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AIC 300 Claims in an Evolving World
with Answers 2023|VERIFIED
B. By certified mail with a return receipt requested.
Some will also send a copy via regular mail in case the certified letter is not accepted. - Insurers usually send denial letters Select one: A. By email to ensure prompt receipt by the insured. B. By certified mail with a return receipt requested. C. By overnight courier. D. By registered mail.
D. Subpoenaed.
Any written claims communication may be subpoenaed. - As methods of communication evolve, it's important for claims professionals to remember that any written claims communication may be Select one: A. Replaced with verbal communication. B. Misinterpreted. C. Edited later. D. Subpoenaed.
D. An insured's negotiations with the insurer on a complex claim are not going well.
If a claim is complex, or if settlement negotiations are not progressing with the insurer, the insured may hire a public adjuster to protect his or her interests. - In which one of the following scenarios is a public adjuster most likely to become involved? Select one: A. An insurer finds it financially unfeasible to hire its own claims staff in a given state. B. An insured is unable to afford legal representation to contest a claim. C. A catastrophic disaster strikes, involving damage to many properties. D. An insured's negotiations with the insurer on a complex claim are not going well.
B. TPAs handle claims, keep claims records, and perform statistical analyses. - Which one of the following statements regarding third-party administrators (TPAs) is most accurate? Select one: A. TPAs are typically used by businesses that have chosen not to self-insure. B. TPAs handle claims, keep claims records, and perform statistical analyses. C. TPAs are generally found in an insurer's claims department. D. TPAs are employed only by independent adjusting firms.
A. Proper releases taken
Proper releases taken is a qualitative audit factor; the others are quantitative. - 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? Select one: A. Proper releases taken B. Timeliness of reports C. Number of files opened D. Accuracy of data entry
D. Line underwriter.
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. - 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 Select one: A. Staff underwriter. B. Public underwriter. C. Personal lines underwriter. D. Line underwriter.
D. Listening.
Claims professionals should first listen carefully to understand what the claimant is saying. - The first key to communicating empathetically as a claims professional is Select one: A. A comprehensive understanding of relevant insurance policies. B. Speaking calmly and clearly. C. Being prepared with all documentation relating to the claim. D. Listening.
C. Cost to investigate, defend, and settle claims.
Cost to investigate, defend, and settle claims. LAE is the expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. - Mia tracks loss adjustment expense (LAE) as part of her management of the claims department for an insurer. Mia considers LAE to be the Select one: A. Total amount of loss reserves of all claims. B. Paid portion of claims.
The right of subrogation allows an insurer to recover payment from a negligent third party. - In which one of the following scenarios is the right of subrogation most likely to be employed by the insurer? Select one: A. An insured files a homeowners claim for stolen jewelry. An investigation reveals that the jewelry is still in the insured's possession. B. An investigation reveals that an insured set her own business on fire. C. An insured files a claim for collision damage from a hit and run accident, when in fact he backed into a utility pole. D. A claims rep discovers that their insured's car accident was caused by a road contractor who left equipment lying in the travel lanes of a highway.
D. A medical investigation.
All bodily injury claims, including workers compensation claims, require a medical investigation. - In claims investigation, all bodily injury claims require Select one: A. Statements from all witnesses. B. Multiple claims payments C. An attorney. D. A medical investigation.
D. Prepare a list of questions for the insured.
Before making initial contact with an insured or claimant, a claims representative should prepare a list of questions for the insured, along with information on how the claim will be handled. - Before making initial contact with an insured or claimant, a claims representative should Select one: A. Research similar losses in the same geographical area. B. Contact company counsel for a reservation of rights letter. C. Prepare an approximate estimate based on similar losses. D. Prepare a list of questions for the insured.
C. Recorded statement.
A recorded statement is taken by the claims rep over the phone or in person. - 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) Select one: A. Affidavit. B. Deposition. C. Recorded statement. D. Examination under oath.
