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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
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If a claims representative doesn't set accurate case reserves, it could affect the financial health of the insurer for which he or she works. In extreme cases, inaccurate reserving could cause insolvency. - correct answer - Why is establishing and maintaining adequate reserves important? With the formula method of setting claim reserves, a formula for setting a reserve is determined by the insurer and is automatically created for the claims rep based on the facts of a claim. - correct answer - What is the formula method of setting claim reserves? A claims rep may set a modest initial reserve but then raise the reserve by a few thousand dollars to issue payments. Later, the reserve is increased again when more bills arrive. - correct answer - What is stairstepping a reserve? Qualitative Audit Factors - answers-Realistic reserving, accurate evaluation of insured's liability and follow-up on subrogation opportunity Loss ratio - answers-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) - answers-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. - answers-B. Line 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 - answers-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. - answers-A. TPAs handle claims, keep claims records, and perform statistical analyses. Steps of Making an Initial Claims Assessment - answers-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? - answers-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: - answers-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.
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) - answers-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 - answers-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 - answers-The insurer's case reserves. Direct loss - answers-A reduction in the value of property that results directly and often immediately from damage to that property. Indirect loss - answers-A loss that arises as a result of damage to property, other than the direct loss to the property. Pro rata contribution - answers-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 Disfigurement - answers-Medical expenses and lost wages are specific losses covered by special damages. Losses that do not have a specific economic value, such as pain and suffering and disfigurement, are covered by general damages. Whom should a claims rep notify if a claim's losses will exceed the policy's limits? - answers- If a loss will likely exceed policy limits, a claims rep should notify the insured, as well as a
reinsurer for the insurer or an excess insurer for the insured. Insurable interest - answers-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) - answers-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 - answers-A payment awarded by a court to reimburse a victim for actual harm. Special damages - answers-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 - answers-A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific, measurable expenses. Coinsurance clause - answers-A clause that requires the insured to carry insurance equal to at least a specified percentage of the insured property's value. Claim payments can be made by - - answers-check, bank draft, or electronic transfer of funds. What Is a Claims-Made Policy? - answers-This means your insurer helps cover claims filed during your policy period. Although most policies are occurrence forms, covering claims that occur during the policy period, some are claims-made forms. Which one of the following types of loss is most likely to involve a claims-made form? A. A homeowners claim due to storm damage. B. An automotive collision claim. C. A homeowners liability claim due to a slip and fall.
determined and then listen to the answer. The answer will reflect the extent of knowledge the attorney has about the claim and the level of thought that was put into the demand. The claims rep should insist that any changes in the settlement be based on the facts of the case. Establish strengths and weaknesses - answers-There are strengths and weaknesses in any negotiation. For example, if a house is uninhabitable after a fire, the claims rep can use the insured's desire to be back in his or her home as a bargaining tool. As another example, if an insurer and a public adjuster cannot agree on a settlement amount, a claims rep could suggest an appraisal. This may motivate the public adjuster to settle because the appraisal may result in a lower settlement. Time settlements effectively - answers-Sometimes, the best time to settle is just before the claim proceeds to litigation. Once a claim becomes a lawsuit, the attorney must invest more time in the claim. Even though a higher settlement—and attorney's fee—may result from the litigation, from the attorney's perspective, the prospect of a slightly higher settlement may not be worth the potentially significant amount of extra time he or she has to invest in the case. Entice a reasonable demand - answers-To expedite an acceptable settlement, the claims rep can begin the negotiation by asking the attorney or public adjuster what fair settlement value would settle the case that day. For example, if the claims rep's settlement range is $4,000 to 6,500 and an attorney demands $6,500 to settle the claim that day, the rep can agree to settle the claim rather than waste time starting at the low end of the range. Make concessions cautiously - answers-The claims rep should only make concessions for specific reasons, such as if new information has become available that affects the claim value, the other party has made a concession, or a concession by the claims rep would allow the claim to be settled that day. If the allegations in the complaint do not appear to be covered under the applicable policy, what should the claims rep do? - answers-The claims rep should discuss the coverage issue with coverage counsel before taking any other action and should follow any insurer procedures, such as requesting a managerial review. Reviewing the Summons and Complaint - answers-Determine the time available to respond Identify the parties in the complaint Check how service was handled Determine whether a statute of limitations applies Verify that the jurisdiction and venue are correct
Discovery - answers-A pretrial exchange of all relevant information between the plaintiff and defendant. Summons - answers-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 - answers-The allegations made by a plaintiff in a lawsuit. Service of process - answers-The delivery of a summons and complaint to a defendant by an authorized person. Allegation - answers-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 - answers-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 - answers-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. Why do you think it's good for claims reps to read up on case law and court opinions related to the types of claims they handle, even when they're not actively engaged in litigation or trial preparations? - answers-Claims reps may find it helpful to stay abreast of recent court opinions and changes in case law related to the types of claims they handle so they know how specific types of claims and legal defenses are likely to be dealt with in the courtroom moving forward. Pretrial Motions - answers-Motion to dismiss Motion for summary judgment Motion in limine Stare decisis - answers-The principle that lower courts must follow precedents set by higher courts. Motion to dismiss - answers-A request that a court terminate an action because of settlement, voluntary withdrawal, or procedural defect.
