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.
Producer - Any of several kinds of insurance personnel who place insurance and surety
business with insurers and who represent either insurers, insureds, or both
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
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.
First Notice of Loss (FNOL) - The initial report notifying the insurer of a claim.
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 claims personnel who have independently evaluated the claims 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.
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).
Insurable interest - 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.
Punitive damages (exemplary damages) - A payment awarded by a court to punish a
defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need
not bear any relation to a party's actual damages.
Compensatory damages - A payment awarded by a court to reimburse a victim for actual
harm.
Special damages - A form of compensatory damages that awards a sum of money for
specific, identifiable expenses associated with the injured person's loss, such as medical
expenses or lost wages.
General damages - A monetary award to compensate a victim for losses, such as pain and
suffering, that do not involve specific measurable expenses.
Coinsurance clause - A clause that requires the insured to carry insurance equal to at
least a specified percentage of the insured's property value.
Discovery - A pretrial exchange of all relevant information between the plaintiff and
defendant.
Summons - A document that directs a sheriff or another court-designated officer to
notify the defendant named in the lawsuit that a lawsuit has been started and that the
defendant has a specified amount of time to answer the complaint.
Complaint - The allegations made by a plaintiff in a lawsuit.
Service of process - The delivery of the complaint and summons to a defendant by an
authorized person.
,Allegation - A claim made in the complaint by the plaintiff, specifying what the plaintiff
expects to prove to obtain a judgment against the defendant.
Federal Rules of Civil Procedure - A set of rules established to ensure that civil actions
and procedures move through the United States district courts as quickly as possible.
Statute of limitations - A law that stipulates the length of time after an event during
which legal proceedings (such as a lawsuit or criminal charges) may be initiated.
Stare decisis - The principle that lower courts must follow precedents set by higher
courts.
Motion to dismiss - A request that a court terminate an action because of settlement,
voluntary withdrawal, or procedural defect.
Motion for summary judgment - A pretrial request asking the court to enter a judgment
when no material facts are in dispute and the moving party is entitled to judgment as a matter
of law.
Motion in limine - A pretrial request that certain evidence be excluded from the trial.
Big data - Sets of data that are too large to be gathered and analyzed by traditional
methods.
Internet of Things (IoT) - A network of objects that transmit data to each other and to
central hubs through the internet.
Telematics - The use of technological devices to transmit data via wireless
communication and GPS tracking.
Wearable sensor tag - A sensor attached to or embedded in clothing and accessories.
Data mining - The analysis of large amounts of data to find new relationships and
patterns that will assist in developing business solutions.
Algorithm - An operational sequence used to solve mathematical problems and to create
computer programs.
Cross-Industry Process for Data Mining (CRISP-DM) - An accepted standard for the steps
in any data mining process used to provide business solutions.
Machine learning - Artificial intelligence in which computers continually teach
themselves to make better decisions based on previous results and new data.
Complex claim - A claim that contains one or more characteristics that cause it to cost
more than the average claim.
, Information gain - A measure of the predictive power of one or more attributes.
Classification tree - A supervised learning technique that uses a structure similar to a tree
to segment data according to known attributes to determine the value of a categorical target
variable.
Recursively - Successively applying a model.
Root node - The first node in a classification tree.
Combination of nodes - A representation of data attributes in a classification tree.
Leaf node - A terminal node of a classification tree that is used to classify an instance
based on its attributes.
Training data - Data that is used to train a predictive model and that therefore must have
known values for the target variable of the model.
Holdout data - In the model training process, existing data with a known target variable
that is not used as part of the training data.
Lift - In model performance evaluation, the percentage of positive predictions made by
the model divided by the percentage of positive predictions that would be made in absence of
the model.
Accuracy - In model performance evaluation, a model's correct predictions divided by its
total predictions.
Precision - In model performance evaluation, a model's correct positive predictions
divided by its total positive predictions.
Actuary - A person who uses mathematical methods to analyze insurance data for various
purposes, such as to develop insurance rates or set claim reserves.
Data science - An interdisciplinary field involving the design and use of techniques to
process very large amounts of data from a variety of sources and to provide knowledge based
on the data.
Domain knowledge - Information related to the context of the information a data
scientist is working with.
Insurance fraud - Any deliberate deception committed against an insurer or an insurance
producer for the purpose of unwarranted financial gain.
Special Investigation Unit (SIU) - A division set up to investigate suspicious claims,
premium fraud, or application fraud.
