Chartered Property Casualty Underwriter (CPCU) 500 Practice Exam

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• What is the practical application of the relationship between the expected value and the standard deviation of a normal distribution?
• Which statement is correct with respect to evaluating the efficiency of alternative risk control measures?
• How is scenario analysis used in policy analysis?
• Which policy provides excess coverage and might cover exposures not included in underlying policies?
• Which development has increased the appeal of onshore captive domiciles?
• 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 parking lot at the mall are all examples of
• The Shelton Manufacturing scenario illustrates which type of capital market solution?
• Which statement about insurance surveys is true?
• In commercial property insurance, special-form coverage provides protection against causes of loss that are
• Premises liability exposure concerns injuries to customers on the business premises. Which option best captures this concept?
• Generally, it is difficult to establish market value on property when the property
• Galliano Insurance Agency wants to identify new products by finding groups with common and previously unknown characteristics. Which data mining technique should it use?
• Business continuity is designed to meet the primary post-loss goal of continuity of operation and the:
• Which type of policy violates the principle of indemnity?
• Self-insurance is usually combined with transfer, such as
• In theory, liability losses are limited only by the
• Which statement best identifies types of organizations that should be concerned with personnel loss exposures from a manager leaving for another organization?
• Under The Prouty Approach of analyzing loss exposures, the four broad categories of loss frequency and the three loss severity categories are
• The step that immediately follows identifying loss exposures is
• In probability, increasing the number of independent exposure units generally improves forecast accuracy. Which choice best expresses this principle?
• The term for the weighted average of all possible outcomes in a theoretical probability distribution is:
• Which statement about risk control technique of separation is correct?
• Which term describes the consensus process by which the veracity of data is confirmed and verified?
• Liability entries on an organization's balance sheet are particularly useful to the risk professional for identifying which loss exposure?
• What term refers to the expensive and inefficient process of insuring low-severity small claims?
• Which clause in a property policy requires the insured to maintain a minimum level of insurance relative to value and reduces payout if underinsured?
• Finite risk insurance combines many of the advantages of
• Regarding the use of checklists and questionnaires with respect to loss exposures, which statement is true?
• In the context of secured lending, how is a secured lender best defined?
• With insurance-to-value provisions under homeowners and business owners policies, the amount payable will never be less than which of the following?
• With respect to identifying loss exposures, which statement about inspections is true?
• A risk management plan that considers all of the risks that an organization faces, including operational, financial, and strategic risks, is called
• Pre-loss policy analysis almost exclusively relies on which method to determine the extent of coverage?
• Which four criteria best describe loss data suitable for loss exposure analysis?
• COPE is an acronym for the basis used to examine commercial property loss exposures. The letter P in COPE represents
• If an organization has adequate in-house legal and accounting resources, which describes a key benefit of conducting compliance reviews?
• In a court of law, during policy analysis, which one of the following types of policies or forms is most difficult to interpret?
• Which option represents the essential public-sector risk management goal in the list?
• In Jim's Computer Repair scenario, the shop is in the role of
• Which statement about pools is correct?
• In risk management, what term describes the level of uncertainty a business is willing to accept to maintain earnings stability?
• Which pair of measures are most commonly cited as fundamental measures of central tendency?
• Which plan adjusts the premium for the current policy period to recognize the insured's actual losses during that period?
• Which term describes the network through which sensors and other smart products capture and transmit data?
• Which statement is true about the agreed value method of property valuation used in some policies?
• Which statement describes a funded risk transfer measure?
• Which statement is correct with respect to risk control techniques for net income loss exposures?
• Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He plans to drive it to special events at schools around the country where it will serve as a mobile billboard to promote his product. Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is Oscar's vehicle least likely to meet?
• When property is used to secure a loan, which parties are exposed to loss?
• Which of the following is least helpful for identifying bottlenecks in business processes?
• In risk management, which term refers to an employee whose loss would materially affect the company's prospects if they were unable to work?
• Which of the following statements is true with regard to the risk financing goal of maintaining an appropriate level of liquidity?
• Bailees must consider exposures of property held for others.
• The insuring agreement is typically associated with which policy section?
• Many states require a self-insurer to
• All of the following are considered risk control techniques, EXCEPT:
• Which statement about risk control effectiveness and cost is true?
• Which coverage category are company-specific preprinted forms most likely developed for?
• Which scenario best describes applying a descriptive approach?
• Private insurers are reluctant to provide windstorm insurance on coastal properties because the loss exposures fail to meet which criterion of ideally insurable exposures?
• To jointly reflect both frequency and severity of losses, these two components are combined into which type of distribution?
• What is the name of the policy provision that addresses the situation where recovery from a negligent third party overlaps with first-party insurance coverage?
• The two benefits of risk management affecting individuals, organizations, and society are: it preserves financial resources by reducing expected losses and it
• Perils are an important aspect of property insurance. Which statement about perils is correct?
• Which statement regarding probability is correct?
• What is the term for the process by which data accuracy is confirmed in distributed data systems?
• Insurance is a
• An empirical probability distribution is based on
• An organization that maintains a production site and an active backup site that functions as the primary site as needed is using which continuity plan strategy?
• Kendall Incorporated's diversification to reduce loss severity is indicated by which action?
