AIC 300 - CLAIMS IN AN EVOLVING WORLD EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+

1 AIC 300 - CLAIMS IN AN EVOLVING WORLD EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+ Insurers usually send denial letters Select one: A. By email to ensure prompt receipt by the insured. B. By certified mail with a return receipt requested. C. By overnight courier. D. By registered mail. Correct Answer: B. By certified mail with a return receipt requested. Some will also send a copy via regular mail in case the certified letter is not accepted. As methods of communication evolve, it's important for claims professionals to remember that any written claims communication may be Select one: A. Replaced with verbal communication. B. Misinterpreted. 2 C. Edited later. D. Subpoenaed. Correct Answer: D. Subpoenaed. Any written claims communication may be subpoenaed. In which one of the following scenarios is a public adjuster most likely to become involved? Select one: A. An insurer finds it financially unfeasible to hire its own claims staff in a given state. B. An insured is unable to afford legal representation to contest a claim. C. A catastrophic disaster strikes, involving damage to many properties. D. An insured's negotiations with the insurer on a complex claim are not going well. Correct Answer: D. An insured's negotiations with the insurer on a complex claim are not going well. If a claim is complex, or if settlement negotiations are not progressing with the insurer, the insured may hire a public adjuster to protect his or her interests. Which one of the following statements regarding third-party administrators (TPAs) is most accurate? Select one: A. TPAs are typically used by businesses that have chosen not to self-insure. B. TPAs handle claims, keep claims records, and perform statistical analyses. 3 C. TPAs are generally found in an insurer's claims department. D. TPAs are employed only by independent adjusting firms. Correct Answer: B. TPAs handle claims, keep claims records, and perform statistical analyses. Hugo is conducting an audit of a branch office claims operation. He is evaluating timeliness of reports, number of files opened, proper releases taken, and accuracy of data entry. Which one of Hugo's metrics is a qualitative audit factor? Select one: A. Proper releases taken B. Timeliness of reports C. Number of files opened D. Accuracy of data entry Correct Answer: A. Proper releases taken Proper releases taken is a qualitative audit factor; the others are quantitative. Aaron works for a multi-line insurer. He works with insurance producers and applicants to evaluate new business submissions and conduct renewal underwriting. Aaron is a Select one: A. Staff underwriter. B. Public underwriter. C. Personal lines underwriter. D. Line underwriter. 4 Correct Answer: D. Line underwriter. Line underwriter. This describes the duties of a line underwriter, rather than a staff underwriter. There is not enough information to determine which line of business is being written. A public underwriter does not exist. Line underwriters evaluate new submissions and perform renewal underwriting, usually by working directly with insurance producers and applicants. Staff underwriters, meanwhile, manage risk selection by working with line underwriters and coordinating decisions about products, pricing and guidelines. The first key to communicating empathetically as a claims professional is Select one: A. A comprehensive understanding of relevant insurance policies. B. Speaking calmly and clearly. C. Being prepared with all documentation relating to the claim. D. Listening. Correct Answer: D. Listening. Claims professionals should first listen carefully to understand what the claimant is saying. Mia tracks loss adjustment expense (LAE) as part of her management of the claims department for an insurer. Mia considers LAE to be the Select one: A. Total amount of loss reserves of all claims. 5 B. Paid portion of claims. C. Cost to investigate, defend, and settle claims. D. Total incurred amount of claims. Correct Answer: C. Cost to investigate, defend, and settle claims. Cost to investigate, defend, and settle claims. LAE is the expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. In her role with an insurer, Katarina has opportunity to collaborate with not only employees from her company, but also external experts with particular expertise. For example, as part of her investigation, she hired an engineer to conduct a review of a machine that was involved in a personal injury. Katarina is a(n) Select one: A. Medical provider. B. Expert Witness. C. Premium auditor. D. Claim representative. Correct Answer: D. Claim representative. Claim reps collaborate with more than other insurer employees. Many insurers employ a panel of experts that the claims rep can select according to the investigation's needs. When Mehmet interviews witnesses as part of his claims investigation, he asks different types of questions based on need, such as open-ended, direct, indirect, and leading. 6 Which type of question should Mehmet ask when he wants to set the interviewee at ease and he is looking for explanation or elaboration of details in the interviewee's own words? Select one: A. Open-ended B. Direct C. Indirect D. Leading Correct Answer: A. Open-ended Open-ended questions can be used to clarify an interviewee's statements. Charlotte is handling a new claim and she has set the initial reserves at $1,000,000. She has been asked to complete an internal report summarizing all the file status information for distribution to management and updated as more information is received. The report Charlotte is completing is most likely a Select one: A. Status report. B. Summarized report. C. Preliminary report. D. Large loss report. Correct Answer: D. Large loss report. 7 Most insurers have guidelines outlining when and under what circumstances large loss reports should be prepared. In which one of the following scenarios is the right of subrogation most likely to be employed by the insurer? Select one: A. An insured files a homeowners claim for stolen jewelry. An investigation reveals that the jewelry is still in the insured's possession. B. An investigation reveals that an insured set her own business on fire. C. An insured files a claim for collision damage from a hit and run accident, when in fact he backed into a utility pole. D. A claims rep discovers that their insured's car accident was caused by a road contractor who left equipment lying in the travel lanes of a highway. Correct Answer: D. A claims rep discovers that their insured's car accident was caused by a road contractor who left equipment lying in the travel lanes of a highway. The right of subrogation allows an insurer to recover payment from a negligent third party. In claims investigation, all bodily injury claims require Select one: A. Statements from all witnesses. B. Multiple claims payments C. An attorney. D. A medical investigation. 