B. Large loss
Large loss reports are required by most insurers to summarize claims with reserves above a certain threshold. - One of Juan's responsibilities as a claims representative is to prepare internal reports, such as preliminary, interim, large loss, and captioned. Which one of the reports Juan prepares is required for claims with reserves that exceed a specified threshold? Select one: A. Interim B. Large loss C. Preliminary D. Captioned
D. First notice of loss (FNOL) form.
An internal claims handler will often transfer information to the insurer's standard form, called the first notice of loss (FNOL) form. - In the process of assigning a claim, an internal claims handler will often transfer information to the insurer's standard form, called the Select one: A. Standard claims handling (SCH) form. B. Initial acknowledgment of notice (IAN) form. C. Claim intake (CI) form. D. First notice of loss (FNOL) form.
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. - 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? Select one: A. Individual case method B. Average value method C. Formula method D. Roundtable method
A. The insurer's case reserves.
To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to the insurer's case reserves. - To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to Select one: A. The insurer's case reserves. B. The insurer's profits. C. NAIC model regulations. D. National averages.
D. Known terrorists and drug traffickers.
Failure to check a master list of known terrorists and drug traffickers may result in substantial penalties. - The Office of Foreign Assets Control requires claims payors to check payees against a database of Select one: A. Known perpetrators of insurance fraud. B. Policyholders of other insurers. C. Those who have collected a payment for the same loss. D. Known terrorists and drug traffickers.
B. By electronic funds transfer. - Claims may be paid in any of three ways: by check, by bank transfer or Select one: A. In a direct transfer of goods or services, as with a contractor performing repairs. B. By electronic funds transfer. C. By the issuance of a credit on the premium for the next policy period. D. In cash.
B. Timing settlements effectively
Timing settlements effectively can impact how much money a claimant is willing to accept. - Riko is an experienced settlement negotiator. When negotiating with claimant representatives, she uses techniques such as timing settlements effectively, enticing a reasonable demand, making concessions cautiously, and leaning on the evaluation. She understands that her current claimant is eager to receive money, so she is delaying the negotiations as long as possible. Which negotiation technique is Riko using? Select one: A. Enticing a reasonable demand B. Timing settlements effectively C. Making concessions cautiously D. Leaning on the evaluation
D. Lower courts must follow precedents set by higher courts.
Lower courts must follow precedents set by higher courts. This is the principle of stare decisis. - Chloe is an insurer defense attorney who is preparing a trial strategy. She has researched a court decision that was made in a similar case and is basing the defense on that precedent. Chloe is relying on the principle of stare decisis, which is that Select one: A. Lower courts must follow precedents set by any other courts. B. Higher courts must follow precedents set by any other courts. C. Higher courts must follow precedents set by lower courts. D. Lower courts must follow precedents set by higher courts.
A. A reservation of rights letter.
The insurer will issue a reservation of rights letter stating that it will provide defense only until it can establish that there is no coverage. - Kira, a claims representative, receives a summons and complaint from an insured. In reviewing the facts, she has doubts that the insured's applicable policy will provide coverage. She should work with counsel and request a managerial review in order to issue Select one: A. A reservation of rights letter. B. An excess letter. C. A countersuit. D. A claim denial.
C. A summons and complaint.
The claims litigation process begins with the receipt of a summons and complaint announcing the initiation of a lawsuit. - The claims litigation process begins with the receipt of Select one: A. A notice of claim. B. A civil violation notice. C. A summons and complaint. D. A settlement offer.
C. Motion in limine.
This is a pretrial request that certain evidence be excluded from the trial because it is irrelevant or prejudicial. - Linnea is an attorney who is preparing to defend an insurer in a workers compensation case. Discovery produced several documents that are being presented as witnesses statements, but the witnesses admit in the statements to not actually seeing the accident. Linnea would like to omit these statements from the proceedings, so she is filing a Select one: A. Motion to dismiss. B. Motion to strike. C. Motion in limine. D. Motion to suppress.
C. Using traditional sales techniques
A common sales technique is mirroring the behavior of the customer. - Claims rep Lily is negotiating a claim settlement with an unrepresented claimant and wishes to smooth the process. She is matching her demeanor, tone, and mannerisms to those of the claimant. Lily is using which one of the following negotiation techniques? Select one: A. Setting expectations
Which one of the following is a data mining technique an insurer applies when it knows what information it wants to predict? Select one: A. Machine learning B. Association rule learning C. Cluster analysis D. Classification
C. Understand what a business wants to achieve. - The first step in the data mining process is to Select one: A. Collect the data that will be used. B. Select a data mining technique. C. Understand what a business wants to achieve. D. Prepare the data that will be used.
