's societal responsibility to meet that need. D. Many insurance products have evolved from the identification of a social need and the industry's societal responsibility to meet that need. [Show Less]
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CPCU 500 - Managing Evolving Risks questions and answers 100% correct
Big Data Sets of data that are too large to be gathered and analyzed by traditional methods. Smart product An innovative item that uses sensors; ... [Show More] wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved. Internet of Things (IoT) A network of objects that transmit data to and from each other without human interaction. Cloud computing Information, technology, and storage services contractually provided from remote locations, through the internet or another network, without a direct server connection. Blockchain A distributed digital ledger that facilitates secure transactions without the need for a third party. Telematics The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver. Text mining Obtaining information through language recognition. Insurtech The use of emerging technologies in the insurance industry. Sensor A device that detects and measures stimuli in its environment. Preventive analytics Statistical and analytical techniques used to influence or prevent future events or behaviors. Transducer A device that converts one form of energy into another. Actuator A mechanical device that turns energy into motion or otherwise effectuates a change in position or rotation using a signal and an energy source. Accelerometer A device that measures acceleration, motion, and tilt. Ergonomics The science of designing work space and equipment based on the needs of the people who use the work space and equipment. Risk management framework A foundation for applying the risk management process throughout the organization. Risk criteria Information used as a basis for measuring the significance of a risk. Pure risk A chance of loss or no loss, but no chance of gain. Speculative risk A chance of loss, no loss, or gain. Credit risk The risk that customers or other creditors will fail to make promised payments as they come due. Subjective risk The perceived amount of risk based on an individual's or organization's opinion. Objective risk The measurable variation in uncertain outcomes based on facts and data. Diversifiable risk A risk that affects only some individuals, businesses, or small groups. Systemic risk The potential for a major disruption in the function of an entire market or financial system. Market risk Uncertainty about an investment's future value because of potential changes in the market for that type of investment. Liquidity risk The risk that an asset cannot be sold on short notice without incurring a loss. Risk appetite Amount of risk an organization is willing to take on in order to achieve an anticipated result or return. Value at risk (VaR) A technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time. Cost of risk The total cost incurred by an organization because of the possibility of accidental loss. Exposure Any condition that presents a possibility of gain or loss, whether or not an actual loss occurs. Volatility Frequent fluctuations, such as in the price of an asset. Likelihood A qualitative estimate of the certainty with which the outcome of a specific event can be predicted. Consequences The effects, positive or negative, of an occurrence. Time horizon Estimated duration. [Show Less]
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CPCU 500 - Foundations of Risk Management and Insurance, questions and answers graded A+
CHAPTER 1 ... What are the two elements of risk? -Uncertainty of outcome - Time of the outcome and type of outcome are uncertain -possibility of ... [Show More] a negative outcome - at least 1 outcome is negative What is the difference between probability and possibility? Possibility - an outcome or event may or may not occur. It does not quantify the risk, only verifies the risk is there Probability - the likelihood than an outcome will occur, quantifies the risk. It is measurable and has value between zero and one How does probability help an organizations risk management exposure? -by understanding the probability of an exposure, an organization can focus its risk management efforts to avoid it. -helps organization decided what projects and activities to undertake How does classifying a risk help an organizations risk management process? -can help with assessing risk cause many risks in the same classification have similar attributes -helps manage risks -helps administrative function of RM by helping to ensure the risks in same class are less likely to be overlooked -Compare pure risk with speculative risk -why is it important to distinguish between the 2 what making risk management proceduces pure risk - change of loss or no loss but no gain speculative risk - involves a chance of gain type of SR includes: price risk and credit risk (financial investments involve a distinct set of speculative risks) its important when making RM decisions cause the 2 types must often be managed different. most insurance policies are not designed to handle speculative risks insurable risks are generally classified as pure, objective, and diversafiable - How does subjective and objective risk differ? subjective risk - perceived amount of risk based on individuals or organizations opinion objective risk - measurable variation in uncertain outcomes based on facts and data where they differ (see page 