• As part of an effective risk management program, which is essential?
• Which statement best describes the primary function of an insurance pool for its members?
• Which description best matches cluster analysis?
• Which risk control technique is most commonly applied to manage business risks by spreading exposure across products, markets, and geographies?
• In insurance terminology, equipment such as tractors, bulldozers, road graders, front-end loaders, and forklifts designed primarily for off-road use are considered to be
• Data credibility refers to the level of confidence that which of the following statements is true?
• Which term describes the method by which insurers decide the amount paid for a loss, often defined in the policy?
• Preprinted forms are typically interpreted as which type of contract?
• Capital market solutions can typically meet all of the following risk financing goals, EXCEPT
• What term describes a policy structure built from separate, modular components rather than a single form?
• All of the following are reasons insurers restrict the use of deductibles in liability insurance policies, EXCEPT:
• A self-insured organization needs a(n)
• When choosing deductible levels, what is the insured's primary objective?
• Loss exposure analysis emphasizes which elements?
• Manuscript forms often cause delays unless they are based on what approach?
• The development and implementation of a business continuity plan entails seven steps. Which of the following steps involves assessing what events may occur, when they will occur, and how they could affect achievement of key objectives?
• Which document may become part of the policy by reference, thereby incorporating its rules and rates?
• If the mortgaged property is destroyed, the mortgagor's loss is limited to what?
• Common risk financing goals for maximizing market value include which of the following?
• Understanding the business is the first step in the development of a business continuity plan. Understanding the business involves
• Information asymmetry occurs when the insured has more knowledge about the risk than the insurer.
• A building contractor uses lower grade materials than called for in the specifications for an office building. A balcony collapses a year after completion, injuring several employees and customers and causing damage to the building and contents. For the building construction company, this is an example of
• If two distributions have the same mean, the distribution with the larger standard deviation will have?
• Property loss risk control techniques are typically selected based on which consideration?
• Probabilities are stated as a decimal figure, a percentage, or a
• In a mortgage transaction, the borrower who uses the house as security is the
• After using the DICE method to determine coverage, what is the next step for the insurer?
• County Janitorial Service has contracted to clean restrooms in bars on a daily basis. The greatest liability exposure is most likely which of the following?
• Which risk control technique is most associated with maintaining operations after a disruption by having multiple sites or backup?
• A bailee relationship is characterized by
• With a settlement of 1,300,000 under a liability policy that has a 1,000,000 limit and a 100,000 self-insured retention (SIR), under normal circumstances, how much will the insurer pay?
• Which statement best describes the financial consequences of a property loss when handling it as a bailee?
• Which is particularly useful in vacant or temporarily unoccupied buildings?
• In a four-owner business with survivorship rights and insurable interest equal to the full value, this arrangement is commonly described as what form of ownership?
• 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
• Under a finite risk insurance agreement, a large part of the insured's premium
• Which risk control technique is more commonly applied to managing business risks rather than hazard risks?
• As dispersion decreases, the distribution becomes more peaked. Which option presents the correct peak position?
• Which statement about insurer's big data is true?
• What is the combined value of tires and equipment and supplies and furniture in the described scenario?
• What best describes residual uncertainty in risk management after controls are applied?
• The accuracy of theoretical probabilities depends on
• What is the typical effect of risk transfer on cash flow variability, according to investor perception?
• Which statement regarding probability is correct?
• Sara's auto accident may lead to recovery from her personal auto insurer or her employer's workers compensation insurer. This is an example of which other source of recovery?
• In evaluating the cost of risk for a facility, are insurance premiums included as a cost of risk?
• Inspections often identify loss exposures that a review of written descriptions would not reveal. Which group within the organization is best able to identify non obvious loss exposures to a person conducting an inspection?
• Which statement best describes the effect of a coinsurance penalty?
• Which statement about the timing dimension in the analysis of loss exposures is correct?
• Probability analysis is best suited for organizations that have
• Which two risk control techniques are directly aimed at reducing the severity of net income losses?
• With respect to the completeness of past loss data when estimating future loss exposures, which statement is correct?
• Which best describes a probability distribution?
• What is the principal advantage of risk transfer measures?
• Which continuity plan strategy involves maintaining a production site and an active backup site that can take over as primary when needed?
• According to Big Data 2.0, which statement best describes the current stage in insurance and risk management?
• Self-insurance is usually combined with transfer, such as
• In the DICE method, which item is NOT usually analyzed?
• Which statement best describes a retrospective rating plan's ability to help an organization comply with legal and regulatory requirements?
• Which statement about data science is correct?
• Spouses Ed and LeeAnn own a home. If Ed dies, LeeAnn will become the sole owner of the house. Both have insurable interest equal to the full value. This arrangement is an example of which form of ownership?
• Which of the following statements best describes how inspections contribute to identifying loss exposures?
• In the DICE method, the initial step is to examine the policy's Declarations.
• If Brenda has an insurable interest in the poem she wrote as property, the legal basis of her insurable interest arises from which principle?
• The second step in the risk management process is analyzing loss exposures. Which statement about this step is true?
• Internationally based American organizations' employees may be kidnapped or held for ransom primarily for which reasons?
• Most manuscript forms are:
• In property insurance, the term 'property in transit' refers to which?
