New CPCU 520 Latest Exam Test Bank 2025 With 350

pg. 1 New CPCU 520 Latest Exam Test Bank 2025 With 350 Real Exam Prep Questions And Correct Answers | CPCU Test 2025 | CPCU – Chartered Property Casualty Underwriter Exam (Newest)

Premium auditor Ralph became concerned about an increase in hazard from the insured's chemical operations. In an audit Ralph discovered the plant had added a product that could greatly increase the products liability exposure. Due to the misclassification of the current loss exposures, the information discovered by Ralph is most useful to which one of the following insurer functions?

Select one:

• Risk control
• Underwriting
• Marketing and sales
• Claims
• Underwriting

Insurance pools operate either as a syndicate or through

Select one:

• Reciprocal insurers.
• Surplus lines insurers.
• Stock insurers.
• Reinsurance.
• Reinsurance.

Allied Insurer has a $450,000 xs $150,000 per risk excess of loss reinsurance treaty with Omega Reinsurer. An insured with a limit of $1,000,000 sustains the

following losses:

Loss 1:$125,000

Loss 2:$500,000

Loss 3:$850,000

How much will Omega Reinsurer pay for Loss 3? 1 / 4

pg. 2

Select one:

A. $150,000

B. $212,500

C. $450,000

D. $650,000

C. $450,000

The first 150,000 will be retained, the next 450,000 will be reinsured, and the next 250,000 will also be retained. Omega Reinsurer will pay $450,000 for Loss 3.

An insurer has the following year-end financial results:

Written premiums$100,000,000 Earned premiums$ 95,000,000 Incurred underwriting expenses$ 40,000,000 Incurred losses (including LAE)$ 76,000,000

Based on this information, which one of the following is the insurer's loss ratio?

Select one:

• 76 percent
• 80 percent
• 116 percent
• 125 percent
• 80 percent

The loss ratio = incurred losses/earned premiums. In this case:

$76,000,000/$95,000,000 = 0.80 or 80 percent Treaty reinsurance provides primary insurers with the

Select one:

• Option to reinsure identified classes of business.
• Certainty needed to formulate underwriting policy and develop underwriting

guidelines.

• Opportunity to cede individual loss exposures as it chooses.
• Necessary large-line capacity for exposures that exceed the facultative

reinsurance limits. 2 / 4

pg. 3

• Certainty needed to formulate underwriting policy and develop underwriting

guidelines.Benjamin has his home insured with Westfork Mutual under an HO-3 policy for $100,000. He is the named insured on the policy. There are three other residents of

the home: Maria, Benjamin's mother; Daniel, his nephew; and Cian, a family

friend. An accidental fire causes damage to the home and to personal property of all four occupants. Benjamin reports the loss to Westfork and Fatima, a claim representative, is assigned the claim. Which one of the following will most likely be Fatima's principal concern when analyzing coverage for the loss?

Select one:

• Whether any policy exclusions preclude coverage for the loss
• Whether Maria's, Daniel's, and Cian's property would be covered
• Whether fire is a covered cause of loss under the H0-3 policy
• Whether the limit of insurance is sufficient to cover the damage
• Whether Maria's, Daniel's, and Cian's property would be covered

Workers compensation insurance benefits are established by statute. If legislation or a court decision changes these benefits, past losses must be adjusted to

Select one:

• A state specific percentage of benefits level.
• Mandatory minimum benefit requirements.
• Current inflation levels.
• Current benefit levels.
• Current benefit levels.

Which one of the following statements is correct?

Select one:

• Some states require insurance consultants who give advice or opinions about

polices to be licensed.

• Licensing requirements for insurance brokers are standardized among all the

states.

• Public adjusters, who represent insureds for a fee, are not subject to licensing

requirements.

• Insurance agents are not subject to licensing requirements in most states. 3 / 4

pg. 4

• Some states require insurance consultants who give advice or opinions about

polices to be licensed.ABC Insurance Company's actuary has calculated the pure premium for the company's homeowner's insurance line as $40. Fixed expenses for the line are $2.50 per exposure unit and variable expenses are 12 percent. The company's loading for profits and contingencies is 5 percent. Using the pure premium ratemaking method and rounding to the nearest whole dollar, which one of the following is the rate per exposure unit that ABC needs to charge?

Select one:

A. $45

B. $47

C. $51

D. $58

C. $51

The rate per exposure unit that ABC needs to charge is $51, calculated as (pure premium plus expenses per exposure unit) divided by (1 minus variable expense percentage minus profit and contingencies factor). In this case, the rate per exposure = ($40+$2.50) / (1-0.12-0.05) The rate multiplied by the appropriate number of exposure units results in the

Select one:

• Pure premium.
• Loss cost multiplier.
• Premium.
• Total earned exposure units.
• Premium.

Every insurer has its own set of unique challenges, which can hinder the complete alignment of information technology (IT) and business strategies. Which one of the following statements best describes how an organization can overcome one of those challenges?

Select one:

• Have IT staff guide internal and external customers through the learning curve

and encourage acceptance of IT initiatives.

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