8 Correct Answer: D. A medical investigation. All bodily injury claims, including workers compensation claims, require a medical investigation. Before making initial contact with an insured or claimant, a claims representative should Select one: A. Research similar losses in the same geographical area. B. Contact company counsel for a reservation of rights letter. C. Prepare an approximate estimate based on similar losses. D. Prepare a list of questions for the insured. Correct Answer: D. Prepare a list of questions for the insured. Before making initial contact with an insured or claimant, a claims representative should prepare a list of questions for the insured, along with information on how the claim will be handled. Carolina is a claim representative handling a liability claim. She is speaking to the claimant over the phone and has informed him that his statements must be true under penalty of perjury. When completed, she sent a transcription of the conversation to the claimant for him to sign before a notary. Carolina has taken a(n) Select one: A. Affidavit. B. Deposition. 9 C. Recorded statement. D. Examination under oath. Correct Answer: C. Recorded statement. A recorded statement is taken by the claims rep over the phone or in person. One of Juan's responsibilities as a claims representative is to prepare internal reports, such as preliminary, interim, large loss, and captioned. Which one of the reports Juan prepares is required for claims with reserves that exceed a specified threshold? Select one: A. Interim B. Large loss C. Preliminary D. Captioned Correct Answer: B. Large loss Large loss reports are required by most insurers to summarize claims with reserves above a certain threshold. In the process of assigning a claim, an internal claims handler will often transfer information to the insurer's standard form, called the Select one: A. Standard claims handling (SCH) form. B. Initial acknowledgment of notice (IAN) form. 10 C. Claim intake (CI) form. D. First notice of loss (FNOL) form. Correct Answer: D. First notice of loss (FNOL) form. An internal claims handler will often transfer information to the insurer's standard form, called the first notice of loss (FNOL) form. Which one of the following methods of establishing case reserves is used most often when there are small variations in loss size for a particular type of claim? Select one: A. Individual case method B. Average value method C. Formula method D. Roundtable method Correct Answer: B. Average value method The average value method is used most often when their are small variations in loss size for a particular type of claim, and when claims can be concluded quickly. To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to Select one: A. The insurer's case reserves. B. The insurer's profits. 11 C. NAIC model regulations. D. National averages. Correct Answer: A. The insurer's case reserves. To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to the insurer's case reserves. Samuel was seriously injured in a car accident caused by a drunk driver. His settlement included payments for repairs to his vehicle, medical bills, pain and suffering, and lost wages. Which one of the payments in Samuel's settlement is considered general damages? Select one: A. Medical bills B. Lost wages C. Repairs to his vehicle D. Pain and suffering Correct Answer: D. Pain and suffering Pain and suffering, disfigurement, loss of body function, and emotional distress are all forms of general damages. Andrew is a claims representative investigating whether coverage applies to a new claim. To help ensure that he considers every facet of the policy before determining coverage, he might use Select one: 12 A. The CARD method. B. The CARE method. C. The DICE method. D. The DARE method. Correct Answer: C. The DICE method. Mitsuki was severely injured when the safety latch on an amusement park ride failed and she was thrown from the ride. In her lawsuit with the amusement park, Mitsuki was awarded payment for pain and suffering, emotional distress, disfigurement, and loss of earnings. Which one of Mitsuki's awards is considered special damages? Select one: A. Loss of earnings B. Emotional distress C. Pain and suffering D. Disfigurement Correct Answer: A. Loss of earnings Loss of earnings, medical bills, and lost property payments are all considered special damages. Although most policies are occurrence forms, covering claims that occur during the policy period, some are claims-made forms. Which one of the following types of loss is most likely to involve a claims-made form? Select one: 13 A. An automotive collision claim. B. A homeowners liability claim due to a slip and fall. C. A homeowners claim due to storm damage. D. A medical malpractice claim. Correct Answer: D. A medical malpractice claim. Claims-made forms are most often used for environmental, medical malpractice and directors and officers' policies. The Office of Foreign Assets Control requires claims payors to check payees against a database of Select one: A. Known perpetrators of insurance fraud. B. Policyholders of other insurers. C. Those who have collected a payment for the same loss. D. Known terrorists and drug traffickers. Correct Answer: D. Known terrorists and drug traffickers. Failure to check a master list of known terrorists and drug traffickers may result in substantial penalties. Claims may be paid in any of three ways: by check, by bank transfer or Select one: 14 A. In a direct transfer of goods or services, as with a contractor performing repairs. B. By electronic funds transfer. C. By the issuance of a credit on the premium for the next policy period. D. In cash. Correct Answer: B. By electronic funds transfer. Riko is an experienced settlement negotiator. When negotiating with claimant representatives, she uses techniques such as timing settlements effectively, enticing a reasonable demand, making concessions cautiously, and leaning on the evaluation. She understands that her current claimant is eager to receive money, so she is delaying the negotiations as long as possible. Which negotiation technique is Riko using? Select one: A. Enticing a reasonable demand B. Timing settlements effectively C. Making concessions cautiously D. Leaning on the evaluation Correct Answer: B. Timing settlements effectively Timing settlements effectively can impact how much money a claimant is willing to accept. Chloe is an insurer defense attorney who is preparing a trial strategy. She has researched a court decision that was made in a similar case and is basing the defense on that precedent. Chloe is