• Which of the following is NOT usually analyzed as part of the DICE method?
• Calculate the coefficient of variation for a distribution with mean 20 and standard deviation 6.
• The basic structure of an insurance policy can be either a self-contained policy or a
• The insuring agreement is usually applied to which part of a policy?
• In a policy's insuring agreement, the insurer promises to pay to the insured, to pay on behalf of the insured, and to
• In risk financing, the term for moving loss exposure to another party, such as an insurer, is known as
• Which policy type is most suitable for coordinating coverages across multiple lines for a company with a large inventory?
• Which is a liability policy that provides excess coverage above underlying policies and may provide coverage not available, subject to a self-insured retention?
• Which instrument would be used to securitize insurance risk through the capital markets?
• Which of the following is a virtual ledger of data that has been verified, timestamped, encrypted, and protected against tampering?
• An injury to a customer due to a slip-and-fall in a store is an example of
• The goal of insurers that sell property insurance is to motivate each insured to buy a limit of insurance that approximates the full value. The benefit to the insured is that this ensures which outcome?
• Which technology is described as a tamper-evident ledger for verified data?
• Which of the following is a loss prevention technique that should help reduce the frequency of auto-related losses among company managers with company cars?
• Which of the following is an example of a noninsurance risk transfer measure?
• Ideally, loss exposures should be spread across a large number of similar exposure units within the same period.
• The possibility that a retailer might be sued because it used a customer's photo in a sales brochure without the customer's permission is what kind of liability exposure for the retailer?
• A hold harmless agreement is a
• What is a key legal/regulatory concern when obtaining mass information from social media?
• Which component is used to calculate the mean by weighting each observed outcome by its what?
• Which is true about loss reduction techniques?
• Which statement about the normal distribution is true?
• If dispersion decreases while the mean remains the same, the distribution becomes more concentrated around the mean. Which statement is true?
• Kid Smart manufacturing makes a line of children's toys. The possibility that a child may be injured because of a defect in a Kid Smart toy is what type of liability loss exposure for this toy manufacturer?
• Which of the following risk management program goals is an essential goal for all public entities?
• Which term describes the numerical likelihood of an event used to quantify risk?
• Cost-benefit analysis for loss control expenditures aims to compare the present value of projected losses avoided to the cost of controls.
• Which statement best describes a completed operations exposure?
• Which of the following is NOT typically used to identify loss exposures?
• Which statement best describes a probability distribution in the context of loss data?
• Which policy provision outlines what is covered and where and when coverage applies?
• Data science is particularly useful for which type of data?
• Which statement is correct with respect to empirical probability distributions?
• The coefficient of variation for a mean of 10,000 and standard deviation of 15,000 is:
• An organization must meet the standard of care that it owes to others in order to ensure that
• Which is a limitation of pre-loss policy analysis?
• Which statement about probability is true?
• Under US common-law, damages awarded compensate loss incurred as of the
• COPE is an acronym for the basis used to examine commercial property loss exposures. The letter P in COPE represents
• The extent to which a distribution is spread out rather than concentrated around the expected value is its:
• During on-site risk assessment, which option best describes property in transit?
• Which statement about the subjective risk example is most accurate?
• For most insureds, the primary source of information for generating scenarios for pre-loss policy analysis is?
• Which option best illustrates a peril?
• A key advantage of performing compliance reviews using in-house resources is that the review can be conducted mostly in-house.
• What is the term for a contractual agreement in which one party indemnifies another for liability arising on the leased premises?
• What is the important first step in a decision-making model?
• Which statement about inspections to identify loss exposures is true?
• A risk analyst seeking reliable loss forecasts should ensure the dataset possesses which of the following characteristics?
• Which loss reduction measure is a post-loss action?
• Which loss exposure is primarily concerned with harm resulting from a company's advertising or misrepresentation?
• Which term best describes the system of devices that collect and send data via interconnected networks?
• Property insurance policies not only protect the property owner but also generally protect a secured lender's interest in the financed property by
• Which statement best describes the use of hold-harmless agreements in risk financing?
• In the context of business continuity planning, which activity involves identifying potential exposures that could disrupt operations?
• Two steps of the risk management process, when combined, constitute the process of assessing loss exposures. For this reason, they are probably the two most important steps in the process. These two steps are identifying loss exposures and
• Which statement about finite risk insurance plans is correct?
• Which step involves assessing what events may occur, when they will occur, and how they could affect achievement of key objectives?
• Which one of the following potential financial consequences of liability loss exposures is often difficult to quantify?
• Which component of a policy is typically used to confirm the insured's duties after a loss and to set notice timelines?
• Delmond Manufacturing is opening a new manufacturing facility in a building that it purchased from a competitor. Using the information below, which represents the cost of risk of opening the new facility?
• Which statement about insurers' and risk managers' internal data is correct?
• Which statement best describes the role of standard deviation in risk estimation?
• Which statement is correct with respect to transfer's ability to meet risk financing goals?
• After identifying and analyzing loss exposures and evaluating and selecting the appropriate risk management techniques, the next step in the risk management process is to
• Retrospective rating plans require which level of administration by the insured?
• Which focuses on the minimum building design, construction, operation, and maintenance requirements necessary to assure occupants of a safe exit from the burning portion of a building?
