Assignment 11 - The Claim Function

Riko is an automobile claim representative who has been assigned a claim submitted by John. John owns a Honda Civic, which is insured in his name for liability, collision, and comprehensive coverage on a Personal Auto Policy (PAP). He is the only named insured on the policy. John lives with his parents and his sister, Carla. One Saturday, while John is asleep, Carla borrows his car to run errands. Unfortunately she backs into the concrete base of a sign at the mall, damaging the vehicle. Riko confirms that the Honda is the covered vehicle, that it is insured against collision, and that the loss occurred during the policy period. Which one of the following will she most likely determine next?

Is Carla covered as a driver of the damaged vehicle?

Which one of the following best describes the purpose of authority levels?

Limiting reserve and payment amounts

Incurred losses (including loss adjustment expenses) divided by earned premium is the formula for

Loss ratio

Liability policies cover insureds for compensatory damages an insured owes to a third party. Compensatory damages normally covered by the policy include

Pain and suffering and out-of-pocket expenses claimed up to the policy limit

Each of the following are regulatory compliance measures insurers can institute, EXCEPT

Pre-claim practice and drills

Which one of the following statements is true concerning claim information users?

Producers must have policyholder loss information to prepare renewal policies properly

For liability claims, damages for which the insured may be found liable include compensatory and

Punitive

Files chosen by managers or technical support staff for internal claim audits are selected on the basis of the

Reason for audit

The purpose of an activity log is to

Record all activities and analysis of a particular claim

The right of subrogation allows the insurer to

Recover claim payments from a negligent third party

Alexis has inherited a family cottage that she has insured with Millstone Insurance for $100,000. One weekend while Alexis is at the cottage, a fire starts in the night. The cottage is a total loss. Alexis calls her insurance agent who reports the claim to Millstone. The claim is assigned to Victor, a property claim representative. After entering the information from the notice of loss into Millstone's claim-processing system, which one of the following will Victor most likely do?

Set preliminary loss reserves

Insurers use a variety of different methods when setting claim reserves. Which one of the following statements is correct with respect to loss reserves?

Setting accurate and adequate reserves is important to an insurer's continued solvency and ability to write new business

When adjusting a property loss, a claim representative must determine whether or not the loss was caused by a covered peril. Insurance that covers every cause of direct physical loss or damage that is not specifically excluded is referred to as

Special form coverage

At the initial contact with the insured or the insured's representative, the claim representative will normally take all of the following actions, EXCEPT

Tell the insured if the claim will be covered and the estimated payment amount

Which one of the following statements is correct?

The claim adjusting process can be a source of new coverage ideas and product niche innovations

Claim representatives are responsible for determining the cause of loss, liability, and the loss amount. Which one of the following statements is correct with respect to this process?

The claim representative reviews all component parts of the policy and applies them to the facts of the case

A loss reserving method that bases reserves on the circumstances of the claim and the claim representative's experience in handling similar claims is called

The individual case method

One of the first determinations a claim representative must make is whether or not the person involved in a loss is covered. In order for an individual to be covered under a property insurance policy, all of the following conditions must apply, EXCEPT

The individual must provide the systematic framework for coverage to the claim representative

All of the following explain when the use of independent adjusters might be advantageous, EXCEPT

The insured may retain an independent adjuster after becoming dissatisfied with the pace of negotiations with the insurer

All of the following correctly describe reasons for the use of independent adjusters, EXCEPT

The insured may retain an independent adjuster if settlement negotiations with the insurer are not progressing satisfactorily

The claim handling process begins when the insured reports the loss to the producer or to the insurer's claim center. Which one of the following statements is correct with respect to the next element of the claim handling process?

The insurer provides the insured with a claim number and contact information for the assigned claim representative

Buddy's store is damaged in a fire. He suffers loss of his merchandise as well as loss of income while he replenishes his stock. His direct loss is

The loss of his merchandise and damage to the store

People who handle claims fall into a number of categories. Those who handle claims, keep claim records, and perform statistical analysis on behalf of self-insureds are called

Third-party administrators

Which type of claim personnel are often contracted by organizations that have self-insurance plans?

Third-party administrators

State insurance regulators conduct claim audits to ensure

Understanding of reserving practices

Benjamin has his home insured with Westfork Mutual under an HO-3 policy for $100,000. He is the named insured on the policy. There are three other residents of the home: Maria, Benjamin's mother; Daniel, his nephew; and Cian, a family friend. An accidental fire causes damage to the home and to personal property of all four occupants. Benjamin reports the loss to Westfork and Fatima, a claim representative, is assigned the claim. Which one of the following will most likely be Fatima's principal concern when analyzing coverage for the loss?

Whether Maria's, Daniel's, and Cian's property would be covered

An insurance company employee who investigates the scene of a loss; meets with insureds, claimants, lawyers, and others; and inspects damage is most accurately called

A field claim representative

The control of a computer user's ability to review, enter, and change information in a claim information system is an example of which one of the following types of claim department control?

Access security

Worthley Insurance Company uses claim audits to ensure compliance with best practices. These audits evaluate both quantitative and qualitative factors. Which one of the following factors that Worthley evaluates is a qualitative factor?

