AIC 300 - CLAIMS IN AN EVOLVING
WORLD CORRECT 100%
Indemnify - ANSWER To restore a party who has sustained a loss to the same financial
position that party held before the loss occurred.
Third-Party Administrator (TPA) - ANSWER An organization that provides administrative
services associated with risk financing and insurance.
Claims Representative - ANSWER An individual responsible for investigating,
evaluating, and settling claims.
Producer - ANSWER Any of several kinds of insurance personnel who place insurance
and surety business with insurers and who represent either insurers or insureds, or
both.
Public Adjuster - ANSWER An outside organization or person hired by an insured to
represent the insured in a claim in exchange for a fee.
Premium Audit - ANSWER Methodical examination of a policyholder's operations,
records, and books of account to determine the actual exposure units and premium for
insurance coverage already provided.
Loss Ratio - ANSWER A ratio that measures losses and loss adjustment expenses
(LAE) against earned premiums and that reflects the percentage of premiums being
consumed by losses.
Loss Adjustment Expense (LAE) - ANSWER The expense that an insurer incurs to
investigate, defend, and settle claims according to the terms specified in the insurance
policy.
First Notice of Loss (FNOL) - ANSWER The initial report notifying the insurer of a claim.
Reserve - ANSWER The amount the insurer estimates and sets aside to pay on an
existing claim.
Reinstatement - ANSWER When the original limit of coverage is exhausted, the
reinsured will have no cover left for any further losses. Reinsurers will allow the
reinsured to have the original limit reinstated once it is full or partially used up by a loss.
Reinstatement can either be limited or unlimited and can also be free or come at cost.
When the reinstatement is at a cost, the additional premium paid is known as
reinstatement premium.
Cover - ANSWER As claims increase, cover decreases.
, Retention - ANSWER The amount of risk the ceding company (primary insurer) keeps
for its own account or the account of others.
Recovery - ANSWER
Reserve - ANSWER An amount that is established to provide for payment of a future
claim or other obligation.
Occurrence Basis - ANSWER
Claims-Made Basis - ANSWER A provision in a reinsurance contract, that only covers
those claims that occur and are reported within the policy's timeframe unless tail
coverage is also purchased.
Individual Case Method - ANSWER A method of setting reserves based on the claim's
circumstances and the claim representative's experience in handling similar claims.
Roundtable Method - ANSWER A method of setting reserves by using the consensus of
two or more claim personnel who have independently evaluated the claim file.
Formula Method - ANSWER A method of setting claim reserves by using a
mathematical formula.
Average Value Method - ANSWER A case reserving method that establishes a
predetermined dollar amount of reserve for each claim as it is reported.
Expert System Method - ANSWER A method of setting reserves with a software
application that estimates losses and loss adjustment expenses.
Direct Loss - ANSWER A reduction in the value of property that results directly and
often immediately from damage to that property.
Indirect Loss - ANSWER A loss that arises as a result of damage to property, other than
the direct loss to the property.
Pro Rate Contribution - ANSWER An approach to other insurance by which the insurers
contribute to the loss payment in the proportion to which they contribute to the total
amount of coverage purchased (their limits of liability).
Insurable Interest - ANSWER An interest in the subject of an insurance policy that is not
unduly remote and that would cause the interested party to suffer financial loss if an
insured event occurred.
WORLD CORRECT 100%
Indemnify - ANSWER To restore a party who has sustained a loss to the same financial
position that party held before the loss occurred.
Third-Party Administrator (TPA) - ANSWER An organization that provides administrative
services associated with risk financing and insurance.
Claims Representative - ANSWER An individual responsible for investigating,
evaluating, and settling claims.
Producer - ANSWER Any of several kinds of insurance personnel who place insurance
and surety business with insurers and who represent either insurers or insureds, or
both.
Public Adjuster - ANSWER An outside organization or person hired by an insured to
represent the insured in a claim in exchange for a fee.
Premium Audit - ANSWER Methodical examination of a policyholder's operations,
records, and books of account to determine the actual exposure units and premium for
insurance coverage already provided.
Loss Ratio - ANSWER A ratio that measures losses and loss adjustment expenses
(LAE) against earned premiums and that reflects the percentage of premiums being
consumed by losses.
Loss Adjustment Expense (LAE) - ANSWER The expense that an insurer incurs to
investigate, defend, and settle claims according to the terms specified in the insurance
policy.
First Notice of Loss (FNOL) - ANSWER The initial report notifying the insurer of a claim.
Reserve - ANSWER The amount the insurer estimates and sets aside to pay on an
existing claim.
Reinstatement - ANSWER When the original limit of coverage is exhausted, the
reinsured will have no cover left for any further losses. Reinsurers will allow the
reinsured to have the original limit reinstated once it is full or partially used up by a loss.
Reinstatement can either be limited or unlimited and can also be free or come at cost.
When the reinstatement is at a cost, the additional premium paid is known as
reinstatement premium.
Cover - ANSWER As claims increase, cover decreases.
, Retention - ANSWER The amount of risk the ceding company (primary insurer) keeps
for its own account or the account of others.
Recovery - ANSWER
Reserve - ANSWER An amount that is established to provide for payment of a future
claim or other obligation.
Occurrence Basis - ANSWER
Claims-Made Basis - ANSWER A provision in a reinsurance contract, that only covers
those claims that occur and are reported within the policy's timeframe unless tail
coverage is also purchased.
Individual Case Method - ANSWER A method of setting reserves based on the claim's
circumstances and the claim representative's experience in handling similar claims.
Roundtable Method - ANSWER A method of setting reserves by using the consensus of
two or more claim personnel who have independently evaluated the claim file.
Formula Method - ANSWER A method of setting claim reserves by using a
mathematical formula.
Average Value Method - ANSWER A case reserving method that establishes a
predetermined dollar amount of reserve for each claim as it is reported.
Expert System Method - ANSWER A method of setting reserves with a software
application that estimates losses and loss adjustment expenses.
Direct Loss - ANSWER A reduction in the value of property that results directly and
often immediately from damage to that property.
Indirect Loss - ANSWER A loss that arises as a result of damage to property, other than
the direct loss to the property.
Pro Rate Contribution - ANSWER An approach to other insurance by which the insurers
contribute to the loss payment in the proportion to which they contribute to the total
amount of coverage purchased (their limits of liability).
Insurable Interest - ANSWER An interest in the subject of an insurance policy that is not
unduly remote and that would cause the interested party to suffer financial loss if an
insured event occurred.
