AIC Study Guide Review Practice Test.

AIC Study Guide Review Practice Test. What is the difference between first party and third party? - CORRECT ANSWER Property insurance is considered first-party insurance because the insurer, or second party, makes payment for covered losses directly to the policyholder, or first party. Liability insurance is considered third-party insurance because the insurer makes payments on behalf of the policyholder to a claimant (third party) who is injured or whose property is damaged by the policyholder. Claims Personnel - CORRECT ANSWER A variety of insurance professionals can handle claims, such as staff claims representatives, independent adjusters, employees of TPAs, and producers. Public adjusters also handle claims by representing the interests of insureds to the insurer. Musgriff Insurance has received a claim related to an accident that involved an aircraft, and an investigation is needed to process the claim. However, the company doesn't have any claims representatives with knowledge about handling aircraft claims. What type of claims professional should the company hire to help with the investigation? - CORRECT ANSWER Independent adjuster. Insurers use independent adjusters when their staff claims representatives are too busy to meet customer needs or when specialized skills are needed. Producers - CORRECT ANSWER The term "producer" includes agents, brokers, sales representatives, and intermediaries who place insurance with insurers. Imagine you are a claims representative attempting to settle a complex claim for an insured. Unfortunately, the insured is not satisfied with the way settlement negotiations are progressing. Whom might the insured hire to ensure that his or her interests are protected? - CORRECT ANSWER The insured might hire a public adjuster. A public adjuster is an outside organization or person who represents the insured in a claim. Indemnify - CORRECT 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) - CORRECT ANSWER An organization that provides administrative services associated with risk financing and insurance. Claims representative - CORRECT ANSWER A person responsible for investigating, evaluating, and settling claims Producer - CORRECT 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 - CORRECT ANSWER An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee Underwriting - CORRECT ANSWER the Claims Department relies on underwriters for thorough, accurate data about the circumstances under which coverage was written. Claims personnel help underwriters by ensuring that claims are paid fairly and according to their respective policy. Proper, consistent, and efficient claims handling enables underwriters to evaluate, select, and appropriately price loss exposures. Producer - CORRECT 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. Premium audit - CORRECT 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. What do you think sets the tone for the claims adjustment process? - CORRECT ANSWER The claims rep's initial contact with the insured sets the tone for the adjustment process. When do you think claims reps have the greatest opportunity to positively influence others? - CORRECT ANSWER One of the times when claims reps have the greatest opportunity to positively influence others is during catastrophes. Profitability Measures - CORRECT ANSWER A loss ratio compares an insurer's losses and loss adjustment expenses (LAE) with its collected premiums and reveals the percentage of premiums being consumed by losses. An increasing loss ratio could indicate that the insurer isn't performing the claims function properly. Increasing losses could also mean that the Underwriting Department elected to cover loss exposures that were more costly or occurred more frequently than it estimated or that the Actuarial Department failed to price the insurer's products correctly. Quality Measures - CORRECT ANSWER Three frequently used tools provide quality measures of a Claims Department's performance: best practices, claims audits, and customer satisfaction data. "best practices" generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. Claims Department best practices are often based on legal requirements. For example, a Claims Department may have a best practice stating that claims will be acknowledged within 24 hours of receipt. This time frame may have been selected because of a regulation, law, or court decision. Insurers use claims audits to ensure compliance with best practices and to gather statistical information on claims. A claims audit is performed by evaluating information in a number of open and closed claim files. Claims audits usually evaluate both quantitative and qualitative factors. quantitative vs qualitative - CORRECT ANSWER quantitative = timelinedd of reports, reserving, payment, number of files, percentaged, etc qualitative = realistic reserves, accurate evaluation, follow up, correct coverage evals, throrough investigations, etc An insurer's management team is evaluating the organization's financial well-being and wants to determine whether the Claims Department is functioning properly, whether the Underwriting Department is selecting appropriate loss exposures, and whether the Actuarial Department is pricing the insurance products correctly. Describe the profitability measure that can help management make these determinations. - CORRECT ANSWER The loss ratio can help the management team make these determinations. The loss ratio compares an insurer's losses and LAE to its collected premiums and reveals the percentage of premiums being consumed by losses. Loss ratio - CORRECT 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) - CORRECT ANSWER The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. Which one of the following best describes the purpose of a claim acknowledgment? - CORRECT ANSWER c. The purpose of a claim acknowledgment is to advise that the claim was received Identifying the Policy - CORRECT ANSWER Once a claims rep receives an assignment, they will identify the policy that was in force on the date of loss and then determine whether: -The loss occurred within the policy period -Coverage exists under the policy for the type of loss reported -The insured followed the policy's terms and conditions four critical aspects of a claims rep's initial contact with an insured - CORRECT ANSWER Timing Method of Contact Preparation Initial Contact First notice of loss (FNOL) - CORRECT ANSWER The initial report notifying the insurer of a claim. Public adjuster - CORRECT ANSWER An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee. How do recorded statements and examinations under oath differ? - CORRECT 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.