CAWC EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
What are the different types of Workers Compensation Products? - Answers Guaranteed Cost
Small Deductible Plan
Large Deductible Plan
Retroactive Rating Plan
Guaranteed Cost - Answers Premium doesn't vary that much during a policy period even if there are
considerable/limited losses. Carrier Assumes all the risk
Dividend Plans - Answers Goes along with Guaranteed Cost; allows insured opportunity to receive
money back after policy period has ended
Small Deductible Plan - Answers Policy holder shares cost of claims of the injured worker
Retrospective Rating Plan - Answers Premium calculated after the policy period has ended; Takes into
consideration all losses that occurred. Large loss > more premium. Small loss > less premium. "loss
sensitive"- amount of losses affect premium
Large Deductible Plan - Answers Insured assumes more risk by paying substantial portions (or all) of
each claim. Lower initial premium. Pays for losses as they occur
Monopolistic states - Answers North Dakota, Ohio, Washington, Wyoming; Workers comp regulated
and controlled by the state; no private insurance carriers
State Funds - Answers 25 States offer workers compensation
Competitive State Funds - Answers 21 states have state offered workers compensation insurance but
private insurance carriers are permitted to sell WC insurance
Self Insurance - Answers Employer retains the risk of workers compensation losses if they have the
financial means to do so;
Excess Insurance - Answers Typically purchased by employer who self-insures; cover losses over a
specified amount, provides additional coverage for $$$ claims
Assigned Risk - Answers provide coverage for companies that cannot obtain insurance due to very
high risk and poor loss history
Employer's Liability/ Stop-gap Coverage - Answers Coverage for employer against law liability for
injured workers whose injuries are not covered by workers comp laws
What factors / economic conditions affect workers compensation premium? - Answers Hard and Soft
Markets
Hard Market - Answers Rates are higher, not a lot of negotiation with employers when
buying/renewing policies, Carrier has greater leverage. Stricter Underwriting practices. Shorter
duration lasting 3-5 years
Soft Market - Answers Rates are lower, Employers have greater leverage to negotiate premiums, "not
as tough" underwriting practices, higher policy limit, longer duration lasting 6-8 years
CAIF estimated _______________ to be estimated total cost of insurance fraud per year - Answers +
$80 billion
Employee Fraud - Answers Claims a bogus injury to get paid time off. Tells employer it happened on
job when it happened on personal time
Insurance Fraud - Answers Intentional misrepresentation of facts and circumstances to an insurance
company to illegally obtain funds
Employer Fraud - Answers Employer lowers the amount of the company payroll to lower premium
payments, employer says employees are independent contractors,Employer misrepresents employee
duties/ risk to get lower premiums
Premium Fraud - Answers Lying about amount of the payroll, misrepresented job codes, not carrying
the required workers comp insurance, experience mod evasion
How does Experience Mod Evasion factor into insurance fraud? - Answers It is a type of employer
fraud and premium fraud
What are the 2 types of Agent Fraud? - Answers Delaying the Payment, Keeping the Premium
Delaying the Payment - Answers Agent doesn't immediately send client's payment to insurance
carrier, puts money in an interest-bearing account, collects interest on money, sends original
premium minus interest to insurance carrier.
