CPHRM Insurance and Finance 4

Question 1

A hospital is evaluating finite risk insurance. What distinguishes finite risk products from traditional insurance?

Accepted Answer

Finite risk transfers limited risk but allows significant premium funding and investment income sharing

Answer

Finite risk programs transfer only a defined, limited amount of risk while allowing the insured to fund premiums over time and share in investment returns, blending risk transfer with risk financing.

Question 2

An insurance policy's 'insuring agreement' is BEST described as:

Accepted Answer

The core promise by the insurer to pay covered losses in exchange for premium

Answer

The insuring agreement is the heart of the policy—it defines the insurer's fundamental promise to pay, defend, or indemnify for covered claims.

Question 3

A healthcare organization uses a large-deductible liability program rather than self-insurance. The PRIMARY distinction is that under a large-deductible program:

Accepted Answer

The insurer pays all claims and bills the insured for amounts within the deductible, maintaining direct insurer control

Answer

In a large-deductible program, the insurer pays the full claim and then invoices the insured for the deductible portion, while maintaining claims handling authority and providing regulatory compliance benefits.

Question 4

Which actuarial method relies on historical loss ratios to project future losses by multiplying expected losses by a development factor?

Accepted Answer

Bornhuetter-Ferguson method

Answer

The Bornhuetter-Ferguson method blends a priori expected losses with actual development experience, weighting them to project ultimate losses—commonly used when data is immature.

Question 5

A risk manager is reviewing the hospital's directors and officers (D&O) policy. Which of the following losses would MOST LIKELY be covered under a standard D&O policy?

Accepted Answer

A shareholder lawsuit alleging misrepresentation in financial disclosures

Answer

D&O insurance covers wrongful acts by directors and officers in their management capacity, including securities claims and allegations of mismanagement or misrepresentation to shareholders.

CPHRM Exam Practice Test

CPHRM Exam Practice Test

CPHRM Insurance and Finance 4