AIC 300 CORRECT QUESTIONS &
SOLUTIONS(RATED A+)
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 A person responsible for investigating, evaluating,
and settling claims.
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 coverages already provided.
Quantitative Audit Factors - ANSWER Timeliness of reports, reserving and payments
Qualitative Audit Factors - ANSWER Realistic reserving, accurate evaluation of
insured's liability and follow-up on subrogation opportunity
Loss ratio - ANSWER A ratio that measures losses and loss adjustment expenses
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.
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
A. Personal lines underwriter.
B. Line underwriter.
C. Staff underwriter.
D. Public underwriter. - ANSWER B. 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.
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?
A. Number of files opened
B. Timeliness of reports
C. Accuracy of data entry
D. Proper releases taken - ANSWER D. Proper releases taken
Which one of the following statements regarding third-party administrators (TPAs) is
most accurate?
A. TPAs handle claims, keep claims records, and perform statistical analyses.
B. TPAs are generally found in an insurer's claims department.
C. TPAs are typically used by businesses that have chosen not to self-insure.
D. TPAs are employed only by independent adjusting firms. - ANSWER A. TPAs handle
claims, keep claims records, and perform statistical analyses.
Steps of Making an Initial Claims Assessment - ANSWER Acknowledging and
Assigning the Claim
Identifying the Policy
Contacting the Insured or the Insured's Representative
How do recorded statements and examinations under oath differ? - ANSWER An
examination under oath is more formal than a recorded statement. Recorded
statements are often taken by claims representatives, typically by telephone.
Examinations under oath are usually performed by an attorney for the insurer at the
insurer's office or a court reporter's office.
Effective statements exhibit these qualities: - ANSWER Coherence—The statement
follows a logical sequence.
Completeness—The statement is thorough.
Objectivity—The statement contains facts relevant to the loss expressed in the
interviewee's own words.
Seven-Part Method - ANSWER 1. Permission and introduction—date, time, and location
of the interview, names of the parties involved in the interview, and an affirmation from
the interviewee that the interview is given with permission
2. Identification—identifying information about the person being interviewed, such as
name, address, phone number, and driver's license number
, 3. Setting—answers to questions such as who was involved in the loss, what was
involved in the loss, when the loss occurred, where the loss occurred, and why the loss
occurred
4. Incident—a step-by-step description of how the loss occurred
5. Post incident injuries/damages—description of the property damage and bodily
injuries to individuals
6. Miscellaneous—any information the interviewee wants to add
7. Conclusion—reaffirmation that the statement was taken with permission
Reserve - ANSWER The amount the insurer estimates and sets aside to pay on an
existing claim.
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
Average value method - ANSWER A case reserving method that establishes a
predetermined dollar amount of reserve for each claim as it is reported.
Formula method - ANSWER A method of setting claim reserves by using a
mathematical formula.
Expert system method - ANSWER A method of setting reserves with a software
application that estimates losses and loss adjustment expenses.
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) - ANSWER Recorded
statement
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?
A. Roundtable method
B. Average value method
C. Formula method
D. Individual case method - ANSWER B. Average value method
SOLUTIONS(RATED A+)
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 A person responsible for investigating, evaluating,
and settling claims.
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 coverages already provided.
Quantitative Audit Factors - ANSWER Timeliness of reports, reserving and payments
Qualitative Audit Factors - ANSWER Realistic reserving, accurate evaluation of
insured's liability and follow-up on subrogation opportunity
Loss ratio - ANSWER A ratio that measures losses and loss adjustment expenses
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.
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
A. Personal lines underwriter.
B. Line underwriter.
C. Staff underwriter.
D. Public underwriter. - ANSWER B. 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.
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?
A. Number of files opened
B. Timeliness of reports
C. Accuracy of data entry
D. Proper releases taken - ANSWER D. Proper releases taken
Which one of the following statements regarding third-party administrators (TPAs) is
most accurate?
A. TPAs handle claims, keep claims records, and perform statistical analyses.
B. TPAs are generally found in an insurer's claims department.
C. TPAs are typically used by businesses that have chosen not to self-insure.
D. TPAs are employed only by independent adjusting firms. - ANSWER A. TPAs handle
claims, keep claims records, and perform statistical analyses.
Steps of Making an Initial Claims Assessment - ANSWER Acknowledging and
Assigning the Claim
Identifying the Policy
Contacting the Insured or the Insured's Representative
How do recorded statements and examinations under oath differ? - ANSWER An
examination under oath is more formal than a recorded statement. Recorded
statements are often taken by claims representatives, typically by telephone.
Examinations under oath are usually performed by an attorney for the insurer at the
insurer's office or a court reporter's office.
Effective statements exhibit these qualities: - ANSWER Coherence—The statement
follows a logical sequence.
Completeness—The statement is thorough.
Objectivity—The statement contains facts relevant to the loss expressed in the
interviewee's own words.
Seven-Part Method - ANSWER 1. Permission and introduction—date, time, and location
of the interview, names of the parties involved in the interview, and an affirmation from
the interviewee that the interview is given with permission
2. Identification—identifying information about the person being interviewed, such as
name, address, phone number, and driver's license number
, 3. Setting—answers to questions such as who was involved in the loss, what was
involved in the loss, when the loss occurred, where the loss occurred, and why the loss
occurred
4. Incident—a step-by-step description of how the loss occurred
5. Post incident injuries/damages—description of the property damage and bodily
injuries to individuals
6. Miscellaneous—any information the interviewee wants to add
7. Conclusion—reaffirmation that the statement was taken with permission
Reserve - ANSWER The amount the insurer estimates and sets aside to pay on an
existing claim.
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
Average value method - ANSWER A case reserving method that establishes a
predetermined dollar amount of reserve for each claim as it is reported.
Formula method - ANSWER A method of setting claim reserves by using a
mathematical formula.
Expert system method - ANSWER A method of setting reserves with a software
application that estimates losses and loss adjustment expenses.
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) - ANSWER Recorded
statement
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?
A. Roundtable method
B. Average value method
C. Formula method
D. Individual case method - ANSWER B. Average value method
