ARM400 Practice Exam Questions

The ARM™ 400 exam questions are tough. The ARM™ 400 exam consists of 75 multiple choice questions broken up into two sections, part A and part B. 

Let’s look at an example of a Part A and Part B question. Below we will breakdown two sample questions, including an answer and full explanation, from the ARM 400™ exam. These questions are written by AssociatePI, though we do not offer an ARM 400™ course at this time I do recommend this study material from AB Training Center. This is the study material I use; it includes practice questions much like the question and explanations in this blog.

ARM 400™ Sample Exam Questions – Part A

Which of the following is an example of a moral hazard?

  1. Jamie forgets to lock the front door of her apartment. When she comes home, she realizes her TV and laptop have been stolen.
  2. David makes a claim with his insurer for $5,000 when the cost of the damage was actually $4,000.
  3. Max accidentally runs his boat into a nearby dock, injuring two passengers and a bystander on the dock.
  4. Gary lives in a hail-prone state and owns a garage but chooses not to use the garage to protect his car.


Answer: B – David makes a claim with his insurer for $5,000 when the cost of the damage was actually $4,000.

In a moral hazard, a person intentionally increases the frequency or severity of a loss.

In this case, David is intentionally increasing the amount he claims. He should claim $4,000 for the actual damages, but he chooses to claim $5,000. This is an example of a moral hazard.

Remember, these questions will put you in the shoes of a risk management professional. These questions will not ask you to define anything, but instead will ask you to make the best recommendation by applying the definition to a real-life scenario. This means you must fully understand the definition and fully understand how this definition is applied, meaning you must know:

  1. What are the types of hazard
  2. What is a moral hazard
  3. What is an example of a moral hazard


For more Part A questions, download our free ARM 400 practice exam.

ARM 400™ Sample Exam Questions – Part B

A risk manager is analyzing two companies to determine which company’s losses are more predictable. Company A has a standard deviation of $100 and a mean of $1,000. Company B has a standard deviation of $50 and a mean of $400. Which company’s losses are more predictable?

  1. Company A is more predictable.
  2. Company B is more predictable.
  3. Each company is the same.
  4. Neither company is more predictable.


Answer: A – Company A is more predictable.

The coefficient of variation is used to compare two distributions with different means. The coefficient of variation = Standard deviation ÷ mean.

  • Company A coefficient of variation = $100 ÷ $1,000 = 0.1
  • Company B coefficient of variation = $50 ÷ $400 = 0.125

The lower coefficient of variation indicates less variability, meaning Company A is more predictable.

This gives you an example of how tricky these scenario based questions can be. In this example you are given a lot of information. You must decipher what the question is asking and determine what facts are relevant to answering the question. In this case you must know:

  1. How to determine which company is more predictable
  2. How to calculate coefficient of variation
  3. What is meant by a lower coefficient of variation


On your exam, you will be given a scenario like the one seen above; it is your job to understand what is being asked of you and how to solve or recommend a solution to the scenario.

For more scenario based questions, download our free ARM 400 practice exam.

Free Practice Exam

Ready to get started studying? We’re here to help (for free). Download our free ARM™ 400 practice exams to get a feel for the type of questions you will see on the exam.

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More Information

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Difficulty rank, importance rank, and the advice provided in this resource are solely the opinion of AssociatePI. This resource is intended to provide you with a general idea of where your focus should be. Each exam administered by The Institutes is different. AssociatePI is not affiliated with The Institutes or involved in the exam writing process. Please be sure to thoroughly study every chapter and every topic of this course.

ARM™ exams are administered by the American Institute for Chartered Property Casualty Underwriters (“The Institutes”). AssociatePI does not administer the actual exams, we are an independent resource of free content, advice, and study material for professional insurance education. This blog is intended for informational purposes only, to inform prospective students of the benefit of the ARM™ designation.

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