• Which statement best describes captive programs?
• Diversification is used to spread risk across different products or markets. Which answer choice best describes this concept in risk control?
• Hazard risks, as categorized in risk quadrants, are typically managed by which group?
• To improve decision making, insurers often use data from both the organization and external sources. Which statement best reflects this practice?
• Which statement about guaranteed cost premiums is true?
• Which factor is essential for the law of large numbers to make losses predictable?
• For insurance purposes, why are money and securities treated separately from other contents?
• When pre-funding for retained future losses, which financial calculation is used to determine the present value?
• Which term describes a contractual agreement where one party agrees to hold the other party harmless from liability?
• Which statement best describes how a coinsurance penalty affects the payout when a property is underinsured?
• Hazard risks, as described in risk quadrants, are typically managed by which group?
• To accurately analyze loss exposures using data on past losses, which criteria should the data meet?
• Underwriting fire loss exposures typically assesses risk based on which four components?
• Which option describes distinguishing between critical and noncritical processes as part of understanding the business?
• In the Shelton Manufacturing example, what event triggers the bank's purchase of the company's shares?
• An ideally insurable loss exposure must be definite in which aspects?
• In a hold-harmless agreement where DHM agrees to assume liability for losses DHM's products cause to HBD, who is the indemnitee?
• One of the elements of risk is uncertainty. Which description best captures the type of uncertainty risk involves?
• In a policy with a self-insured retention, the insured is generally required to pay losses up to the retention amount before the insurer pays.
• A completed operations liability exposure differs from a products liability exposure in that it
• Which one of the following is the term used for the weighted average of all the possible outcomes in a theoretical probability distribution?
• Which correctly describes classification?
• Which of the following is measurable and quantifies risk?
• What is the goal of a loss prevention measure?
• Which category of policy provisions outlines what is covered and where and when coverage applies?
• Which one of the following limits multiple sources of recovery within property and liability insurance policies?
• If the standard deviation is high relative to the mean, what does this imply about the coefficient of variation?
• Which one of the following best explains how most smart products potentially improve risk management?
• Which describes the function of the service layer of a smart operation?
• Telematics data improves insurer results primarily for which type of insurance?
• Which of the following actions might best assuage analysts' concerns about the health and longevity of a company's key executive?
• In the context of business continuity planning, which activity best identifies which processes are essential to operations and how disruptions affect objectives?
• Which uninsurable loss exposure is listed as uninsurable besides war?
• Which risk control technique is typically used to prevent the start of a loss before it occurs?
• Following a liability incident, a business might suffer revenue decline because customers doubt product quality. This is an example of what?
• Which of the following types of captive typically operates as a formalized retention plan rather than a transfer measure?
• A vending company installed a new top of the line security system with an expectation of fewer thefts. Which statement is true?
• What is the practical effect of ensuring insurance coverage approaches the property’s full value in property insurance?
• What is a financial consequence of personnel losses for an organization?
• Which significant expense is typically saved by using a retrospective rating plan?
• Which statement is true about guaranteed cost premiums in general?
• For loss data analysis, which data organization approach is most appropriate when examining trends across multiple years?
• Three main theoretical concepts explain why ERM works. Which list is correct?
• Which is NOT a typical purpose of exclusions?
• In a rent-a-captive arrangement, does any risk transfer occur among the members?
• Calculating the standard deviation provides a measure of how sure Hank can be in his estimate of claims.
• Manuscript forms are most often produced how?
• In a symmetric distribution, the mean, median, and mode are equal.
• In pricing, which concept ensures that premiums reflect the risk the insured presents?
• Which of the following would indicate that an organization is using the risk control technique of duplication to reduce loss severity?
• Which of the following describes insurer's big data?
• In practice, high deductibles in liability policies are intended to accomplish which of the following?
• What is the purpose of data analytics for insurers?
• In the given business example, if the property is destroyed and not restored for a full month, what is the maximum possible loss?
• The first step of the DICE method is to examine the policy's
• Which best explains how most smart products potentially improve risk management?
• What kind of liability exposure does a manufacturer face if it emits contaminants that cause environmental impairment?
• Which depreciation concept best explains a valuation discrepancy where a laptop's sale price is much lower than its original cost after several years?
• Which type of risk assessment involves a global assessment of risks that could affect the organization's overall business goals?
• After using the DICE method to determine coverage, the next step for the insurer is to determine which of the following?
• In the material, an external change that increases competition is categorized as which type of risk?
• Which situation could cause an entire group of employees to leave the organization without a merger, layoff, or organizational change?
• Which of the following types of risk assessment involves a global assessment of risks that could affect the organization's overall business goals?
• A pool used for risk financing spreads losses among participants and can improve liquidity when adequately funded.
• Company Z carries a pollution liability policy with a $5,000,000 limit. The policy provides for defense costs in addition to the policy limit. If Company Z is found liable for a $4,500,000 judgment, and the insurer incurs $2,000,000 in defense costs, how much in total will the insurer pay for this claim?
• A net income loss exposure is a condition that presents the possibility of loss caused by a reduction in net income. In a given time period, net income equals revenue minus which items?
• An organization can best analyze its loss control expenditures by
• Which characteristic differentiates big data from traditional data?