relying on the principle of stare decisis, which is that Select one: 15 A. Lower courts must follow precedents set by any other courts. B. Higher courts must follow precedents set by any other courts. C. Higher courts must follow precedents set by lower courts. D. Lower courts must follow precedents set by higher courts. Correct Answer: D. Lower courts must follow precedents set by higher courts. Lower courts must follow precedents set by higher courts. This is the principle of stare decisis. Kira, a claims representative, receives a summons and complaint from an insured. In reviewing the facts, she has doubts that the insured's applicable policy will provide coverage. She should work with counsel and request a managerial review in order to issue Select one: A. A reservation of rights letter. B. An excess letter. C. A countersuit. D. A claim denial. Correct Answer: A. A reservation of rights letter. The insurer will issue a reservation of rights letter stating that it will provide defense only until it can establish that there is no coverage. The claims litigation process begins with the receipt of 16 Select one: A. A notice of claim. B. A civil violation notice. C. A summons and complaint. D. A settlement offer. Correct Answer: C. A summons and complaint. The claims litigation process begins with the receipt of a summons and complaint announcing the initiation of a lawsuit. Linnea is an attorney who is preparing to defend an insurer in a workers compensation case. Discovery produced several documents that are being presented as witnesses statements, but the witnesses admit in the statements to not actually seeing the accident. Linnea would like to omit these statements from the proceedings, so she is filing a Select one: A. Motion to dismiss. B. Motion to strike. C. Motion in limine. D. Motion to suppress. Correct Answer: C. Motion in limine. This is a pretrial request that certain evidence be excluded from the trial because it is irrelevant or prejudicial. 17 Claims rep Lily is negotiating a claim settlement with an unrepresented claimant and wishes to smooth the process. She is matching her demeanor, tone, and mannerisms to those of the claimant. Lily is using which one of the following negotiation techniques? Select one: A. Setting expectations B. Performing a needs analysis C. Using traditional sales techniques D. Collecting extraneous information Correct Answer: C. Using traditional sales techniques A common sales technique is mirroring the behavior of the customer. Greatview Insurance wants to predict which auto liability claims will most likely go to litigation, so it can assign them to experienced adjusters early in the process. There are certain known indicators of litigation that Greatview wants to use in the data mining process. Which one of the following data mining techniques would Greatview's analyst most likely use? Select one: A. Regression analysis B. Association rule learning C. Classification D. Cluster analysis Correct Answer: C. Classification 18 Because Greatview wants to use known characteristics, the analyst would most likely use classification to predict which auto liability claims will go to litigation. In seeking to identify claims that will potentially develop into complex and more costly claims, the data science team at Great Midsouthwest Insurance ranks a series of attributes by their importance to the data model. Which one of the following terms describes the level of predictive power of each attribute? Select one: A. Statistical relevance B. Information gain C. Lift D. Precision factor Correct Answer: B. Information gain Information gain is a measure of the predictive power of one or more attributes. Rin works for an insurer designing and using techniques to process large amounts of data from various sources and providing knowledge based on the analysis of that data. Rin is a(n) Select one: A. Actuary. B. Data scientist. C. IT professional. 19 D. Ratemaker. Correct Answer: B. Data scientist. Data science involves experimenting with data using rapidly evolving methods to learn and provide solutions to complex problems. Which one of the following is a data mining technique an insurer applies when it knows what information it wants to predict? Select one: A. Machine learning B. Association rule learning C. Cluster analysis D. Classification Correct Answer: D. Classification Classification is a data mining technique an insurer applies when it knows what information it wants to predict. The first step in the data mining process is to Select one: A. Collect the data that will be used. B. Select a data mining technique. C. Understand what a business wants to achieve. 20 D. Prepare the data that will be used. Correct Answer: C. Understand what a business wants to achieve. Generally speaking, the most common application of predictive modeling in insurance occurs in Select one: A. Risk selection. B. Marketing. C. Reinsurance. D. Claims handling. Correct Answer: A. Risk selection. Hanna is in IT and works on data analytics projects for an insurer. These projects involve analyzing large amounts of data to help underwriting to select risks and price policies. Hanna knows that collaboration between data science, IT, underwriting, and actuary is critical to the success of these projects. In Hanna's experience, as soon as the need for a data project arises, the key to collaborating effectively is to engage which one of the following teams as soon as possible? Select one: A. Actuary B. IT C. Underwriting D. Data science Correct Answer: D. Data science 21 Data science team needs to be engaged as soon as the need for a project arises. Part of the continuous cycle of data mining is preparing the data to eliminate missing or inaccurate information. This process is called Select one: A. Machine learning. B. Parsing. C. Predictive modeling. D. Cleaning. Correct Answer: D. Cleaning. Data should be cleaned as much as possible to eliminate missing or inaccurate information. Which one of the following types of workers compensation claims are the most difficult for insurers to identify at the time of first report? Select one: A. Catastrophic claims B. Medical-only claims C. Potentially minor claims D. Potentially complex claims Correct Answer: D. Potentially complex claims 22 Potentially complex claims are the most difficult for insurers to identify at the time of first report. Soft fraud, also called opportunity fraud, occurs when Select one: A. An application for insurance contains untrue information. B. A legitimate claim is exaggerated. C. A loss is triggered intentionally. D. A claim is filed for a loss that did not occur. Correct Answer: B. A legitimate claim is exaggerated. Soft fraud, also called opportunity fraud, occurs when a legitimate claim is exaggerated. Carla is investigating a claim for a stolen car. The insured provided a copy of the police report, but she notices that the account in the police report differs from the insured's version of events. At this point, Carla should Select one: A. Refer the case to the SIU. B. Continue with her investigation. C. Deny the claim. D. Contact the police. Correct Answer: B. Continue with her investigation. 