CPCU 540 Practice Questions - CPCU 540 Contributing To Insurer Financial Performance Exam

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Under statutory accounting, how are policy acquisition costs (such as agent commissions) treated, and what is the effect on surplus?

They are expensed immediately when the policy is written, reducing surplus up front They are deferred and amortized, smoothing the effect on surplus They are capitalized as a nonadmitted asset with no surplus effect They are recorded as a liability and released over the policy term

Correct Answer:

They are expensed immediately when the policy is written, reducing surplus up front

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