• If the property is destroyed and not restored for an entire month, what is the time period over which the loss is considered?
• The cause of loss that occurs more frequently than death, causing personnel losses, is
• The use of data from sensors to react immediately to hazardous situations is known as which approach?
• Which statement about risk retention groups is consistent with the material?
• Which of the following is a way insurers and risk managers can use data science to improve results through data-driven decision making?
• For a company with a large inventory seeking coordinated coverage, which policy type is most appropriate?
• Which is a goal of risk control efforts?
• To determine the extent of coverage a policy provides, pre-loss policy analysis almost exclusively relies on
• Generally, in a liability claim, the burden of proof regarding what bodily injury or property damage losses were proximately caused by the insured belongs to the
• The statement that loss exposures that could interfere with the achievement of organizational goals are identified in the analysis step is
• Which factor makes it difficult to estimate market value for property that has had few recent transactions?
• Which data mining technique is best for grouping individuals by similarity without prior labeling?
• What is the most important reason for risk management and insurance professionals to learn about data analytics?
• Which statement is correct regarding how a large deductible plan compares with guaranteed cost in meeting the various risk financing goals?
• Which of the following best describes the purpose of a declarations page?
• Which continuity plan strategy uses a production site with an active backup site that functions as the primary site as needed?
• What is the most common violation of the concept of utmost good faith in insurance policies?
• Which statement is true regarding risk management efforts on the part of individuals, organizations, and society in general?
• Which of the following is an example of an extra expense?
• All for-profit organizations are exposed to net income losses. Net income is defined as which of the following?
• Which quadrant is associated with long-term goals and competitive positioning?
• Which risk control technique is more commonly applied to managing business risks, rather than hazard risks?
• Which statement is true regarding large deductible plans?
• Which clause limits multiple recovery by sharing risk across policies?
• Which statement is true regarding the use of checklists and questionnaires to identify loss exposures?
• The consensus process by which the veracity of data is confirmed and verified is known as?
• Risk is a term that is regularly used and that is generally understood in context. As used in this discussion, which one of the following is one of the two elements within the definition of risk?
• Which one of the primary advantages of using retention as a risk financing measure to help an organization meet its risk financing goals?
• Company G's risk related to product design and changing customer demand is classified under which quadrant of risk?
• Which statement about evaluating the efficiency of risk control measures is correct?
• Which strategy for addressing a disruption entails risk controls and plans to reduce, minimize, or divert any loss?
• An auto dealer's showroom is destroyed by fire and the dealer has to temporarily rent an adjacent building to use as a showroom. This is an example of?
• Which statement best describes the focus of the four risk quadrants?
• An 80 percent coinsurance clause applies: replacement cost is 100,000; insured carries 90,000; loss is 20,000. How much will be paid?
• Which capital market solution involves transferring insurance risk to investors via securities?
• In determining the optimal risk financing approach, retention is most associated with which objective?
• From an investor's perspective, which of the following is an advantage of insurance-linked securities?
• If net income declines due to higher expenses, which financial performance measure is most directly affected?
• During monitoring and revision, which activity involves comparing actual results with the established standards?
• Ideally insurable loss exposures are subject to losses that
• Which advantage of risk transfer is valued by investors?
• When developing loss severity distributions, risk professionals should organize loss data by
• The difference between an organization's total revenues and its total expenses is called what?
• When Joshua purchased his home, he did not tell his insurer that he kept flammable chemicals in his basement for use in a hobby. Joshua is aware that storing the chemicals increases the potential for loss to his home. The fact that the insurer is not aware of this exposure is an example of which of the following?
• In property insurance, which factor justifies treating wall-to-wall carpeting as part of the building?
• Which of the following is a direct example of replacement costs in personnel losses?
• Diversification in risk management refers to which term?
• Organizations find it difficult to establish a benchmark because it is difficult to assign a specific value to the
• Many laws and regulations require organizations to implement specific risk control measures. Which statement is true?
• Which risk control technique reduces the potential impact of a single event by ensuring redundancy across independent resources?
• A protected cell company is best described as
• The most common coinsurance percentages for buildings and business personal property are 90 percent, 100 percent, and which other percentage?
• Which document best helps to identify bottlenecks in an organization's operations that might present critical loss exposures?
• A trenching machine installs fiber and later a community member is injured by the trench area. This is an example of a liability loss exposure arising out of
• To accurately analyze loss exposures using data on past losses, the data should meet certain criteria. Which list reflects those criteria?
• Which statement best describes the difference between retrospective rating and guaranteed cost?
• Telematics data is used to improve results for which type of insurance?
• Which step in monitoring and revising the risk management program refers to a proper standard that includes specifications for how results or performance will be measured, such as target activity levels or results?
• In loss recovery planning, which description best fits 'extra expense' coverage?
• If a liability claim goes to trial and the court awards a judgment that exceeds policy limits, who pays the excess?
• Which statement best describes fortuitous loss exposures?
• Under a 90 percent coinsurance arrangement, with replacement cost 100,000, insured 90,000, and a 20,000 loss, how much is paid?
• Under The Prouty Approach, the four broad categories of loss frequency and the three loss severity categories are?
• Which statement best describes risk control techniques for property loss exposures?