their decision making. This knowledge also proves helpful when communicating with data scientists, claimants, and customers. Lastly, it helps claims professionals describe the types of data that best support their decision making, such as fraud indicators. What is an example of a technology that can glean insights from data collected from IoT and telematics devices? - answers-Artificial intelligence (AI) is used to quickly process and make sense of large amounts of data—and to make accurate decisions based on that understanding. As a result, AI is playing an increasingly bigger role in many areas of insurers' operations, such as claims, underwriting, and risk management. AI is essentially a computerized simulation of how the human brain processes data to make judgments and assess situations. The AI process involves programming machines to analyze vast amounts of data and to make predictions about that data based on a set of rules or complex calculations. AI aids insurers in several ways, including automating simple routine tasks, predicting and processing claims, and detecting fraud. Big data - answers-Sets of data that are too large to be gathered and analyzed by traditional methods. Internet of Things (IoT) - answers-A network of objects that transmit data to each other and to central hubs through the internet. IoT Devices - answers-Telematics in Automobiles Sensors in buildings Drones Smartphones and tablets Health trackers Robots High-definition cameras with sensors Telematics - answers-The use of technological devices to transmit data via wireless communication and GPS tracking. Wearable sensor tag - answers-A sensor attached to or embedded in clothing and accessories. The process of data mining has several steps, but the first occurs before the data mining
even starts. What do you think that step is? - answers-The first step in the data mining process is to understand what a business wants to achieve by applying data mining to one or more sets of data. This is similar to choosing your target before shooting an arrow—it won't matter how refined your technique is unless you know where to aim. Classification - answers-Categorizing members of a dataset based on known characteristics Regression analysis - answers-A statistical technique that predicts a numerical value given characteristics of each member of a dataset. Association rule learning - answers-Examining data to discover new and interesting relationships. From these relationships, algorithms are used to develop rules to apply to new data. An insurer can explore data to find relationships among its products purchased. cluster analysis - answers-Using statistical methods, a computer program explores data to find groups with common and previously unknown characteristics. An insurer wants to predict which claims to target for fraud investigation. It wishes to do this based on the known fraud indicators: a claimant who threatens to hire an attorney immediately after an accident and a claimant with a history of similar claims. Which data mining technique would the analyst be likely to use? - answers-The analyst would likely use classification because the insurer is predicting the category into which a member of a dataset belongs—namely, the category that indicates the likely existence of fraud. The insurer intends to use characteristics known beforehand: threatening to hire an attorney immediately after the accident and having a history of similar claims with the insurer. Association rule learning and cluster analysis are exploratory techniques and do not rely on categorizing members of a dataset based on known data characteristics. Regression analysis is used to predict a numerical value based on known data characteristics rather than a category. Data mining - answers-The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions. Algorithm - answers-An operational sequence used to solve mathematical problems and to create computer programs.
variable that is not used as part of the training data. Lift - answers-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 the absence of the model. Accuracy - answers-In model performance evaluation, a model's correct predictions divided by its total predictions. Precision - answers-In model performance evaluation, a model's correct positive predictions divided by its total positive predictions. What role do data scientists play in insurance and risk management? - answers-Rather than being concerned directly with pricing and reserving, data scientists study big data with the goal of extracting insights from it that will lead to new or improved insurance products and risk management techniques. Insurance and risk management professionals on a data science team typically provide what type of knowledge? Computer programming Domain Mathematical Statistical - answers-Insurance and risk management professionals on a data science team typically provide domain knowledge. Why do you think a claims representative would be a valuable member of a data science team? - answers-The claims rep would help supply domain knowledge, which would provide the context for the goals of a data mining project and how the results can be applied to generate business solutions. To increase the chances of success from a data analytics project, insurance and risk management professionals must work with data scientists to address several key issues before starting a data analytics project. What do you think these issues are? - answers-All stakeholders should be aligned around these issues before starting a data analytics project: What is the business issue or problem being addressed? How does the project help the organization achieve its goals?