23 Continue with her investigation. Indicators of fraud are not proof of fraud. Benjamin is with the SIU department of an insurer. His company developed technology to identify patterns related to fraudulent claims activity. He is using a program to analyze claims data to identify similarities or connections that might indicate fraud. Benjamin is utilizing Select one: A. Data mining. B. Telematics. C. Claims audits. D. Wearables. Correct Answer: A. Data mining. Data mining. This is using computers to analyze vast amounts of data to detect trends. Soft fraud occurs when a claim is exaggerated and is also referred to as Select one: A. Victimless fraud. B. Reimbursement fraud. C. Opportunity fraud. D. Financial fraud. Correct Answer: C. Opportunity fraud. 24 Larissa is an auto claim adjuster. Traditionally, she has relied on police reports and witness testimony in her decision making. Recent technological developments give her access to the driver's driving habits, including acceleration, speed, and braking. This data available to Larissa is known as Select one: A. Artificial Intelligence. B. Telematics. C. Wearables. D. Internet of Things. Correct Answer: B. Telematics. Telematics are used to collect data on personal autos, commercial vehicles, products, shipments, machinery, smart devices, and workers. Martin is in SIU and helps his employer, a multi-line insurer, to detect fraudulent claims. He is using a technology that enables insurers to share fraud-related information. This distributed digital ledger that facilitates secure transactions without using a third party is known as Select one: A. Blockchain. B. A predictive model. C. The Internet of Things. D. Telematics. Correct Answer: A. Blockchain. 25 By having a transparent ledger associated with a car, for example, insurers can detect fraud that would be difficult to detect otherwise. Jack leads the claims department for a large insurer and has embraced the recent developments in claims data collection and analysis. Jack knows that Select one: A. People make little difference in analyzing data and explaining it to a customer. B. Claims determinations and payments will soon be accomplished entirely by AI. C. He will eventually not need people because insurance is not a customer-driven industry. D. He still needs people because the data need to be analyzed in context by a human. Correct Answer: D. He still needs people because the data need to be analyzed in context by a human. As a claims representative, Beatrice is on the front lines for protecting her employer from insurance fraud. Beatrice should understand that insurance fraud Select one: A. Is the costliest white-collar crime in the U.S. B. Accounts for 25 percent of the P&C industry incurred losses. C. Costs roughly $40 billion per year, excluding health insurance. D. Costs each American family between $2,000 and $4,000 per year. Correct Answer: C. Costs roughly $40 billion per year, excluding health insurance. 26 Ella sued her insurer and alleged bad-faith claim handling after the insurer settled a claim against her that Ella thought should have been denied. As a result of the settlement, Ella's premium increased. In her suit, Ella claimed that the insurer rushed the investigation and did not take all of her facts into consideration in her defense. While the court found that Ella's argument had merit, it did not award her the full value because it found that Ella had not provided her information to the insurer in a timely manner. The insurer used the defense of Select one: A. Contributory negligence. B. Debatable reasonable basis. C. Comparative negligence. D. Comparative bad faith. Correct Answer: C. Comparative negligence. In states that permit negligence as a basis for a bad-faith claim, most use a comparative negligence approach, reducing the amount of damages that may be awarded. Not long after Valteri issued a denial and closed the claim, the insured sued for coverage and alleged bad-faith claim handling against the insurer. Valteri was able to demonstrate for his superiors that he had made a good-faith investigation and determined that the claim was not covered by the policy. The insurer maintains that Valteri had reasonable justification in fact for denying the claim. The insurer is employing the Select one: A. Lack of standing defense. B. Advice of counsel defense. 27 C. Debatable reasonable basis defense. D. Statute of limitations defense. Correct Answer: C. Debatable reasonable basis defense. The insurer may establish that defense that it had a reasonable basis for questioning whether a claim was covered. One of Julio's expectations as a claims representative is good-faith claims handling. He keeps insureds informed about the claim because they have that expectation and because they are most likely to make a complaint about bad-faith claim handling. He also wishes to participate in the defense and in discussions about the possibility of settlement. For these reasons, Julio Select one: A. Conducts fair evaluations. B. Maintains complete and accurate documentation. C. Maintains regular and prompt communication. D. Conducts good-faith negotiation. Correct Answer: C. Maintains regular and prompt communication. Communicating with all parties to a claim is a crucial aspect of good-faith claims handling and resolution. Which one of the following statements regarding state versions of the NAIC model act is correct? Select one: 28 A. Only insureds may bring lawsuits against insurers. B. Only claimants may bring lawsuits against insurers. C. Both insureds and claimants may bring lawsuits against insurers. D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds. Correct Answer: D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds. Tobias is a claims representative who understands the importance of good-faith claims handling, including fair evaluation, good-faith negotiation, complete and accurate documentation, and timely contact with all parties to a claim. Which one of Tobias' good-faith claims handling practices helps his employer because the parties will be more likely to remember details of the loss accurately? Select one: A. Fair evaluation B. Complete and accurate documentation C. Timely contact with all parties to a claim D. Good-faith negotiation Correct Answer: C. Timely contact with all parties to a claim Timely contact with all parties to a claim helps ensure that parties will be more