• In a finite risk arrangement, a portion of the premium is allocated to fund the insured's own losses.
• Which describes the purpose of pre-loss policy analysis?
• What strategy is commonly used to manage diversifiable risks?
• Which risk management technique should be considered when the expected value of the losses from an activity outweighs the expected benefits of that activity?
• Which network enables sensors and other smart products to capture and transmit data?
• Kendall Incorporated is considering using a pool to meet its risk financing goals, one of which is maintaining liquidity. Which statement best describes how a pool can help achieve this goal?
• In property risk management, why is external exposure considered when assessing fire loss exposures?
• What should an organization do before using a hold-harmless agreement as a risk financing measure?
• Which statement about enterprise risk management (ERM) is true?
• When Joshua purchased his home, he did not tell his insurer that he kept flammable chemicals in his basement for use in a hobby. Joshua is aware that storing the chemicals increases the potential for loss to his home. The fact that the insurer is not aware of this exposure is an example of which one of the following?
• Calculating the present value of a future amount is known as
• After completing a residential wiring project, the electrician's potential liability exposure most closely fits which category?
• Which one of the following best describes the function of the service layer of a smart operation?
• Net income losses can be caused by which of the following?
• If a claim totals 600,000 with a 100,000 SIR and a 1,000,000 limit, how much will the insurer pay?
• Which statement best reflects a desirable property of insurable loss exposures?
• In the DICE method, which item is not typically analyzed?
• Which description best captures data science as presented?
• What is a primary purpose of policy exclusions?
• Anyone who owns or occupies property has which type of loss exposure?
• When a business suffers loss of income following a liability suit that causes customers to lose confidence in the business' products, what type of loss has the business suffered?
• A commercial building may contain furniture, machinery and equipment, raw materials, and finished products. Which term is generally used in property insurance policies to refer to all these types of property?
• Which of the following is the best example of a speculative risk?
• Net income loss exposure is defined as the potential loss from a reduction in net income. In a given period, net income equals revenue minus which items?
• Which one of the following is an element of a loss exposure?
• Which statement correctly identifies the first step in developing a business continuity plan?
• What is the single largest impediment to successful implementation of an ERM program?
• Which form is created to meet the needs of a single insured rather than the broad market?
• Which one of the following is a major factor in determining the level of indemnity the insured receives from an insurance policy?
• Net income becomes negative if which condition occurs?
• Which retention option is described as funding losses without setting aside funds in advance?
• In a large deductible plan, who pays and adjusts losses up to the deductible?
• Which statement best describes the purpose of risk control techniques?
• Which term describes cross-policy coordination when two policies from different lines cover the same loss?
• Which one of the following uses infrared light to detect nearby objects?
• Which can be applied over time to refine a model to better predict results?
• What is the total value of all property described in the scenario?
• Under the agreed value method, if there is a total loss, what happens?
• When developing loss severity distributions, risk professionals should organize loss data by which attribute?
• Which statement is correct about insurable loss exposures?
• Which statement about property loss exposures is correct?
• Which statement is true regarding endorsements and other related documents?
• A pool can meet the risk financing goal of minimizing the cost of risk through
• Empirical probability distributions require which property?
• Risk involves the possibility of a negative outcome. Possibility means
• Under a deductible, if a 50,000 claim is made with a 10,000 deductible, how much does the insurer pay (assuming no other limits)?
• The normal distribution curve is:
• What liability exposure do attorneys, physicians, architects, and engineers face when a client is injured due to a failure to meet the standard of care?
• A plan that considers operational, financial, and strategic risks across an organization is called
• In a jewelry store theft coverage for customers' jewelry left for repair, duplication with homeowners coverage is an example of which other source of recovery?
• What defines dispersion in a distribution?
• Which risk control technique is most associated with creating redundancy across locations or systems to reduce loss severity?
• When evaluating the efficiency of alternative risk control measures, which approach can determine which is most efficient?
• Which statement best describes ERM in terms of stakeholder involvement?
• What is the primary purpose of a business continuity plan?
• In a liability policy, the Self-Insured Retention (SIR) represents the amount the insured must pay before coverage begins. Which statement best describes its role?
• Diversifying loss exposures tends to reduce the accuracy of loss estimates, and increases the uncertainty regarding future losses.
• Regarding the mean, which statement is correct?
• In some policies, how are defense costs treated in relation to limits?
• How do property insurance policies typically protect a secured lender's interest in financed property?
• Which statement about dispersion is true?
• Insurance deals primarily with loss exposures that are fortuitous. Which statement best characterizes fortuitous losses?
• Which statement best describes loss prevention as a risk control technique?
• Which method is used to evaluate variability around the mean in risk management?
• Which statement best describes guaranteed cost insurance's impact on the cost of risk?
• The DICE method is used in pre-loss policy analysis to determine the extent of coverage.
• Which one of the following statements is true regarding the relationship between the size of the property policy deductible and the premium reduction?
• Which distribution shape has mean = median = mode?
• Risk management programs should
• A risk management program must be monitored and periodically revised, and that revision involves four steps. Which of the following is one of those four steps?
• Advertising exposure arises when a retailer uses a customer's image in promotional materials without permission. This is an example of which liability exposure?
