CPCU 520 flashcards
CPCU 520 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Operational risk
- The risk of loss from inadequate or failed internal processes, people, systems, or external events. It excludes underwriting, market, and credit risk and is managed through control self-assessments and key risk indicators.
- Combined ratio
- Loss ratio plus expense ratio. A result below 100 means underwriting operations produced a profit; above 100 means an underwriting loss funded by investment income or capital.
- Loss ratio
- Incurred losses divided by earned premium over a period. It measures claims cost relative to premium earned and is a primary indicator of pricing adequacy and claims performance.
- Expense ratio
- Underwriting expenses divided by written premium. It captures acquisition, administration, and general costs and is a key target for operational efficiency programs.
- Straight-through processing
- Automated, touchless handling of a transaction from submission to completion without manual re-keying. STP rate measures the share of transactions completed end-to-end without human intervention.
- Claims leakage
- Payments made on claims that exceed what the policy requires, caused by errors, fraud, or inefficiency. Leakage is measured through claims audits and reduces underwriting profitability.
- First notice of loss
- The initial report of a claim to the insurer. It starts the claims cycle and triggers coverage verification, reserving, and assignment to an adjuster.
- Subrogation
- The insurer's right to recover claim payments from the party legally responsible for the loss. Effective subrogation reduces net incurred losses and is a claims recovery operation.
- Business impact analysis
- A continuity planning process that identifies critical functions and quantifies the operational and financial effect of their disruption. It sets recovery priorities and resource requirements.
- Recovery time objective
- The maximum acceptable time to restore a business function or system after disruption. RTO drives continuity strategy selection and is validated through testing.
- Recovery point objective
- The maximum acceptable data loss measured in time before a disruption. RPO determines backup frequency and replication design for critical insurance systems.
- Segregation of duties
- An internal control that separates authorization, custody, and recordkeeping among different people. It reduces fraud and error risk in underwriting, claims, and finance processes.
- Maker-checker control
- A control where one person prepares a transaction and another independently reviews and approves it. It is common in claims payments, policy changes, and disbursements.
- Control self-assessment
- A structured process where process owners evaluate the design and effectiveness of their controls. Results feed the operational risk register and remediation planning.
- Key risk indicator
- A metric that provides early warning of rising operational risk exposure, such as claims cycle time, error rates, or system downtime. KRIs are monitored against thresholds.
- Data quality dimensions
- Accuracy, completeness, timeliness, consistency, and validity. Poor data quality causes mispricing, claims leakage, and failed regulatory reporting in insurance operations.
- Underwriting cycle
- The recurring pattern of soft and hard insurance markets. Soft markets bring price competition and looser terms; hard markets bring capacity shortages and tighter terms.
- Market conduct examination
- A regulatory review of insurer sales, underwriting, claims, and complaint handling practices. Findings can lead to fines, remediation, and operational process changes.
- Rate filing compliance
- The requirement to submit rates and forms to regulators according to state rules, including prior approval or file-and-use regimes. Noncompliance creates regulatory and reputational risk.
- Risk-based capital
- A regulatory solvency framework that sets minimum capital relative to the insurer's risk profile. It constrains operational and strategic decisions on growth and reserving.
- Policy administration system
- The core system that records policies, endorsements, billing, and renewals. Its reliability and integration with other systems drive operational efficiency and customer experience.
- Legacy system modernization
- Replacing or integrating aging core systems that are costly to maintain and hard to change. It is a major operational and technology challenge for insurers.
- Digital distribution channel
- Sales and service through web, mobile, or embedded platforms rather than agents alone. It changes underwriting data capture, compliance, and customer service operations.
- Outsourcing risk
- The operational and compliance exposure from delegating functions to third parties. It requires due diligence, contract controls, and ongoing vendor performance monitoring.
- Talent and skills gap
- The shortage of qualified staff in underwriting, claims, and technology roles as experienced employees retire. It drives training, automation, and knowledge-transfer initiatives.
- Customer experience metrics
- Measures such as net promoter score, claims satisfaction, and resolution time. They link operational performance to retention and are tracked by insurers as strategic indicators.
- Fraud detection operations
- Analytics and controls used to identify false or inflated claims and applications. Effective detection reduces claims leakage and is measured through recovery and referral rates.
- Catastrophe response planning
- Preparedness for surge claims volume after a disaster, including adjuster deployment, remote inspection, and communication plans. It protects service levels and controls costs.
- Reinsurance operations
- Administration of ceded and assumed reinsurance, including treaty and facultative records, recoverables, and reporting. Errors here affect capital and financial reporting.
- Process mapping
- Documenting the steps, owners, and handoffs in an operational process. It identifies waste, control gaps, and automation opportunities before redesign.
- Lean process improvement
- A method to remove non-value-added steps and reduce cycle time in operations. Insurers apply it to underwriting, claims, and policy servicing workflows.
- Regulatory change management
- The process for tracking, assessing, and implementing new laws and regulations. It includes impact analysis, control updates, and staff training across operations.