likely to remember details of the loss accurately. For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and 29 Select one: A. The insured must have paid that judgment. B. The amount of the judgment must be in excess of the insured's policy limit. C. Evidence of bad faith must be produced. D. The insurer must have determined that coverage does not apply. Correct Answer: B. The amount of the judgment must be in excess of the insured's policy limit. For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and the amount of the judgment must be in excess of the insured's policy limit. The insured is not required to have paid the judgment before bringing suit. Which one of the following best describes the term 'professionalism' as it relates to claims professionals? Select one: A. The behaviors necessary to implement an ethical decision B. Remaining silent when a competitor is disparaged publicly C. Fulfilling the terms of an insurance contract D. A set of principles and values Correct Answer: A. The behaviors necessary to implement an ethical decision As a claims representative, some of Sara's goals is to benefit her employer by ensuring the parties to a loss remember details accurately, reassuring the parties that their claims 30 are important, and lessening the chance that the parties will retain attorneys. Sara accomplishes these goals through Select one: A. Effective claims management. B. Regular and prompt communication. C. Complete and accurate documentation. D. Timely contact with all parties to a claim. Correct Answer: D. Timely contact with all parties to a claim. Early contact with parties helps to ensure details are correct, parties feel heard, and don't feel the need for attorneys. Erik is a claims manager for Taunton Insurance. He is leading a team of property claims representatives responding to a recent tornado in Kentucky. Before sending the representatives into the field, Erik has decided to use Internet of Things (IoT) technology to assess the damage and danger in the area. Which one of the following IoT devices would Erik most likely use in this situation? Select one: A. Drones B. Sensors C. Smartphones D. Telematics Correct Answer: A. Drones 31 Erik would most likely use drones to take photos or videos of the difficult-to-reach area and assess the damage and danger. By using the drones, he can assess the danger without risking the safety of the claims representatives. Luke runs his business out of a store front in a commercial building. After a fire destroyed part of the building, Luke made a claim for damages and received a settlement check from the property insurer. This necessarily means that Luke Select one: A. Has business interruption coverage. B. Is named in the policy declarations or an endorsement. C. Has an insurable interest in the damaged property. D. Is the owner of the building. Correct Answer: B. Is named in the policy declarations or an endorsement. An individual may have an insurable interest in a building, but not be considered an insured under the policy because the person's name is not listed in the declarations or on an endorsement. Rodrigo manages a claims department for an insurer and uses loss ratio as a measure of the department's performance. Rodrigo calculates loss ratio as Select one: A. Losses divided by written premium. B. Losses and LAE divided by earned premium. C. Losses and LAE divided by written premium. D. Losses divided by earned premium. 32 Correct Answer: B. Losses and LAE divided by earned premium. Losses and LAE divided by earned premium. Loss ratio measures losses and loss adjustment expenses against earned premium and reflects the percentage of premiums being consumed by losses. In liability claims, the claims rep will require an authorization from the injured party to Select one: A. Investigate the claim. B. Obtain medical records. C. Contact the insured. D. Issue a partial claim settlement. Correct Answer: B. Obtain medical records. In liability claims, the claims rep will require an authorization from the injured party to obtain medical records. Mustafa is a data scientist who is working with a team of underwriting, IT, and actuary to develop a predictive analytics model. The main goal of the project is to translate the insights gained from the model they develop into business action. In Mustafa's experience, the team member that can provide the bridge between the analytics and the business is Select one: A. Actuary. B. IT. 33 C. Underwriting. D. Data science. Correct Answer: A. Actuary. Actuaries are critically important to this process because they understand the business and the analytics. As a part of the first contact with an insured on a property damage claim, a claims representative may provide a blank Select one: A. Reservation of rights form. B. Proof of loss form. C. First notice of loss form. D. Nondisclosure form. Correct Answer: B. Proof of loss form. A claims representative may provide a blank proof of loss form and any necessary written instructions so the insured can document the claim. Ida was named in a bad-faith lawsuit as the claims representative who handled the file. The court dismissed the suit, however, because the statute of limitations had expired. This means that Select one: A. Too much time had expired after the claim concluded. 34 B. The limits of the policy had been exceeded. C. There was no basis to pierce the corporate veil. D. She was immune to prosecution as an employee. Correct Answer: A. Too much time had expired after the claim concluded. Too much time had expired after the claim concluded. A statute of limitations is a law that stipulates the length of time after an event during which legal proceedings may be initiated. DaJuan, a claims representative, sets a low case reserve for a seemingly simple claim. A few weeks later it becomes apparent that the initial reserve was too low, and he increases it in order to issue payments. More bills related to the claim arrive a few months later, and he increases the reserve again. This process is known as Select one: A. Stairstepping. B. Reopening. C. Readjusting. D. Incremental reserving. Correct Answer: A. Stairstepping. Erin helps her employer, a multi-line insurer, to determine actual exposure and premium for coverage. She does this by conducting detailed examinations of policyholder operations, records, and accounting. Erin is a(n) Select one: A. Producer. 