CPCU Exam

Question 1

Steps for new product launch

Answer 1

(1) Assessing new opportunities
(2) Defining product, underlying support, and pricing & obtain approval
(3) Creating business forecast (KPIs, etc.) & obtain senior mgmt approval
(4) Complying with regulatory requirements (file with DOI, etc.)
(5) Selecting distribution systems / channels
(6) Introducing the product (sales training, customer support training)

Question 2

State DOI v NAIC v Fed Regulators

Answer 2

State DOI - incl department (rates, monitoring, etc.) and commissioner (hearings)
NAIC - coordinates regulatory activities between states and sets standards
Fed - particularly applies to public entities

Question 3

Claims program experience factors

Answer 3

Qualitative - realistic reserving, negotiation skills, litigation cost management, etc.
Quantitative - timeliness of reports, # of files opened / closed, % of claims to litigation

Question 4

Claims handling process

Answer 4

(1) Acknowledging and assigning the claim
(2) identifying the policy
(3) contacting insured
(4) determining cause of loss, liability, and loss amount
(5) Concluding the claim

Question 5

Reservation of rights letter vs nonwaiver agreement

Answer 5

Reservation of rights letter - letter specifying coverage issues and informs the inured that the insurer is handling the claim but may later deny

Non-waiver agreement - signed doc saying investigation is underway and neither party waives rights under the policy

Question 6

Alternative dispute resolution methods (ADR)

Answer 6

(1) Mediation - neutral 3rd party to come up with mutually agreed upon solution
(2) Arbitration - neutral 3rd party to decide an outcome / settlement
(3) Appraisals - 3rd party valuation of property
(4) Mini-trial - abbreviated trial in front of a mock judge or panel who decide outcome
(5) Summary jury trial - abbreviated trial in front of a mock jury who decide outcome

Question 7

Field vs Corporate UW

Answer 7

Field - select risks, classify and price, recommend coverage, manage book of business, support producers, support marketing objectives

Corporate - market research, set UW policy and guidelines, develop coverage forms, review rates, educate / train, reinsurance, support complex acct (including manuscript policies), UW audits

Question 8

Commercial UW process

Answer 8

(1) Evaluate application
(2) Develop UW alternatives (risk control measures, premium adj, amended policy terms / conditions)
(3) Select UW alternative
(4) determine appropriate premium
(5) Implement UW decision

Question 9

Reundewriting process

Answer 9

(1) Analyze book of business
(2) Identify the problem and corrective measures
(3) Select corrective measure (policy level or org level)
(4) Implement corrective measure
(5) Monitor the book of business

Question 10

4 hazards

Answer 10

(1) Moral - intentionally create loss (fraud)
(2) Morale - carelessness leads to loss
(3) Physical - tree over house
(4) Legal - regulatory, poor litigation environment etc

Question 11

Supplementary data sources for personal lines

Answer 11

Govt databases (MVR, court records)
Credit reports (# in households, income)
Loss histories (CLUE from lexisnexis - 7 yrs of claims data; A-PLUS from ISO with prop and auto claims)

Question 12

Marketing plan components

Answer 12

(1) Product proposal and sales target
(2) SWOT
(3) Marketing goals
(4) Marketing strategies
(5) Projected outcomes

Question 13

Marketing activities

Answer 13

(1) Market research
(2) Segmentation
(3) Product development
(4) Marketing plan
(5) Advertising and promotion
(6) Customer and public relations
(7) Sales fulfillment
(8) Reporting results (internally and external market reporting)

Question 14

Insurance producer activities

Answer 14

(1) Prospecting
(2) Risk management review
(3) Sales
(4) Policy issuance
(5) Premium collection
(6) Customer service
(7) claims handling
(8) consulting

Question 15

6 functions of reinsurance

Answer 15

(1) Cat protection
(2) increased large line size
(3) Increase PHS
(4) stabilize loss experience
(5) Withdrawal from market segment
(6) UW guidance

Question 16

DOI vs Commissioner

Answer 16

DOI activities
(1) licensing
(2) approving policy forms
(3) holding rate hearings
(4) solvency info
(5) market conduct evals
(6) Investigating policyholder complaints
(7) Rehabilitating insolvent insurers
(8) Cease and desist orders
(9) fining insurers

Commissioner
(1) oversee DOI
(2) Declare orders
(3) Determine whether to issue new licenses
(4) Review pricing and coverage
(5) conducting market examinations
(6) Holding insurance issue hearings
(7) issuing annual report