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.
Producer - Any of several kinds of insurance personnel who place insurance and surety
business with insurers and who represent either insurers, insureds, or both
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
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.
First Notice of Loss (FNOL) - The initial report notifying the insurer of a claim.
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 claims personnel who have independently evaluated the claims 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.
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).
Insurable interest - 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.
Punitive damages (exemplary damages) - A payment awarded by a court to punish a
defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need
not bear any relation to a party's actual damages.
Compensatory damages - A payment awarded by a court to reimburse a victim for actual
harm.
Special damages - A form of compensatory damages that awards a sum of money for
specific, identifiable expenses associated with the injured person's loss, such as medical
expenses or lost wages.
General damages - A monetary award to compensate a victim for losses, such as pain and
suffering, that do not involve specific measurable expenses.
Coinsurance clause - A clause that requires the insured to carry insurance equal to at
least a specified percentage of the insured's property value.
Discovery - A pretrial exchange of all relevant information between the plaintiff and
defendant.
Summons - A document that directs a sheriff or another court-designated officer to
notify the defendant named in the lawsuit that a lawsuit has been started and that the
defendant has a specified amount of time to answer the complaint.
Complaint - The allegations made by a plaintiff in a lawsuit.
Service of process - The delivery of the complaint and summons to a defendant by an
authorized person.
,Allegation - A claim made in the complaint by the plaintiff, specifying what the plaintiff
expects to prove to obtain a judgment against the defendant.
Federal Rules of Civil Procedure - A set of rules established to ensure that civil actions
and procedures move through the United States district courts as quickly as possible.
Statute of limitations - A law that stipulates the length of time after an event during
which legal proceedings (such as a lawsuit or criminal charges) may be initiated.
Stare decisis - The principle that lower courts must follow precedents set by higher
courts.
Motion to dismiss - A request that a court terminate an action because of settlement,
voluntary withdrawal, or procedural defect.
Motion for summary judgment - A pretrial request asking the court to enter a judgment
when no material facts are in dispute and the moving party is entitled to judgment as a matter
of law.
Motion in limine - A pretrial request that certain evidence be excluded from the trial.
Big data - Sets of data that are too large to be gathered and analyzed by traditional
methods.
Internet of Things (IoT) - A network of objects that transmit data to each other and to
central hubs through the internet.
Telematics - The use of technological devices to transmit data via wireless
communication and GPS tracking.
Wearable sensor tag - A sensor attached to or embedded in clothing and accessories.
Data mining - The analysis of large amounts of data to find new relationships and
patterns that will assist in developing business solutions.
Algorithm - An operational sequence used to solve mathematical problems and to create
computer programs.
Cross-Industry Process for Data Mining (CRISP-DM) - An accepted standard for the steps
in any data mining process used to provide business solutions.
Machine learning - Artificial intelligence in which computers continually teach
themselves to make better decisions based on previous results and new data.
Complex claim - A claim that contains one or more characteristics that cause it to cost
more than the average claim.
, Information gain - A measure of the predictive power of one or more attributes.
Classification tree - A supervised learning technique that uses a structure similar to a tree
to segment data according to known attributes to determine the value of a categorical target
variable.
Recursively - Successively applying a model.
Root node - The first node in a classification tree.
Combination of nodes - A representation of data attributes in a classification tree.
Leaf node - A terminal node of a classification tree that is used to classify an instance
based on its attributes.
Training data - Data that is used to train a predictive model and that therefore must have
known values for the target variable of the model.
Holdout data - In the model training process, existing data with a known target variable
that is not used as part of the training data.
Lift - In model performance evaluation, the percentage of positive predictions made by
the model divided by the percentage of positive predictions that would be made in absence of
the model.
Accuracy - In model performance evaluation, a model's correct predictions divided by its
total predictions.
Precision - In model performance evaluation, a model's correct positive predictions
divided by its total positive predictions.
Actuary - A person who uses mathematical methods to analyze insurance data for various
purposes, such as to develop insurance rates or set claim reserves.
Data science - An interdisciplinary field involving the design and use of techniques to
process very large amounts of data from a variety of sources and to provide knowledge based
on the data.
Domain knowledge - Information related to the context of the information a data
scientist is working with.
Insurance fraud - Any deliberate deception committed against an insurer or an insurance
producer for the purpose of unwarranted financial gain.
Special Investigation Unit (SIU) - A division set up to investigate suspicious claims,
premium fraud, or application fraud.