35 B. Claims adjuster. C. Premium auditor. D. Underwriter. Correct Answer: C. Premium auditor. Premium auditors provide inventory values, contractors' equipment lists, and other facts that are important to the claims function. Thomas is an attorney who is defending an insurer in a litigated case. He has located documents that show the insured was aware of the issue that cause the injury to the claimant before the accident. Thomas is concerned that this evidence will hurt his case. He should Select one: A. Preserve the evidence as part of the record. B. File a motion to suppress the evidence. C. File a motion in limine to exclude the evidence. D. Destroy the evidence to make the defense stronger. Correct Answer: A. Preserve the evidence as part of the record. An insurer defending a first-party coverage lawsuit could be found liable if evidence is intentionally or negligently lost or destroyed. Through data mining, Goshen Mutual discovers that customers who insure two or more vehicles on a personal auto policy are very likely to buy a personal umbrella policy. Algorithms are then used to identify potential customers who might be interested in 36 purchasing both personal auto and umbrella policies. Which one of the following data mining techniques did Goshen Mutual use? Select one: A. Classification B. Association rule learning C. Regression analysis D. Cluster analysis Correct Answer: B. Association rule learning Olivia is careful to keep proper claim status notes when she handles a claim. For example, she makes sure to only include neutral, objective comments about the parties involved. This is because claim notes Select one: A. Continue for as long as the claim is open. B. Present a chronology of the life of the claim. C. Are potentially discoverable in a trial. D. Must be able to speak for themselves. Correct Answer: C. Are potentially discoverable in a trial. Are potentially discoverable in a trial. Seemingly innocuous comments can be devastating when read to a jury. Millstone Insurance wanted to assign its most complex workers compensation claims to experienced claim adjusters as early as possible. The data science team used the 37 classification tree technique to develop a predictive model. When holdout data was used to test the model's predictive accuracy, 45% of the complex claims were assigned to experienced adjusters. When claims were randomly assigned, only 15% of the complex claims were assigned to experienced adjusters. What is the lift provided by the predictive model? Select one: A. 0.333 B. 3 C. 30 D. 45 Correct Answer: B. 3 The lift provided by the predictive model is 3. The lift is calculated by dividing the model percentage by the nonmodel percentage. (45/15 = 3) Alva works for an international, multi-line insurer. She helps her company to manage risk selection by working with other underwriters and coordinating decisions about products, pricing, and guidelines. Alva is a Select one: A. Master underwriter. B. Line underwriter. C. Staff underwriter. D. Chief Underwriting Officer. Correct Answer: C. Staff underwriter. 38 This describes the duties of a staff underwriter. Line underwriter. This describes the duties of a line underwriter, rather than a staff underwriter. There is not enough information to determine which line of business is being written. A public underwriter does not exist. Line underwriters evaluate new submissions and perform renewal underwriting, usually by working directly with insurance producers and applicants. Staff underwriters, meanwhile, manage risk selection by working with line underwriters and coordinating decisions about products, pricing and guidelines. Maja handled a large liability claim that settled above the policy limits. The insured is now charging the claim was handled in bad faith. During their investigation of the badfaith claim, Maja and defense counsel discovered that the claimant had received the payment from the insurer, but not the amount above the policy limits that was to come from the insured's assets. Which one of the following defenses would Maja's defense most likely invoke? Select one: A. Contributory negligence B. Advice of counsel C. Debatable reasonable basis D. Insured's collusion with claimant Correct Answer: D. Insured's collusion with claimant Insured's collusion with claimant. Discovering collusion between the insured and claimant, such as a claimant agreeing not to collect a judgment from the insured's assets, can lead to dismissal of a bad-faith claim. Among the methods used to pay claims are the issuance of checks and bank drafts. The main difference between the two is that 39 Select one: A. Only checks may be used for claim payments in excess of $10,000. B. With a check, the bank must verify that the insurer has authorized payment. C. Only bank drafts may be used for claim payments in excess of $10,000. D. With a bank draft, the bank must verify that the insurer has authorized payment. Correct Answer: D. With a bank draft, the bank must verify that the insurer has authorized payment. A claims representative should have the ability to persuade or influence Select one: A. Supervisors. B. Insureds. C. Claimants, insureds, supervisors and others. D. Claimants. Correct Answer: C. Claimants, insureds, supervisors and others. The impression that claims reps make on claimants, insureds, and others reflects either favorably or unfavorably on the insurer. In a typical scenario, a summons and complaint initiating litigation is received by these parties in which one of the following sequences? Select one: A. Defense counsel, insured, claims rep 40 B. Defense counsel, claims rep, insured C. Insured, claims rep, defense counsel D. Claims rep, insured, defense counsel Correct Answer: C. Insured, claims rep, defense counsel A summons and complaint is typically received by the insured, who then shares it with the claims rep, who in turn sends it to the insurer's defense counsel. Bettina's apartment is burglarized and several items are stolen. In filing her claim, she tells her insurer that her stolen television was both newer and larger than it actually was. This constitutes which one of the following types of fraud? Select one: A. Concealment B. Misrepresentation C. False claim D. Soft fraud Correct Answer: D. Soft fraud In soft fraud, a legitimate loss occurs but the value of that loss is exaggerated. Adam manages a claims department for an insurer. He measures the department's performance by best practices, claims audits, customer satisfaction data, and loss ratio. Which one of Adam's measures refers to a system of identified internal practices that claims representatives perform to produce superior performance? 