1.8): 1. Familiarity and control 2. consequences over likelihood 3. Risk Awareness -Contracts diversifiable and nondiversifiable risk? diversifiable risk - is not highly correlated and can be managed through diversification non-d risk - is correlated, losses and gains occur together (type: systemic risk - potential for a major disruption in the function of an entire market or financial system - Describe the quadrants of risk way of categorizing risk is putting them in quadrants: -hazard risk - property, liability, and personnel loss, generally the subject of insurance -operational risks - fall outside hazard cat, arise from people or failure in process, system, or control, including info tech -financial risks - effect of market forces on financial assets or liabilities and include market risk, credit risk, liquidity risk and price risk -strategic risks - arise from trends in the economy and society, including changes in econ, political and competitive environments, as well as from demographic shirts see graph on 1.10 What are the 3 components to constitute the financial consequence of risk faced by individuals or organizations? - expected cost of losses or gains - expenditures on RM - cost of residual uncertainty What are hidden costs that can affect an organization's calculation of expected costs of loss? -time lost by the injured employee -time lost by other employees who stop work -time lost by foremen, supervisors or other execs -time spent on the case by first-aid attendants and hospital department staff -damage to equipment -interference with production -continuation of injured employees wages -loss of profit on injured employees productivity and on idle machines -lost productivity because of employees excitement or weakened moral from the accident -overhead per injured employee that continues while the employee is not productive What are the costs of residual uncertainty? residual uncertainty is the level of risk that remains after individuals or organizations implement their RM programs -cost of this uncertainty is hard to measure -for individ - cost includes lost salary or forgone invest opportunities - for organiz - includes effect that uncertainty has on consumer, investors, and suppliers How does risk management practices differ between individuals and organizations? for individ - practice RM by buying insurance policies and contributing to savings plans for smaller org - RM is not usually a dedicated function, usually carried out by senior management for large org - the RM is conducted as part of a formalized RM program What is the difference in scope between traditional risk management and enterprise-wide risk management? -how does the focus of risk management differ between the 2? scope of traditional risk - is on losses generated by pure, as opposed to speculative risks scope of enterprise-wide RM - encompasses all types of risks with the intent of maximizing the org value TRM - focuses on managing safety, purchasing insurance, controlling financial recovery from losses generated by hazard EWRM - focuses on managing all of the org's key risks and opportunities with the intent of maximizing the org's value Define: tangible property - Intangible property - Real Property (realty) - Personal property - - prop that has a physical form - prop that has no physical form, like patent or copyright - is tangible prop consisting of land, all structures permanently attached to the land and whatever is growing on the land -personal prop is all tangible prop other than real prop Define: property loss exposure - Liability loss exposure - personnel loss exposure - net income loss exposure - - loss results from damage to prop in which the person has financial interest - loss results from claim alleging that the person or org is legally responsible for BI/PD -loss can result from key person's death, disability, retirement, or resignation that deprives org of their skill set - loss results from a reduction in net income, often the result of property, liability, or personnel loss List three elements necessary to describe a loss exposure 1. an asset exposed to a loss 2. cause of loss (also called a peril) 3. financial consequences of that loss What types of assets can be loss exposures for: -organization - -individual - org - property, investments, money that is owed to the org, intangible assets and HR ind - property, investments, money that is owed to the ind, cash, professional qualifications, a unique skill set, and valuable experience What are the 4 classifications of hazards? 1. moral hazard - loss resulting from a person acting dishonestly 2. morale hazard - loss resulting from careless or indifferent behavior 3. physical hazard - loss resulting from property persons or organization 4. legal hazard - loss resulting from legal environment (i.e. courts in some district award higher settlements) What are three factors that affect the financial consequence of a loss? 1. type of loss exposure 2. the cause of loss 3. the frequency and severity What are the costs used to compute the overall financial consequence of risk for a given asset or activity? -cost of losses no reimbursed by the insurance or other external sources -cost of insurance premium -cost of external sources of funds, such as interest payments to lenders or transaction costs associated with the non insurance indemnity -cost of measures to prevent or deuce the size of potential losses -cost of implementing and administering risk management What are ways the RM benefits each of the following: -individuals -organizations -society -thru preserving financial resource by reducing and ind expected losses and thru reducing anxiety -by preserving financial resources, providing a sense of confidence that capital is protected against future costs, reducing the deterrence effect of risk - by lowering expected losses and improving allocation of productive resources Describe four pre-loss operational goals supported by an effective and efficient RM program? 