Keeping the Premium - Answers Agent doesn't send premium to carrier, and keeps it instead; client is
not covered, and agent has committed theft
What are the 4 demographic groups in the CAIF study for why Americans do or do not tolerate
insurance fraud? - Answers Moralist, Conformist, Realist, Critic
, Moralists - Answers Tolerate Insurance Fraud the least, No excuse for this behavior, advocate
punishment of perpetrators severely. Represent 30.7%
Conformists - Answers Tolerate insurance fraud to a fair extent, believe that many people do it,
making it more acceptable. Support moderate punishment, represent 26.4%
Realists - Answers Tolerate insurance fraud to a low extent, believe some behaviors are justified
depending on circumstance, don't advocate strong punishment, represent 21.6%
Critics - Answers Tolerate insurance fraud the most, blame industry for peoples behavior; insurers
don't conduct business cleanly; no punishment for perpetrators, 21.2%
Red flags of agent fraud - Answers Employee leasing firm reports to lower payroll than previous
employer
Lowers job classification of employees
Agent wants to be present at audit
Shows premium checks were endorsed/ negotiated by third party
Experience Rating - Answers Tailoring Cost of Insurance to Employer Characteristics/ amount of risk
Purpose of Experience Rating - Answers Incentivize employers to manage their own costs through
cost saving programs (i.e return to work)
How is Experience Rating Calculated - Answers System of classifications, size of pay roll, experience
modification factor
How many years and what data is required to calculate experience rating? - Answers 3 years of payroll
and loss data
What are the guidelines that qualify an employer to participate in Experience Rating? - Answers 1)
Employer must have enough premium in the most recent 24 month period
2) Employer must achieve the established premium threshold on average over entire experience
period
What are the two types of Experience Rating Modifications? - Answers 1) Interstate mod
2) Intrastate mod
Interstate Mod - Answers Applies to an employer with exposures in Multiple states in which both
states participate in the plan
Intrastate Mod - Answers When the employer has exposure in only a singular state (Similar to
CompWest in CA)
What are the different statuses in Experience Rating Modification - Answers Preliminary, Contingent
(waiting on information from our end), Final
Why would premiums be different for businesses that have the same pay roll? - Answers Amount of
liability/ risk
Different Class codes & rates
Different # of employees
Jurisdiction
Difference between likelihood and severity of workplace injurty - Answers Likelihood- frequency/odds
of an injury occurring
Severity- probably less often but the cost / loss will be steep
Primary
Excess - Answers What are the different types of losses?
Primary Loss - Answers Less than or equal to $17,000 as of 2019
Excess Loss - Answers Losses that total to greater than $17,000. Also known as loss severity
Split point - Answers the idea that the size of the loss, all of the loss, or a portion will fall into primary
loss or excess loss
Why is premium calculation more driven by primary loss as opposed to excess? - Answers Employers
are more likely to have losses that total to less than split point; small cuts and slips can be prevented
Classification Codes - Answers Apply fairness and accuracy to workers comp ratings; they correlate
rates to job duties and the rate assigns premium to a policy
Manual Premium Formula - Answers (Payroll /100 ) x Classification factor
Manual premium definition - Answers Starting point for rating in worker's compensation
Why is it important to have the correct class code assigned to a business? - Answers Class code
determines class factor and generates appropriate premiums; it can affect premiums
Expected Losses formula - Answers EL= (Payroll/100) x Expected Loss Ratio
What are the different types of Workers Compensation Products? - Answers Guaranteed Cost
Small Deductible Plan
Large Deductible Plan
Retroactive Rating Plan
Guaranteed Cost - Answers Premium doesn't vary that much during a policy period even if there are
considerable/limited losses. Carrier Assumes all the risk
Dividend Plans - Answers Goes along with Guaranteed Cost; allows insured opportunity to receive
money back after policy period has ended
Small Deductible Plan - Answers Policy holder shares cost of claims of the injured worker
Retrospective Rating Plan - Answers Premium calculated after the policy period has ended; Takes into
consideration all losses that occurred. Large loss > more premium. Small loss > less premium. "loss
sensitive"- amount of losses affect premium
Large Deductible Plan - Answers Insured assumes more risk by paying substantial portions (or all) of
each claim. Lower initial premium. Pays for losses as they occur
Monopolistic states - Answers North Dakota, Ohio, Washington, Wyoming; Workers comp regulated
and controlled by the state; no private insurance carriers
State Funds - Answers 25 States offer workers compensation
Competitive State Funds - Answers 21 states have state offered workers compensation insurance but
private insurance carriers are permitted to sell WC insurance
Self Insurance - Answers Employer retains the risk of workers compensation losses if they have the
financial means to do so;
Excess Insurance - Answers Typically purchased by employer who self-insures; cover losses over a
specified amount, provides additional coverage for $$$ claims
Assigned Risk - Answers provide coverage for companies that cannot obtain insurance due to very
high risk and poor loss history
Employer's Liability/ Stop-gap Coverage - Answers Coverage for employer against law liability for
injured workers whose injuries are not covered by workers comp laws
What factors / economic conditions affect workers compensation premium? - Answers Hard and Soft
Markets
Hard Market - Answers Rates are higher, not a lot of negotiation with employers when
buying/renewing policies, Carrier has greater leverage. Stricter Underwriting practices. Shorter
duration lasting 3-5 years
Soft Market - Answers Rates are lower, Employers have greater leverage to negotiate premiums, "not
as tough" underwriting practices, higher policy limit, longer duration lasting 6-8 years
CAIF estimated _______________ to be estimated total cost of insurance fraud per year - Answers +
$80 billion
Employee Fraud - Answers Claims a bogus injury to get paid time off. Tells employer it happened on
job when it happened on personal time
Insurance Fraud - Answers Intentional misrepresentation of facts and circumstances to an insurance
company to illegally obtain funds
Employer Fraud - Answers Employer lowers the amount of the company payroll to lower premium
payments, employer says employees are independent contractors,Employer misrepresents employee
duties/ risk to get lower premiums
Premium Fraud - Answers Lying about amount of the payroll, misrepresented job codes, not carrying
the required workers comp insurance, experience mod evasion
How does Experience Mod Evasion factor into insurance fraud? - Answers It is a type of employer
fraud and premium fraud
What are the 2 types of Agent Fraud? - Answers Delaying the Payment, Keeping the Premium
Delaying the Payment - Answers Agent doesn't immediately send client's payment to insurance
carrier, puts money in an interest-bearing account, collects interest on money, sends original
premium minus interest to insurance carrier.
