AIC 300 EXAMINATION QUESTIONS AND 100%
VERIFIED ANSWERS
Indemnify - 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) - An organization that provides administrative services
associated with risk financing and insurance.
Claims representative - A person responsible for investigating, evaluating, and settling
claims.
Public adjuster - An outside organization or person hired by an insured to represent the
insured in a claim in exchange for a fee.
Premium audit - 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 - Timeliness of reports, reserving and payments
Qualitative Audit Factors - Realistic reserving, accurate evaluation of insured's liability
and follow-up on subrogation opportunity
Loss ratio - 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) - 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. - 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 - 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. - A. TPAs handle claims, keep
claims records, and perform statistical analyses.
Steps of Making an Initial Claims Assessment - 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? - 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: - 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 - 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 - The amount the insurer estimates and sets aside to pay on an existing claim.
Individual case method - a method of setting reserves based on the claim's circumstances
and the claim representative's experience in handling similar claims
Roundtable method - 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 - A case reserving method that establishes a predetermined dollar
amount of reserve for each claim as it is reported.
Formula method - A method of setting claim reserves by using a mathematical formula.
, Expert system method - 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) - 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 - 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 - The insurer's case reserves.
Direct loss - A reduction in the value of property that results directly and often
immediately from damage to that property.
Indirect loss - A loss that arises as a result of damage to property, other than the direct
loss to the property.
Pro rata contribution - 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).
Which of the following losses might be covered by special damages? Which might be covered by
general damages?
Medical expenses
Pain and suffering
Lost wages
VERIFIED ANSWERS
Indemnify - 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) - An organization that provides administrative services
associated with risk financing and insurance.
Claims representative - A person responsible for investigating, evaluating, and settling
claims.
Public adjuster - An outside organization or person hired by an insured to represent the
insured in a claim in exchange for a fee.
Premium audit - 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 - Timeliness of reports, reserving and payments
Qualitative Audit Factors - Realistic reserving, accurate evaluation of insured's liability
and follow-up on subrogation opportunity
Loss ratio - 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) - 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. - 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 - 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. - A. TPAs handle claims, keep
claims records, and perform statistical analyses.
Steps of Making an Initial Claims Assessment - 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? - 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: - 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 - 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 - The amount the insurer estimates and sets aside to pay on an existing claim.
Individual case method - a method of setting reserves based on the claim's circumstances
and the claim representative's experience in handling similar claims
Roundtable method - 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 - A case reserving method that establishes a predetermined dollar
amount of reserve for each claim as it is reported.
Formula method - A method of setting claim reserves by using a mathematical formula.
, Expert system method - 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) - 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 - 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 - The insurer's case reserves.
Direct loss - A reduction in the value of property that results directly and often
immediately from damage to that property.
Indirect loss - A loss that arises as a result of damage to property, other than the direct
loss to the property.
Pro rata contribution - 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).
Which of the following losses might be covered by special damages? Which might be covered by
general damages?
Medical expenses
Pain and suffering
Lost wages