1. economy of operations - organization should not incur substantial costs in exchange for slight benefits 2. tolerable uncertainty - keeping manager uncertainty about losses at a tolerable level 3. legality - satisfying legal obligations 4. social responsibility - acting ethically and fulfilling obligations to the community and society as a whole List six possible post-loss goals for an organization after a significant foreseeable loss has occured - survival -continuity of operations -profitability -earnings stability, -social responsibility, -growth What are the steps an organization might take to forestall an intolerable shut-down and ensure continuous operations after a loss? 1. identify activities whose interruptions cannot be tolerated 2. identify the types of events that could interrupt such activities 3. determine the standby resources that nust be immediately available to counter the effect of those losses 4. ensure the availability of the standby resources at even the most unlikely and difficult times How does the following RM program goals conflict with pre-losss goal of economy of operations? -Tolerable uncertainty -legality -social responsibility -because the cost of RM efforts necessary to reduce uncert. to a tolerable level may be excessive -because some required safety standards could require substantial expense to implement -because obligations such as a charitable contribution may be expensive What are the six steps in the RM process? 1. identify loss exposure 2. analyze loss exp 3. examine feasibility of rm techniques 4. selecting the appropriate rm tech 5. implementing selected rm tech 6. monitoring results and revising the rm program What are the four dimensions used to analyze a loss exposure? -loss frequency -loss severity -total dollar loss -timing Describe how an organization uses risk control and risk financial techniques to manage loss exposures risk control - reduces severity and frequency rick financing - generates funds to finance losses that risk control tech cannot entirely prevent or reduce What are the forecasts an organization might use to analyze costs of a RM technique -a forecast of the dimensions of expected losses - a forecast, for each feasibility combination of rm tech, of the effect on the frequency, severity, and time of these expected losses - a forecast of the after-tax costs involved in applying various rm tech What are the 4 steps required to monitor and revise a RM program? 1. establishing standard of acceptable performance 2. comparing actual results with these standards 3. correcting substandard performance or revising standards that prove to be unrealistic 4. evaluating standard that have been substantially exceed CHAPTER 2 CHAPTER 2 What types of internal and external documents an organization may use to analyze loss exposures internal docs- financial statements, accounting records, contracts, insurance policies, policy and procedure manuals, flowcharts and org charts, and loss histories what are the advantages and disadvantages of using questionnaires in assessing loss exposures? adv - that they capture more descriptive info than checklists disadv- that they typically require considerable expense, time, and effort to complete and may still not identify all loss exposures Describe how an organization uses the following documents to identify loss exposures: 1. financial statements 2. contracts 3. insurance policies 4. organization policies and records 5. flowcharts and organization charts 6. loss histories 1. balance sheet, income statement, statement of cash flows, and supporting statements help identify major categories of current and past loss exposures and can be used to identify future plans that could lead to new loss exposures. ex - asset entries on a balance sheet indicate prop values that could be reduced by loss. 2. contracts help identify prop and liab loss exp assumed or transferred by contract and help determine who has assumed responsibility 3. insurance policeis can reveal many of the org's insurable loss exp Describe how an organization uses the following documents to identify loss exposures: 4. organization policies and records 5. flowcharts and organization charts 6. loss histories 4. Corporate by-laws, board minutes, employee manuals, procedure manuals, mission statements, and rm policies may identify existing loss exposures and indicate impending changes that may create new loss exposures 5. Flowcharts show the nature and use of resources involved in an org's operations and the sequence of and relationships between the operations. May also reveal bottlenecks where losses could have substantial effects on business ops. An org chart helps identify key personnel for whom the org may have a personnel loss exp 6. an org's loss history, or that of a comparable org, can indicate current or future loss exp describe how a compliance review may facilitate the identification of loss exposures -determines an org's compliance with local, state, and federal statutes and regs and can help organization minimize or avoid liability loss exp associated with non compliance What relevant data does an org use to asses the following types of loss exposures: 1. prop loss 2. liability loss 3. personnel losses 4. net income losses -data should include prop's repair or replacement cost at the time it is to be restored -Data should relate to past claims that are substantially the same as the potential future claims being assessed -data must relate to personnel with similar experience and expertise as those being considered as future loss exposures -data should involve similar reductions in revenue and similar additional expenses to those of the loss exposures under consideration [Show Less]
