CPHRM Insurance and Finance 2

Question 1

A hospital switches from a claims-made policy to an occurrence policy. What does the hospital need to purchase to cover claims arising from incidents that occurred during the claims-made period but are reported after the switch?

Accepted Answer

Tail coverage (extended reporting endorsement)

Answer

Tail coverage (extended reporting endorsement) extends the reporting window of a claims-made policy to capture incidents that occurred during the policy period but are reported after it ends.

Question 2

A health system is evaluating a captive insurance program. Which of the following is the PRIMARY financial advantage of a captive?

Accepted Answer

Allows the organization to retain underwriting profit

Answer

A captive allows the parent organization to retain underwriting profits that would otherwise go to commercial insurers when losses are lower than premiums collected.

Question 3

Under a retrospective rating plan, the final premium is determined by:

Accepted Answer

Actual losses during the policy period, subject to minimum and maximum limits

Answer

Retrospective rating adjusts the final premium based on the insured's actual loss experience during the policy period, bounded by a contractual minimum and maximum.

Question 4

A risk manager notices that the hospital's general liability policy contains a 'subrogation waiver' clause for certain contractors. What does waiving subrogation mean?

Accepted Answer

The insurer gives up its right to pursue a third party for reimbursement after paying a claim

Answer

Waiving subrogation means the insurer surrenders its legal right to recover from a responsible third party after indemnifying the insured, preventing it from suing the named contractor.

Question 5

Which financial statement metric is MOST useful for a risk manager assessing whether a self-insured trust fund has adequate liquidity to pay near-term claims?

Accepted Answer

Current ratio

Answer

The current ratio (current assets divided by current liabilities) measures short-term liquidity, indicating whether a fund has sufficient liquid assets to cover near-term claim payments.

CPHRM Exam Practice Test

CPHRM Exam Practice Test

CPHRM Insurance and Finance 2