A. Risk selection. - Generally speaking, the most common application of predictive modeling in insurance occurs in Select one: A. Risk selection. B. Marketing. C. Reinsurance. D. Claims handling.
D. Data science
Data science team needs to be engaged as soon as the need for a project arises. - Hanna is in IT and works on data analytics projects for an insurer. These projects involve analyzing large amounts of data to help underwriting to select risks and price policies. Hanna knows that collaboration between data science, IT, underwriting, and actuary is critical to the success of these projects. In Hanna's experience, as soon as the need for a data project arises, the key to collaborating effectively is to engage which one of the following teams as soon as possible? Select one: A. Actuary B. IT C. Underwriting D. Data science
D. Cleaning.
Data should be cleaned as much as possible to eliminate missing or inaccurate information. - Part of the continuous cycle of data mining is preparing the data to eliminate missing or inaccurate information. This process is called Select one: A. Machine learning. B. Parsing. C. Predictive modeling.
D. Cleaning.
D. Potentially complex claims
Potentially complex claims are the most difficult for insurers to identify at the time of first report. - Which one of the following types of workers compensation claims are the most difficult for insurers to identify at the time of first report? Select one: A. Catastrophic claims B. Medical-only claims C. Potentially minor claims D. Potentially complex claims
B. A legitimate claim is exaggerated.
Soft fraud, also called opportunity fraud, occurs when a legitimate claim is exaggerated. - Soft fraud, also called opportunity fraud, occurs when Select one: A. An application for insurance contains untrue information. B. A legitimate claim is exaggerated. C. A loss is triggered intentionally. D. A claim is filed for a loss that did not occur.
B. Continue with her investigation.
Continue with her investigation. Indicators of fraud are not proof of fraud. - Carla is investigating a claim for a stolen car. The insured provided a copy of the police report, but she notices that the account in the police report differs from the insured's version of events. At this point, Carla should Select one: A. Refer the case to the SIU. B. Continue with her investigation. C. Deny the claim. D. Contact the police.
A. Data mining.
Data mining. This is using computers to analyze vast amounts of data to detect trends. - Benjamin is with the SIU department of an insurer. His company developed technology to identify patterns related to fraudulent claims activity. He is using a program to analyze claims data to identify similarities or connections that might indicate fraud. Benjamin is utilizing Select one: A. Data mining. B. Telematics. C. Claims audits. D. Wearables.
As a claims representative, Beatrice is on the front lines for protecting her employer from insurance fraud. Beatrice should understand that insurance fraud Select one: A. Is the costliest white-collar crime in the U.S. B. Accounts for 25 percent of the P&C industry incurred losses. C. Costs roughly $40 billion per year, excluding health insurance. D. Costs each American family between $2,000 and $4,000 per year.
C. Comparative negligence.
In states that permit negligence as a basis for a bad-faith claim, most use a comparative negligence approach, reducing the amount of damages that may be awarded. - Ella sued her insurer and alleged bad-faith claim handling after the insurer settled a claim against her that Ella thought should have been denied. As a result of the settlement, Ella's premium increased. In her suit, Ella claimed that the insurer rushed the investigation and did not take all of her facts into consideration in her defense. While the court found that Ella's argument had merit, it did not award her the full value because it found that Ella had not provided her information to the insurer in a timely manner. The insurer used the defense of Select one: A. Contributory negligence. B. Debatable reasonable basis. C. Comparative negligence. D. Comparative bad faith.
C. Debatable reasonable basis defense.
The insurer may establish that defense that it had a reasonable basis for questioning whether a claim was covered. - Not long after Valteri issued a denial and closed the claim, the insured sued for coverage and alleged bad-faith claim handling against the insurer. Valteri was able to demonstrate for his superiors that he had made a good-faith investigation and determined that the claim was not covered by the policy. The insurer maintains that Valteri had reasonable justification in fact for denying the claim. The insurer is employing the Select one: A. Lack of standing defense. B. Advice of counsel defense. C. Debatable reasonable basis defense. D. Statute of limitations defense.