41 Select one: A. Customer satisfaction data B. Loss ratio C. Best practices D. Claims audits Correct Answer: C. Best practices Best practices generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. Which one of the following elements of a policy can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds? Select one: A. The declarations. B. The conditions. C. An exclusion. D. An endorsement. Correct Answer: D. An endorsement. An endorsement can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds. As a claims representative, Joshua frequently requests proofs of loss and affidavits, and conducts examinations under oath and recorded statements. Which one of Joshua's 42 sworn statements is administered by the insurer's attorney at the office of the insurer, attorney, or court reporter? Select one: A. Affidavit B. Examination under oath C. Recorded statement D. Proof of loss Correct Answer: B. Examination under oath Examination under oath is administered by the attorney for the insurer after notice is issued to appear at the office of the insurer, attorney, or court reporter. Because a full or partial denial of a claim may result in a bad-faith lawsuit, a claims representative should Select one: A. Seek a supervisor's approval before denying a claim. B. Make every effort to approve each claim. C. Carefully document their reasoning for denial. D. Check with the reinsurer before denying a claim. Correct Answer: C. Carefully document their reasoning for denial. The activities that make up the claims handling process Select one: 43 A. Are always sequential but may overlap. B. Are always sequential and do not overlap. C. Are not always sequential, and may overlap. D. Are not always sequential, but do not overlap. Correct Answer: C. Are not always sequential, and may overlap. The NAIC model act specifies that its provisions regarding bad-faith claims are to be enforced by Select one: A. State insurance departments. B. The Federal Trade Commission. C. NAIC personnel. D. Insurer personnel, on the honor system. Correct Answer: A. State insurance departments. The NAIC model act specifies that its provisions regarding bad-faith claims are to be enforced by state insurance departments. Conor is a claims representative whose supervisor is reviewing his claim status notes. The supervisor took exception with one of Conor's notes, which read, "The claimant is obviously lying because his account of how the accident happened keeps changing." The supervisor should advise Conor that this statement is inappropriate because it is not Select one: 44 A. Objective. B. Clear. C. Concise. D. Accurate. Correct Answer: A. Objective. Cristobal is negotiating a settlement with a claimant attorney in a workers compensation claim. The attorney has requested 200 weeks of benefits, which was more than Cristobal was hoping to pay. Cristobal countered with an offer to pay the 200 weeks if the worker would sign an agreement to resign his position and to never reopen the claim. Cristobal's negotiation strategy is an example of Select one: A. Timing settlements effectively. B. Leaning on the evaluation. C. Making concessions cautiously. D. Enticing a reasonable demand. Correct Answer: C. Making concessions cautiously. Claims reps should only make concessions for specific reasons, the other party has made a concession, or a concession would allow the claim to be settled more quickly Which one of the following is correct with respect to the elements of good-faith claim management? Select one: 45 A. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. B. When resolving a coverage question, insurers should avoid the appearance of bad faith by dealing only with those lawyers hired to defend the insured. C. If the insured has excess insurance, the claim representative should merely notify the excess insurer of the claim. D. Claim representatives should avoid using policy provisions, such as arbitration clauses, to resolve disputes over the settlement amount. Correct Answer: A. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. Antonia has a general liability policy with a self-insured retention of $50,000. The policy has an occurrence limit of $250,000 and an aggregate limit of $500,000. She had submitted one prior claim this policy term for which $100,000 was paid by the insurer. How much will Antonia's insurer pay on a subsequent claim under the same policy period that is valued at $400,000? Select one: A. $200,000 B. $250,000 C. $400,000 D. $500,000 Correct Answer: B. $250,000 46 After the SIR limit had been reached, the insurer was obligated to pay up to the occurrence limit. If the decision on a claim settlement is negative, as in a denial, good-faith claims handling requires the claims rep to Select one: A. Explain the rationale behind the decision to the claimant. B. Deliver the decision to the claimant in writing. C. Deliver a hard copy of the decision to the claimant by mail. D. Have a supervisor sign off on the communication to the claimant. Correct Answer: A. Explain the rationale behind the decision to the claimant. If the decision on a claim settlement is negative, good-faith claims handling requires the claims rep to explain the rationale behind the decision. While staff claims representatives may have a variety of titles, the role is typically defined by two things: having a primary focus on claims and Select one: A. A focus on inside claims. B. Being an outsourced contractor of the insurer. C. Being an employee of the insurer. D. Having at least five years of claims experience. Correct Answer: C. Being an employee of the insurer. 47 The role of staff claims representative is defined by being an employee of the insurer and having a primary focus on handling claims. Ciara is going to college with the goal of working as a data scientist for an insurer. She will need a strong foundation in mathematics and statistics, computer programming, domain knowledge, and data science. Which one of Ciara's skills will require her to understand the insurance profession to which the data is being applied? Select one: A. Mathematics and statistics B. Data science. C. Domain knowledge D. Computer programming Correct Answer: C. Domain knowledge Domain knowledge is the understanding of the discipline, profession, or activity to which the data is being applied. Which one of the following methods of establishing case reserves involves a consensus among multiple claims reps? Select one: A. Expert system method B. Average value method C. Roundtable method 48 D. Formula method Correct Answer: C. Roundtable method With the roundtable method, a consensus reserve figure may be reached following evaluation and discussion among claims reps. Which one of the following can be applied over time to refine a model to better predict results? Select one: A. Association rule learning B. Statistics C. Regression D. Machine learning Correct Answer: D. Machine learning An insurer that finds it economically impractical to establish a claims office in a given state is likely to use which one of the following to perform the claims handling function? Select one: A. Producers B. Third-party administrators C. Public adjusters D. Independent adjusters Correct Answer: D. Independent adjusters 49 Insurers may contract with independent adjusters to handle