• Which method is used to evaluate the variability around the mean in insurance and risk management?
• A hotel owner is concerned about responsibility for guest property. The insurable interest in that property arises from which legal basis?
• A turnover rate well above industry averages is most likely an indicator of which issue?
• The additional cost of printing the newspaper on another company's press is an example of which type of expense?
• Which statement about hold-harmless agreements aligns with risk financing goals?
• Capital market solutions manage uncertainty and pay for the negative consequences of a loss by
• In risk management, which approach helps reduce exposure by broadening product lines and markets?
• Which data source is commonly used to generate scenarios for pre-loss policy analysis?
• One purpose of exclusions is to eliminate coverages not needed by the typical purchaser. This helps avoid which outcome?
• Which data organization is the foundation for developing loss severity distributions or loss trends over time?
• Understanding cumulative probability distribution helps evaluate the effect of:
• Data science can reveal insights from internal data that have not been used. Which statement best captures this advantage?
• Aligning risks with the organization's risk appetite defines which concept?
• In a close corporation, why is the death of a shareholder particularly significant?
• Conrad Sales Company's tracking devices illustrate which risk management technique?
• Which factor is a major determinant of the level of indemnity the insured receives from an insurance policy?
• The term 'insuring agreement' is usually applied to statements that introduce a policy's
• Which of the following is a data mining technique?
• Which one of the following limits multiple sources of recovery within property and liability insurance policies?
• Probability analysis is particularly effective for projecting losses in organizations that have
• Increasing dispersion around the mean results in what change to concentration?
• Which one of the following planned retention measures is appropriate for funding losses with a low expected value, but becomes less advisable as the expected value of losses gets larger?
• Which characteristic best describes kidnapping and ransom exposure for an international organization?
• Which data mining technique is used to predict a numerical value given characteristics of each member of a dataset?
• In the context of identifying loss exposures, hazard analysis is a method
• Significant deductibles are most common with which type of liability policy?
• Which product has led to significant improvements in supply chain management by allowing the immediate identification of discrepancies and interruptions as well as timely actions?
• Which action might help assuage analysts' concerns about a CEO's health and longevity in a multi-billion dollar financial services firm?
• Which risk financing measure is well suited for a manufacturing organization that is concerned about volatility in commodity prices?
• Which of the following is not typically considered a category of key personnel loss exposure?
• Examples of risk control loss reduction techniques that primarily apply to occupancy?
• Which cost is part of the overall financial consequences of risk?
• Which one of the following statements is true?
• Which one of the following strategies for addressing a disruption of operations entails the implementation of risk controls and plans to reduce, minimize, or divert any loss?
• To avoid misestimating loss projections, historical loss data should be expressed in
• In deciding among a variety of deductible levels under property insurance policies, an insured must balance the benefits of premium reduction with the need to
• In the staffing scenario, with mean 2000, standard deviation 1000, and each representative handling 600 claims per year, how many representatives are needed to achieve at least 80 percent certainty?
• The theoretical probability of a head on a coin toss is 50 percent. Based on the law of large numbers, which number of coin tosses is most likely to result in an empirical frequency of 50 percent?
• Which one of the following is an advantage of using radio frequency identification (RFID) for supply chain management?
• Which statement best describes the role of capital market solutions in risk financing?
• Separation, duplication, and diversification are considered to be which type of techniques?
• A large number of similar exposure units helps insurers achieve what?
• Which term describes the network of devices that collect and share data via the internet?
• Separation, duplication, and diversification are considered to be which type of techniques?
• The owner of Harry's Hardware Store is interested in creating a risk management process to help mitigate risk. Harry has already developed much of the process and is currently working to purchase loss reduction devices and contract for loss prevention services. This is an example of which step in the risk management process?
• Catastrophe bonds are used to
• An owner of a valuable sculpture suffers accidental damage that is repaired; which statement best describes the financial consequences?
• What condition triggers payment under most replacement cost property insurance policies?
• Which data mining technique is described as discovering relationships among variables in large databases?
• The term 'net income losses' is usually associated with which type of losses?
• Which is usually the single largest impediment to successful implementation of enterprise risk management (ERM)?
• Which of the following is an example of a wearable?
• Which term describes the practice of insuring many small claims in aggregate, often leading to higher costs?
• A risk retention group is best described as
• Which of the following risk control techniques could be considered both a loss reduction and a loss prevention measure?
• Billy owns a beach front cottage which has become his primary residence. Billy's primary concern is that his home will be hit by a hurricane and badly damaged or even destroyed. For Billy, this hurricane risk is a
• Which of the following is an example of a fortuitous loss?
• Net income losses can be caused by which of the following?
• Commercial general liability insurance policies written on an occurrence basis apply to bodily injury and property damage that occurs during the policy period. This provision supports the principle that insurable loss exposures must ideally be
• Sean recently started a small consulting practice. He is the only employee and sole revenue generator. He worries that if he becomes disabled, there will be no revenue. Which goal best identifies Sean's concerns?
• What is Shelton Manufacturing's corporate status as described?
• Which of the following would be considered a personnel loss exposure?
• Which factor best describes the role of constant dollars in loss data adjustment?
• In choosing deductible levels, which statement best reflects the trade-off?
