CPCU® 520 Exam Questions
The CPCU® 520 exam questions, similar to the CPCU® 500 exam questions, require you to fully understand and apply every minor detail of the CPCU® 520 topics. When I say you must be able to apply your knowledge from these topics, I mean these questions will put you in the shoes of an insurance professional; it will be your job to analyze each question in order to select the best answer for the given scenario. You will NOT be simply repeating a definition.
If you’ve already passed your CPCU® 500 exam, then you’ll have no problem with the CPCU® 520 exam format and question types. The CPCU® 520 questions will be formatted in a similar manner to the CPCU® 500 exam. Remember these questions are tricky; the hardest part will be staying focused and fully reading the question in order to select the best answer.
The CPCU® 520 exam consists of 75 multiple choice questions broken up into two sections, part A and part B.
- Part A: Concept questions – The first section of the exam will be approximately 49 concept questions; these questions will test your understanding of a definition or topic. The multiple-choice answers will generally provide 2 or 3 partially correct answers and one “best” answer.
- Part B: Case questions – The second section of the exam will be approximately 26 case questions; these questions will require you to apply your knowledge to a specific scenario or event. You will be given a real-life scenario; your job will be to select the best recommendation to solve the given scenario.
In this blog we will break down a sample question from part A and a sample question from part B. We will detail exactly how to solve each type of problem and provide some insight into the type of questions you will see on the CPCU® 520 exam.
These questions are taken directly from our CPCU® 520 online course, the questions are designed to mimic the format and feel of the actual exam.
CPCU® 520 Sample Exam Questions – Part A
ABC Mutual Insurance submits a proposal to the Department of Insurance to increase their homeowner liability rates by 7%. After 30 days without a response from the Department of Insurance, ABC Mutual Insurance implements their rate change.
This is an example of which rating law?
- File and use
- Use and file
- Flex rating
- Prior approval
Answer: D – Prior Approval
As you can see, a concept question will not ask for you to define anything (as is common in a college exam), it will instead ask you a question in regard to a definition. This means you must fully understand the definition, fully understand all minor details about the definition, and fully understand how this definition is applied . In this case you must know “what are the different rating laws” and “what rating law allows implementation after 30 days”.
The answer is D in this case because this is an example of a prior approval law with a deemer provision. The deemer provision states that if the insurer has not heard from the state insurance department within a set amount of time (usual 30-90 days), then the filing is considered to be approved and can be implemented.
In a typical exam, such as a college exam, you might expect this question to ask “What is the deemer provision?” The CPCU® exams will rarely format a question in this manner. You should always expect for the question and answers to be formatted using real life scenarios, often providing 2 or 3 partially correct answers and one BEST answer
As mentioned in our blog about the CPCU® 520 difficulty, the hardest part of the CPCU® 520 will be learning the minor details and complexities of each insurance function. Notice in this example the deemer provision is a minor detail; missing this one little detail would result in choosing the wrong answer.
For more concept questions, check out our CPCU® 520 practice exam.
CPCU® 500 Sample Exam Questions – Part B
Matrix Insurance has $100,000 written premium, $90,000 earned premium and $10,000 investment income for the year of 2014. Matrix incurred $50,000 in losses, $10,000 in underwriting expenses and $25,000 in total expenses for 2014. Total net income for 2014 was $30,000.
What is Matrix’s operating ratio rounded to the nearest whole number?
Answer: C – 55%
A case question will give you a scenario like the one seen above; you will be required to select the correct answer based on the given scenario. For a scenario question you must fully understand what is being asked and fully understand how to apply the information you have learned from studying.
In this example you are given a lot of information, some of which is useful to the scenario and some of which is intended to confuse you. In this case you must know:
- How to calculate operating ratio
- What numbers are needed to calculate operating ratio
- How to calculate the components of operating ratio
In this case the answer is C because: Operating ratio = combined ratio – investment income ratio = 66% – 11% = 55%
Step 1) Calculate combined ratio: Combined ratio = loss ratio + expense ratio = (56% + 10% = 66%)
- Loss ratio = Incurred loss ÷ earned premium = $50,000 ÷ $90,000 = 56%
- Expense ratio = underwriting expense ÷ written premium = $10,000 ÷ $100,000 = 10%
Step 2) Calculate investment income ratio: Investment income ratio = net investment income ÷ earned premium = $10,000 ÷ $90,000 = 11%
Step 3) Calculate operation ratio: Operating ratio = combined ratio – investment income ratio = 66% – 11% = 55%
These questions are tricky and will require a LOT of critical thinking and question analysis. For more case questions, download our free CPCU® 520 practice exam.
Free Practice Exam
Ready to get started studying? We’re here to help (for free). Download our free CPCU® 520 practice exams to get a feel for the type of questions you will see on the exam.
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For more information about the CPCU® 520 exam, checkout some of our other free resources:
- CPCU® 520 exam difficulty
- CPCU® 520 exam questions
- CPCU® 520 exam format
- CPCU® Designation Overview
- CPCU® Designation Salary
- CPCU® Cost
- CPCU® Exam Pass Rates
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CPCU® 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 CPCU® designation.
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