What does success look like, and how can it be measured? What are the best data sources for achieving the desired results? How can data scientists access this data? How will the results be stored, and how can stakeholders access them? Answering these questions before a project will provide the data science team with the appropriate context needed to build a model and present findings that will provide business value. In addition, it positions team members as co-collaborators and gives them an engaging business case for why the project should move forward. Actuary - answers-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 - answers-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 - answers-Information related to the context of the information a data scientist is working with. Which one of the following explains why a computer recursively applies a model? A. To analyze claims data from previous years B. To analyze different splits in the values of attributes C. To determine the probability of a target variable D. To identify attributes that can be used - answers-B. To analyze different splits in the values of attributes A computer recursively applies a model to analyze different splits in the values of attributes. Which one of the following is a data mining technique an insurer applies when it knows what information it wants to predict? A. Machine learning B. Association rule learning C. Classification
Part of the continuous cycle of data mining is preparing the data to eliminate missing or inaccurate information. This process is called - answers-C. Cleaning. Data should be cleaned as much as possible to eliminate missing or inaccurate information. 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? A. Actuary B. IT C. Data science D. Underwriting - answers-C. Data science Rin works for an insurer designing and using techniques to process large amounts of data from various sources and providing knowledge based on the analysis of that data. Rin is a(n)
Select one: A. Ratemaker. B. Data scientist. C. IT professional. D. Actuary. - answers-B. Data scientist. Data science involves experimenting with data using rapidly evolving methods to learn and provide solutions to complex problems. In developing a predictive model for complex claims, the data science team at first uses only a portion of the claims data. This is called A. Trial data. B. Holdout data. C. Training data. D. Provisional data. - answers-C. Training data. Generally speaking, the most common application of predictive modeling in insurance occurs in A. Reinsurance. B. Risk selection. C. Claims handling D. Marketing. - answers-B. Risk selection. In seeking to identify claims that will potentially develop into complex and more costly claims, the data science team at Great Midsouthwest Insurance ranks a series of attributes by their importance to the data model. Which one of the following terms describes the level of predictive power of each attribute? A. Statistical relevance B. Lift C. Precision factor
An insured borrows fine jewelry from her friends and family. She has it appraised and covered by her homeowners policy. She returns the jewelry to the owners and reports it stolen. She then collects on the insurance. - answers-This is a false claim, a type of hard fraud A doctor recommends that a patient receive physical therapy three times per week for twelve weeks when three times per week for eight weeks would suffice. - answers-This is a padded claim, a type of soft fraud. An insured buys multiple fire insurance policies on the same house, then intentionally burns the house to the ground and collects the policy limits on several policies. - answers-This is an intentional loss, a type of hard fraud. Material fact - answers-A fact that is significant to a decision or matter at hand. Hard fraud - answers-Actions that are undertaken deliberately to defraud. Misrepresentation - answers-A false statement of a material fact on which a party relies. Concealment - answers-An intentional failure to disclose a material fact. Staged accident - answers-An accident deliberately caused by a person who intends to feign injury and collect on the ensuing claim.
Soft fraud, or opportunity fraud - answers-Fraud that occurs when a legitimate claim is exaggerated. What other steps should Maria take to conduct a balanced investigation based on her suspicion? (Select all that apply.) Have a physical examination conducted of the vehicle to determine whether the allegedly stolen items would fit in the trunk Schedule an examination under oath of Daniel, and require receipts documenting the source of the cash used to purchase the items Ask for a list of stores where the items were bought and contact those stores regarding the purchases Conduct interviews with Daniel's family members to find out whether they were aware of the purchase of the gifts - answers-Physical evidence and records from third parties can confirm or refute the likelihood of fraud. Interviews with family members are not likely to be helpful because they will probably state they did not know of the gifts or corroborate the insured's story. After conducting a balanced investigation, Maria can refer the claim to the SIU if appropriate.