• Which of the following statements is true with respect to empirical probability distributions?
• Which term describes the process of the insurer seeking reimbursement from a negligent third party after paying a claim?
• Which of the following statements is true regarding central tendency when comparing the characteristics of probability distributions?
• In a transaction to purchase insurance, the insured's premium should be commensurate with the risk it presents to the insurer. This is often called the
• In Fred's maintenance example, probability analysis helps determine:
• For insurers to utilize pooling most effectively and present catastrophic losses, the insured exposure units need to be
• Completed operations loss exposure refers to liability arising from work performed for clients after the project is finished. Which of the following best reflects this concept?
• An empirical probability distribution is primarily based on
• Martin, Sara, Adam, and Laura concurrently own and operate a riding stable. Each has survivorship rights and insurable interest worth the full value. This type of ownership is referred to as
• Which statement about the risk involved in George's inheritance options is true?
• An empirical probability distribution is based on
• Premises liability is most closely associated with which scenario?
• Another term for cause of loss in property insurance terminology is
• When property is lost or damaged, there could be indirect losses to the business. This latter type of loss is known as?
• Under a large deductible plan, the insured usually must provide the insurer with a letter of credit to
• A neighbor has sued Andy for property damage that is potentially covered under Andy's homeowners liability coverage. Even if this lawsuit is found to be groundless, Andy's insurer will still probably be obligated to pay
• Which best describes effective and efficient risk control measures?
• A predictive approach to data analytics involves
• With guaranteed cost insurance, the premium
• For most insureds, the primary source of information for generating scenarios for pre-loss policy analysis is
• Which statement about compliance reviews is true?
• Products liability loss exposures arise from injuries or damage that result from an organization's
• The additional cost of printing the newspaper on another company's press after their press is damaged is best categorized as which?
• Which continuity plan strategy uses a production site with an active backup site that can immediately take over operations as needed?
• Hardware Store faces increased competition due to a new highway. According to the quadrants of risk, this risk falls into which category?
• Which statement best describes a peril in property insurance?
• What is the primary purpose of extra expense coverage?
• Josephine Redmond is the sole proprietor of Dream Quilts, Inc., operating out of three branch offices with 17 employees. What happens to the business if she dies or retires?
• A nonstandard form drafted or adapted by one insurer is sometimes called what?
• The relationships among the mean, median, and mode for any data set are illustrated by the distribution's
• Restricting the number of key employees who can travel on the same aircraft is an example of which risk control technique?
• When classifying risk as diversifiable or nondiversifiable, which statement is true?
• When a business interruption requires using a temporary location to continue operations, the associated cost is classified as what?
• Understanding the business is the first step in the development of a business continuity plan. Which activity is described as part of understanding the business?
• Which of the following is considered an advantage of the use of retention as a risk financing technique?
• Which term describes a rating plan in which the insured receives a premium reduction for reimbursing the insurer for losses up to a substantial per-occurrence limit?
• Which statement is correct regarding applying risk control techniques to various types of loss exposures?
• Which statement explains why finite risk plans may not preserve liquidity for Cara's goal?
• Recruiting, interviewing, and training a new employee who replaces a worker who has just resigned are examples of which one of the following types of financial consequences flowing from personnel losses?
• Probability analysis would be most reliable for projecting losses in an organization
• Which of the following is true regarding risk control techniques?
• What is the first step in the risk management process?
• If losses are not fortuitous, what is the likely effect on premiums?
• Tania's use of social media is an example of which data type?
• In the described business scenario, which asset is valued at $100,000?
• Which risk management technique should be considered when the expected value of losses from an activity outweighs the expected benefits?
• Which statement most accurately describes the effect of duplication on loss characteristics?
• Business continuity is designed to meet both the primary post-loss goal of continuity of operation and the post-loss goal of what?
• Why are involuntary employee separations generally not considered personnel loss exposures?
• In a normal distribution, which statement correctly describes the proportion of outcomes that lie beyond two standard deviations from the mean?
• To understand risk, one needs to know the probability of an outcome or event occurring. Which of the following statements is correct with respect to probability?
• Which action best mitigates risks associated with a single leader's health by ensuring continuity of leadership?
• In risk quadrants, what determines who traditionally manages a given risk?
• Which statement best defines the expected value in a theoretical distribution?
• Which of the following describes the two ways loss data must be consistent to accurately estimate future loss exposures?
• Which one of the following is an example of a fortuitous loss?
• A company with a large inventory and a need to coordinate provisions across forms to minimize coverage gaps should consider which type of policy?
• Which statement is correct with respect to property loss exposures?
• Which description best captures the law of large numbers?
• Which loss exposure best describes a plumber who might start a fire at a customer's home while soldering a pipe?
• Which risk financing measure can reduce the organization's cost of risk over time but has significant start-up costs relative to the others?
• For property insurance purposes, wall-to-wall carpeting is typically considered part of the building because it
• A source of a rapidly growing quantity of external data is
• The risk management process begins with
• Which would help an adjuster determine if the policy was in effect at the time of loss?
• Which statement is correct with respect to retention's ability to meet risk financing goals?
• Which of the following best indicates a potential personnel loss exposure due to workforce dynamics?
• The consensus process by which the veracity of data is confirmed and verified is known as