C. Maintains regular and prompt communication.
Communicating with all parties to a claim is a crucial aspect of good-faith claims handling and resolution. - One of Julio's expectations as a claims representative is good-faith claims handling. He keeps insureds informed about the claim because they have that expectation and because they are most likely to make a complaint about bad-faith claim handling. He
also wishes to participate in the defense and in discussions about the possibility of settlement. For these reasons, Julio Select one: A. Conducts fair evaluations. B. Maintains complete and accurate documentation. C. Maintains regular and prompt communication. D. Conducts good-faith negotiation.
D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds. - Which one of the following statements regarding state versions of the NAIC model act is correct? Select one: A. Only insureds may bring lawsuits against insurers. B. Only claimants may bring lawsuits against insurers. C. Both insureds and claimants may bring lawsuits against insurers. D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds.
C. Timely contact with all parties to a claim
Timely contact with all parties to a claim helps ensure that parties will be more likely to remember details of the loss accurately. - Tobias is a claims representative who understands the importance of good-faith claims handling, including fair evaluation, good-faith negotiation, complete and accurate documentation, and timely contact with all parties to a claim. Which one of Tobias' good-faith claims handling practices helps his employer because the parties will be more likely to remember details of the loss accurately? Select one: A. Fair evaluation B. Complete and accurate documentation C. Timely contact with all parties to a claim D. Good-faith negotiation
B. The amount of the judgment must be in excess of the insured's policy limit.
For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and the amount of the judgment must be in excess of the insured's policy limit. The insured is not required to have paid the judgment before bringing suit. - For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and Select one: A. The insured must have paid that judgment. B. The amount of the judgment must be in excess of the insured's policy limit. C. Evidence of bad faith must be produced. D. The insurer must have determined that coverage does not apply.
A. The behaviors necessary to implement an ethical decision -
D. Is the owner of the building.
B. Losses and LAE divided by earned premium.
Losses and LAE divided by earned premium. Loss ratio measures losses and loss adjustment expenses against earned premium and reflects the percentage of premiums being consumed by losses. - Rodrigo manages a claims department for an insurer and uses loss ratio as a measure of the department's performance. Rodrigo calculates loss ratio as Select one: A. Losses divided by written premium. B. Losses and LAE divided by earned premium. C. Losses and LAE divided by written premium. D. Losses divided by earned premium.
B. Obtain medical records.
In liability claims, the claims rep will require an authorization from the injured party to obtain medical records. - In liability claims, the claims rep will require an authorization from the injured party to Select one: A. Investigate the claim. B. Obtain medical records. C. Contact the insured. D. Issue a partial claim settlement.
A. Actuary.
Actuaries are critically important to this process because they understand the business and the analytics. - Mustafa is a data scientist who is working with a team of underwriting, IT, and actuary to develop a predictive analytics model. The main goal of the project is to translate the insights gained from the model they develop into business action. In Mustafa's experience, the team member that can provide the bridge between the analytics and the business is Select one: A. Actuary. B. IT. C. Underwriting. D. Data science.
B. Proof of loss form.
A claims representative may provide a blank proof of loss form and any necessary written instructions so the insured can document the claim. - As a part of the first contact with an insured on a property damage claim, a claims representative may provide a blank Select one: A. Reservation of rights form. B. Proof of loss form.
C. First notice of loss form. D. Nondisclosure form.
A. Too much time had expired after the claim concluded.
Too much time had expired after the claim concluded. A statute of limitations is a law that stipulates the length of time after an event during which legal proceedings may be initiated. - Ida was named in a bad-faith lawsuit as the claims representative who handled the file. The court dismissed the suit, however, because the statute of limitations had expired. This means that Select one: A. Too much time had expired after the claim concluded. B. The limits of the policy had been exceeded. C. There was no basis to pierce the corporate veil. D. She was immune to prosecution as an employee.