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CPCU 500 questions and answers 100% correct
Risk the uncertainty about outcomes, with the possibility that some of the outcomes can be negative. Quantified by knowing the probability of the possible... [Show More] outcomes Probability the likelihood that an outcome or event will occur. Probabilities are stated as a decimal figure, a percentage, or a fraction. 00:02 01:11 What are the 2 elements associated with risk? uncertainty of outcome + possibility of negative outcome Pure Risk a chance of loss or no loss, but no chance of gain. Speculative Risk a chance of gain or loss (investment). Price Risk the uncertainty over the size of cash flows resulting from possible changes in the cost of raw materials and other inputs (lumber, gas, or electricity) Credit Risk the risk that customers and other debtors will fail to make promised payments. Distinguish Diversifiable vs. Nondiversifiable Risk Diversifiable risks can be managed by spreading (such as purchasing multiple businesses). Nondiversifiable risks are correlated so that their gains or losses tend to occur simultaneously rather than randomly. What are the 4 quadrants of risk? Hazard, Operational, Financial, and Strategic risk Hazard a condition that increases the frequency or severity of a loss. What are the classifications of risk? pure vs. speculative. subjective vs. objective. diversifiable vs. nondiversifiable. The quadrants of risk focus on... the source of risk and who has traditionally managed it 00:33 01:11 The classifications of risk focus on... some aspect of the risk itself 3 components of Financial consequences or risk? Expected cost of losses or gains. Expenditures on risk mgmt. Cost of residual uncertainty. Residual Uncertainty the amount of risk that remains after individuals or organizations implement their risk mgmt plans. (need to study more) Risk Management any effort to economically deal with uncertainty of outcomes (risk). Enterprise Risk Management (ERM) is an approach to managing all of an org's key risks and opportunities, pure and speculative, with the intent of maximizing the org's value. Loss Exposure any condition or situation that presents a possibility of loss, whether or not an actual loss occurs. 4 Types of Loss Exposures Property, Liability, Personnel, and Net Income What are the 3 elements of loss exposures? an asset exposed to loss. cause of loss (peril). financial consequences of the loss. Net Income losses are usually associated with what? Property losses For insurance and traditional risk management purposes, loss exposures are typically divided into the following four types: property, liability, personnel, and net income. A cause of loss is an element of a: loss exposure Physical Hazard A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss. Pre-Loss Goals 1. Economy of Operations 2. Tolerable uncertainty 3. Legality 4. Social Responsibility Post-Loss Goals 1. Survival 2. Continuity of Operations 3. Profitability 4. Earnings Stability 5. Social Responsibility 6. Growth [Show Less]
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The Things They Carried Study Guide questions and answers 100% correct
Why do many of the men hang onto objects that belonged to women they knew from back home? To give them comfort, hope, a sense of home, and something to re... [Show More] turn to. Who straps Ted Lavender's puppy to a Claymore mine? Azar. How does Tim O'Brein cope with his post-traumatic stress disorder? By writing war stories. How did Elroy save Tim O'Brien's life? He offered what O'Brein needed without question and took him in, including giving him the space really needed. What does Henry Dobbins carry around his neck for good luck? His girlfriend's pantyhose. Which soldier kills the baby water buffalo? Rat Kiley. Why does Tim O'Brein go into such detail when explaining the things that each soldier carries? So they sound human, and the reader understands the weight each soldier carried physically and emotionally. What are some examples of theme in the novel? Courage, Escapism, Fear, Revenge, Burdens, Innocence. What is the most important thing when it comes to storytelling to Tim O'Brein? Happening Truth. What Does Tim O'Brein do for his summer job before he goes to Vietnam? A "Declotter" at a Armour Meatpakcing Plant. Why does Tim O'Brein call himself a coward when he chooses to go fight in Vietnam? He didn't run or stand up for what he believed in. What does Ted Lavender carry with him? Tranquilizers and Marijuana (Dope) What does Kiowa carry with him? Illustrated New Testament (Bible) Who is Tim O'Brein's first love from 4th grade and what is significant about her story? Linda. Her story ties into the overall sadness of how stories are told and how O'Brein reminisces on it. Who breaks Lee Strunk's nose? Dave Jensen. [Show Less]
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