claims in strategic locations. Joy Insurance Company is interested in using data mining to solve a problem it is having with claims fraud in one of its product lines. The first step it should take is Select one: A. To understand what it wants to achieve. B. To develop a model to analyze the data. C. To prepare the data by cleaning it. D. To understand the types of data to use. Correct Answer: A. To understand what it wants to achieve. Jose is handling a workers compensation claim. The injured worker claims to have strained his back when he lifted a box at work. He waited a day to report the injury because he thought he would be okay. He asked Jose when he would be referred to a back specialist and when he could expect his first check. Which one of the injured worker's actions would be the most pertinent fraud indicator to Jose? Select one: A. Asking for referral B. Lifting a box C. Waiting to report D. Asking about check Correct Answer: A. Asking for referral 50 Asked for referral could indicate that the worker has knowledge of the workers compensation system because he had been through it before. Daniel is a claims supervisor. One of his responsibilities is to review claim files to monitor the performance of the adjusters and to provide guidance. He also realizes that claims department peers review files as part of roundtable discussions and that state insurance department representatives might review files as part of market conduct studies. For these reasons, Daniel makes sure his direct reports Select one: A. Maintain complete and accurate documentation. B. Provide competent legal advice. C. Make fair evaluations. D. Conduct good-faith negotiations. Correct Answer: A. Maintain complete and accurate documentation. Maintain complete and accurate documentation. A claim file must contain a complete and accurate account of the claims rep's activities and actions. Leila is conducting a claims investigation and is taking a recorded statement from the claimant. She wants a simple yes-or-no answer to prevent the interviewee from explaining the answer further. She asks, "You experienced back pain immediately when you lifted the box, didn't you?" Leila has asked a(n) Select one: A. Direct question. B. Indirect question. 51 C. Open-ended question. D. Leading question. Correct Answer: D. Leading question. Claims rep Miguel is conducting a settlement with a claimant. He constructs his first offer so that the claimant will likely find it undesirable. This becomes the basis of comparison for the second offer that he makes. Miguel understands that people Select one: A. Feel empowered when given a choice. B. Will typically accept a second offer. C. Are naturally suspicious of an initial offer. D. Are easier to manipulate with choices. Correct Answer: A. Feel empowered when given a choice. Which one of the following terms encompasses types of fraud including false claims and intentional losses? Select one: A. Willful fraud B. Staged fraud C. Soft fraud D. Hard fraud Correct Answer: D. Hard fraud 52 Which one of the following statements regarding subrogation is most accurate? Select one: A. Most policies require the insured to cooperate with the insurer in recovering payment through subrogation, to include testifying or appearing in court. B. The insured typically must cooperate with the insurer in recovering payment through subrogation, but is not required to testify or appear in court. C. The insured is typically under no obligation to cooperate with the insurer in recovering payment through subrogation. D. All policies require the insured to cooperate with the insurer in recovering payment through subrogation. Correct Answer: A. Most policies require the insured to cooperate with the insurer in recovering payment through subrogation, to include testifying or appearing in court. The allegations contained in a summons and complaint typically serve four purposes: To give notice, reveal facts, formulate legal causes of action and Select one: A. Suggest an out-of-court settlement. B. Specify a delivery method for the response. C. Identify the opposing attorney(s). D. State the damages sought. Correct Answer: D. State the damages sought. The allegations contained in a summons and complaint typically give notice, reveal facts, formulate legal causes of action and state the damages sought. 53 James works for a multi-line insurer. He is responsible for investigating claims that raise suspicion of fraud. James is in the Select one: A. Legal department. B. Special Investigation Unit. C. Claims department. D. Loss control department. Correct Answer: B. Special Investigation Unit. Tonya is a claims representative tasked with determining whether coverage applies to a new claim. To ensure that she considers all facets of the claim, she uses the DICE method, which stands for declarations, insuring agreement, conditions and Select one: A. Extras. B. Endorsements. C. Encumbrances. D. Exclusions. Correct Answer: D. Exclusions. The DICE method reminds a claims professional to check declarations, insuring agreement, conditions and exclusions. 54 Insurers and claim representatives must keep the promises specified in insurance policies, as well as those created by the law. In insurance transactions, the insured pays a premium for the insurer's promise to Select one: A. Handle claims in good faith. B. Settle all losses in the insured's best interests. C. Comply with federal insurance laws. D. Compete fairly in the insurance market. Correct Answer: A. Handle claims in good faith. In insurance transactions, the insured pays a premium for the insurer's promise to handle claims in good faith. Sho is a claims representative. With regard to his responsibility for defending his employer against fraud, Sho understands that Select one: A. Insurers rely only on SIU to defend against fraud. B. Fraud indicators are proof of fraud. C. Claims reps are the last defense against fraud. D. Paying fraudulent claims affects insureds. Correct Answer: D. Paying fraudulent claims affects insureds. An insurer that pays a high number of fraudulent claims will have to raise its premiums. 55 In her investigations into fraudulent claims, Laura uses information about the driver's history and driving habits to determine factors such as speed, acceleration, and location. Laura is using Select one: A. Internet of Things. B. Blockchain. C. Predictive models. D. Telematics. Correct Answer: D. Telematics. Attorney Grace is representing an insurer in a case and is preparing a pretrial motion. Her argument is that the court has no jurisdiction for the cause of action brought by the claimant. Grace is preparing a Select one: A. Motion in limine. B. Motion for summary judgment. C. Motion to dismiss. D. Motion to suppress. Correct Answer: C. Motion to dismiss.