A. Stairstepping. - DaJuan, a claims representative, sets a low case reserve for a seemingly simple claim. A few weeks later it becomes apparent that the initial reserve was too low, and he increases it in order to issue payments. More bills related to the claim arrive a few months later, and he increases the reserve again. This process is known as Select one: A. Stairstepping. B. Reopening. C. Readjusting. D. Incremental reserving.
C. Premium auditor.
Premium auditors provide inventory values, contractors' equipment lists, and other facts that are important to the claims function. - Erin helps her employer, a multi-line insurer, to determine actual exposure and premium for coverage. She does this by conducting detailed examinations of policyholder operations, records, and accounting. Erin is a(n) Select one: A. Producer. B. Claims adjuster. C. Premium auditor. D. Underwriter.
A. Preserve the evidence as part of the record.
An insurer defending a first-party coverage lawsuit could be found liable if evidence is intentionally or negligently lost or destroyed. - Thomas is an attorney who is defending an insurer in a litigated case. He has located documents that show the insured was aware of the issue that cause the injury to the claimant before the accident. Thomas is concerned that this evidence will hurt his case. He should Select one:
This describes the duties of a staff underwriter. 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. - Alva works for an international, multi-line insurer. She helps her company to manage risk selection by working with other underwriters and coordinating decisions about products, pricing, and guidelines. Alva is a Select one: A. Master underwriter. B. Line underwriter. C. Staff underwriter. D. Chief Underwriting Officer.
D. Insured's collusion with claimant
Insured's collusion with claimant. Discovering collusion between the insured and claimant, such as a claimant agreeing not to collect a judgment from the insured's assets, can lead to dismissal of a bad-faith claim. - Maja handled a large liability claim that settled above the policy limits. The insured is now charging the claim was handled in bad faith. During their investigation of the bad-faith claim, Maja and defense counsel discovered that the claimant had received the payment from the insurer, but not the amount above the policy limits that was to come from the insured's assets. Which one of the following defenses would Maja's defense most likely invoke? Select one: A. Contributory negligence B. Advice of counsel C. Debatable reasonable basis D. Insured's collusion with claimant
D. With a bank draft, the bank must verify that the insurer has authorized payment. - Among the methods used to pay claims are the issuance of checks and bank drafts. The main difference between the two is that Select one: A. Only checks may be used for claim payments in excess of $10,000. B. With a check, the bank must verify that the insurer has authorized payment. C. Only bank drafts may be used for claim payments in excess of $10,000. D. With a bank draft, the bank must verify that the insurer has authorized payment.
C. Claimants, insureds, supervisors and others.
The impression that claims reps make on claimants, insureds, and others reflects either favorably or unfavorably on the insurer. - A claims representative should have the ability to persuade or influence Select one: A. Supervisors. B. Insureds.
C. Claimants, insureds, supervisors and others. D. Claimants.
C. Insured, claims rep, defense counsel
A summons and complaint is typically received by the insured, who then shares it with the claims rep, who in turn sends it to the insurer's defense counsel. - In a typical scenario, a summons and complaint initiating litigation is received by these parties in which one of the following sequences? Select one: A. Defense counsel, insured, claims rep B. Defense counsel, claims rep, insured C. Insured, claims rep, defense counsel D. Claims rep, insured, defense counsel
D. Soft fraud
In soft fraud, a legitimate loss occurs but the value of that loss is exaggerated. - Bettina's apartment is burglarized and several items are stolen. In filing her claim, she tells her insurer that her stolen television was both newer and larger than it actually was. This constitutes which one of the following types of fraud? Select one: A. Concealment B. Misrepresentation C. False claim D. Soft fraud
C. Best practices
Best practices generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. - Adam manages a claims department for an insurer. He measures the department's performance by best practices, claims audits, customer satisfaction data, and loss ratio. Which one of Adam's measures refers to a system of identified internal practices that claims representatives perform to produce superior performance? Select one: A. Customer satisfaction data B. Loss ratio C. Best practices D. Claims audits
D. An endorsement.
An endorsement can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds. - Which one of the following elements of a policy can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds? Select one: A. The declarations.