Keeping the Premium - Answers Agent doesn't send premium to carrier, and keeps it instead; client is
not covered, and agent has committed theft
What are the 4 demographic groups in the CAIF study for why Americans do or do not tolerate
insurance fraud? - Answers Moralist, Conformist, Realist, Critic
, Moralists - Answers Tolerate Insurance Fraud the least, No excuse for this behavior, advocate
punishment of perpetrators severely. Represent 30.7%
Conformists - Answers Tolerate insurance fraud to a fair extent, believe that many people do it,
making it more acceptable. Support moderate punishment, represent 26.4%
Realists - Answers Tolerate insurance fraud to a low extent, believe some behaviors are justified
depending on circumstance, don't advocate strong punishment, represent 21.6%
Critics - Answers Tolerate insurance fraud the most, blame industry for peoples behavior; insurers
don't conduct business cleanly; no punishment for perpetrators, 21.2%
Red flags of agent fraud - Answers Employee leasing firm reports to lower payroll than previous
employer
Lowers job classification of employees
Agent wants to be present at audit
Shows premium checks were endorsed/ negotiated by third party
Experience Rating - Answers Tailoring Cost of Insurance to Employer Characteristics/ amount of risk
Purpose of Experience Rating - Answers Incentivize employers to manage their own costs through
cost saving programs (i.e return to work)
How is Experience Rating Calculated - Answers System of classifications, size of pay roll, experience
modification factor
How many years and what data is required to calculate experience rating? - Answers 3 years of payroll
and loss data
What are the guidelines that qualify an employer to participate in Experience Rating? - Answers 1)
Employer must have enough premium in the most recent 24 month period
2) Employer must achieve the established premium threshold on average over entire experience
period
What are the two types of Experience Rating Modifications? - Answers 1) Interstate mod
2) Intrastate mod
Interstate Mod - Answers Applies to an employer with exposures in Multiple states in which both
states participate in the plan
Intrastate Mod - Answers When the employer has exposure in only a singular state (Similar to
CompWest in CA)
What are the different statuses in Experience Rating Modification - Answers Preliminary, Contingent
(waiting on information from our end), Final
Why would premiums be different for businesses that have the same pay roll? - Answers Amount of
liability/ risk
Different Class codes & rates
Different # of employees
Jurisdiction
Difference between likelihood and severity of workplace injurty - Answers Likelihood- frequency/odds
of an injury occurring
Severity- probably less often but the cost / loss will be steep
Primary
Excess - Answers What are the different types of losses?
Primary Loss - Answers Less than or equal to $17,000 as of 2019
Excess Loss - Answers Losses that total to greater than $17,000. Also known as loss severity
Split point - Answers the idea that the size of the loss, all of the loss, or a portion will fall into primary
loss or excess loss
Why is premium calculation more driven by primary loss as opposed to excess? - Answers Employers
are more likely to have losses that total to less than split point; small cuts and slips can be prevented
Classification Codes - Answers Apply fairness and accuracy to workers comp ratings; they correlate
rates to job duties and the rate assigns premium to a policy
Manual Premium Formula - Answers (Payroll /100 ) x Classification factor
Manual premium definition - Answers Starting point for rating in worker's compensation
Why is it important to have the correct class code assigned to a business? - Answers Class code
determines class factor and generates appropriate premiums; it can affect premiums
Expected Losses formula - Answers EL= (Payroll/100) x Expected Loss Ratio