Accurate evaluation of insured's liability

Anil has his automobile insured with ABC Insurance through his agent, Chad. Returning to his car in a shopping mall parking lot, Anil sees that vandals have spray painted graffiti on his vehicle. He calls Chad to report the damage and ask what he should do. Chad tells him to report the vandalism to the police, follow their instructions, and then take the vehicle home and wait for a call from a claim representative. Chad then reports the loss to ABC. Melissa is the claim representative assigned Anil's loss. Which one of the following will be the first step Melissa takes?

Acknowledge receipt of the claim to Chad and enter the claim information into ABC's computer system

Claim representatives maintain a record of all the activities and analyses that occur while handling a claim in

Activity logs

Most insurers give some producers the authority to pay claims up to a certain amount. In this role, producers function much like

An inside claim representative

Insurers can use different methods of setting claim reserves. Which one of the following methods establishes a predetermined dollar amount of reserve for each claim as it is reported?

Average value

"Every claim will be acknowledged within twenty-four hours" is an example of which of these quality measures?

Claim department best practice

Soon after a loss has been assigned and initial reserves have been established, a claim representative contacts the insured or the insured's representative. Which one of the following statements is correct with respect to that contact?

Claim representatives must be careful not to give the impression that a claim will be paid if potential grounds exist to deny the claim

Which one of the following statements is true?

Consumer complaints are investigated by the state insurance departments

In the claim function, supporting the insurer's profit goal is accomplished through

Controlling expenses

The question, "Did the Loss Occur During the Policy Period?" is part of the framework for coverage analysis. Which one of the following statements is true with respect to policy periods?

Courts have interpreted the date of occurrence differently

Which method of discovery can be described as sworn statements made about the activities or knowledge of a party or witness concerning the subject matter of a lawsuit that can be used as trial evidence if that party or witness cannot attend trial?

Depositions

For which one of the reasons below do actuaries review claim files?

Determination of how reserves were established

In handling a property claim under Special Form Coverage, a claim representative should gather facts about the cause of loss and then

Determine if the cause of loss is excluded in the Special Form Coverage

Antonia and Philip have their house insured with Durham Insurance under an HO-3 homeowner's policy. Philip is the named insured and there is no mortgagee shown on the policy. During a storm, a lightning strike results in a kitchen fire and high winds causes a tree to fall on the roof, leaving a large hole. The homeowners make emergency repairs to protect against further damage and report the loss to the insurer. The claim is assigned to Miguel who identifies the policy and performs an initial review. After discussing the loss with Antonia and Philip, which one of the following will Miguel most likely do?

Determine whether lightning and windstorm are covered causes of loss and whether any exclusions apply

A crumpled car fender is an example of which kind of loss?

Direct loss

Damages that courts award in order to compensate claimants for such things as pain and suffering that do not involve specific measurable expenses are referred to as

General damages

Jessica has her car insured for liability, collision, and comprehensive coverage with Greatview Insurance. She has decided to purchase a pickup truck as a second vehicle. As she is leaving the dealership with her new pickup, she accidently collides with another vehicle, causing damage to both. Neither she nor the other driver is injured. Jessica returns home and calls her insurer to advise of her new purchase and to report the claim. Her claim is assigned to Lucas. After identifying the policy and entering initial loss information, which one of the following describes how Lucas would most likely proceed?

He would confirm that a "newly acquired auto" meets the policy definition of "your covered auto."

In addition to claims personnel, internal claim audits may be conducted by personnel from other departments, such as

Human resources and training

When the investigation has been completed and all documentation has been received, the claim representative must decide whether to pay the claim or deny it. Which one of the following statements is correct with respect to this element of claim handling?

If a disagreement arises over the value of a claim, alternative dispute resolution methods may be used to resolve the situation

Under certain circumstances, an insurer may authorize the adjustment of claims by producers. One of the benefits of providing producers with draft authority is that

If an agent can issue a draft directly to the insured, it reduces the time an insured waits for payment

After receiving a claim assignment, a claim representative will identify the policy and assess the coverage available. Which one of the following statements is correct with respect to this activity?

If it is apparent that coverage may not be available for the loss, the claim representative must notify the insured through a nonwaiver agreement or a reservation of rights letter

Which one of the following statements is correct with regard to the various users of claim information?

Individual underwriters are interested in claim information for the specific accounts they have underwritten

Most insurers give some producers the authority to issue claim payments, up to a certain amount, directly to insureds. In this role, producers function much like a(n)

Inside claim representative

Chloe is a claim representative with Fredine Insurance Company. She has been assigned a personal lines automobile claim for insureds, Oscar and Sara. Oscar and Sara were involved in an accident with another vehicle, and there is damage to both vehicles. In addition, the driver of the other vehicle and Sara each suffered minor injuries in the accident and were treated in the emergency room. Chloe follows the usual steps in the claim handling process. She identifies the policy and sets her initial reserves. She also confirms the details of the accident in a conversation with Oscar and Sara. Using the framework for the claim handling process, which one of the following will most likely be Chloe's next step?

Investigate the claim