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.
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.
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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