CAWC EXAM QUESTIONS &
ANSWERS(SCORED A+)
What are the different types of Workers Compensation Products? -
ANSWERGuaranteed Cost
Small Deductible Plan
Large Deductible Plan
Retroactive Rating Plan
Guaranteed Cost - ANSWERPremium doesn't vary that much during a policy period
even if there are considerable/limited losses. Carrier Assumes all the risk
Dividend Plans - ANSWERGoes along with Guaranteed Cost; allows insured
opportunity to receive money back after policy period has ended
Small Deductible Plan - ANSWERPolicy holder shares cost of claims of the injured
worker
Retrospective Rating Plan - ANSWERPremium 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 - ANSWERInsured assumes more risk by paying substantial
portions (or all) of each claim. Lower initial premium. Pays for losses as they occur
Monopolistic states - ANSWERNorth Dakota, Ohio, Washington, Wyoming; Workers
comp regulated and controlled by the state; no private insurance carriers
State Funds - ANSWER25 States offer workers compensation
Competitive State Funds - ANSWER21 states have state offered workers
compensation insurance but private insurance carriers are permitted to sell WC
insurance
Self Insurance - ANSWEREmployer retains the risk of workers compensation losses
if they have the financial means to do so;
Excess Insurance - ANSWERTypically purchased by employer who self-insures;
cover losses over a specified amount, provides additional coverage for $$$ claims
Assigned Risk - ANSWERprovide coverage for companies that cannot obtain
insurance due to very high risk and poor loss history
Employer's Liability/ Stop-gap Coverage - ANSWERCoverage 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? -
ANSWERHard and Soft Markets
Hard Market - ANSWERRates 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 - ANSWERRates 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 - ANSWER+$80 billion
Employee Fraud - ANSWERClaims a bogus injury to get paid time off. Tells
employer it happened on job when it happened on personal time
Insurance Fraud - ANSWERIntentional misrepresentation of facts and circumstances
to an insurance company to illegally obtain funds
Employer Fraud - ANSWEREmployer 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 - ANSWERLying 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? - ANSWERIt is a
type of employer fraud and premium fraud
What are the 2 types of Agent Fraud? - ANSWERDelaying the Payment, Keeping
the Premium
Delaying the Payment - ANSWERAgent 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 - ANSWERAgent 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? - ANSWERMoralist, Conformist, Realist, Critic
Moralists - ANSWERTolerate Insurance Fraud the least, No excuse for this behavior,
advocate punishment of perpetrators severely. Represent 30.7%
Conformists - ANSWERTolerate insurance fraud to a fair extent, believe that many
people do it, making it more acceptable. Support moderate punishment, represent
26.4%
ANSWERS(SCORED A+)
What are the different types of Workers Compensation Products? -
ANSWERGuaranteed Cost
Small Deductible Plan
Large Deductible Plan
Retroactive Rating Plan
Guaranteed Cost - ANSWERPremium doesn't vary that much during a policy period
even if there are considerable/limited losses. Carrier Assumes all the risk
Dividend Plans - ANSWERGoes along with Guaranteed Cost; allows insured
opportunity to receive money back after policy period has ended
Small Deductible Plan - ANSWERPolicy holder shares cost of claims of the injured
worker
Retrospective Rating Plan - ANSWERPremium 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 - ANSWERInsured assumes more risk by paying substantial
portions (or all) of each claim. Lower initial premium. Pays for losses as they occur
Monopolistic states - ANSWERNorth Dakota, Ohio, Washington, Wyoming; Workers
comp regulated and controlled by the state; no private insurance carriers
State Funds - ANSWER25 States offer workers compensation
Competitive State Funds - ANSWER21 states have state offered workers
compensation insurance but private insurance carriers are permitted to sell WC
insurance
Self Insurance - ANSWEREmployer retains the risk of workers compensation losses
if they have the financial means to do so;
Excess Insurance - ANSWERTypically purchased by employer who self-insures;
cover losses over a specified amount, provides additional coverage for $$$ claims
Assigned Risk - ANSWERprovide coverage for companies that cannot obtain
insurance due to very high risk and poor loss history
Employer's Liability/ Stop-gap Coverage - ANSWERCoverage 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? -
ANSWERHard and Soft Markets
Hard Market - ANSWERRates 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 - ANSWERRates 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 - ANSWER+$80 billion
Employee Fraud - ANSWERClaims a bogus injury to get paid time off. Tells
employer it happened on job when it happened on personal time
Insurance Fraud - ANSWERIntentional misrepresentation of facts and circumstances
to an insurance company to illegally obtain funds
Employer Fraud - ANSWEREmployer 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 - ANSWERLying 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? - ANSWERIt is a
type of employer fraud and premium fraud
What are the 2 types of Agent Fraud? - ANSWERDelaying the Payment, Keeping
the Premium
Delaying the Payment - ANSWERAgent 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 - ANSWERAgent 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? - ANSWERMoralist, Conformist, Realist, Critic
Moralists - ANSWERTolerate Insurance Fraud the least, No excuse for this behavior,
advocate punishment of perpetrators severely. Represent 30.7%
Conformists - ANSWERTolerate insurance fraud to a fair extent, believe that many
people do it, making it more acceptable. Support moderate punishment, represent
26.4%
