Insurance Operations Chapter 6

Supervisors and managers often use a diary or suspense when handling claims as

Reminder systems to review claim files.

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.

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.

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

In property insurance claims, there is sometimes a question of whether coverage exists or not. In these situations the insurer will send a reservation of rights letter. The purpose of this letter is to advise the insured that

a coverage problem may exist

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

If a claim is complex or if settlement negotiations are not progressing with the insurer, the insured may hire

a public adjuster

an employee of an insurance company who performs some or all of the insurer's claim-handling activities is called

a staff claim representative

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 ABCs computer system

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 established a predetermined dollar amount of reserve for each claim as it is reported

average value

Regarding file documentation, the activity log form should be completed as events occur and include the day, month, time, and person making notes. It should also be a brief notation of file activities and analysis. This described procedure is known as a

claim guideline

Whenever a claim representative performs an activity related to a claim that is being managed, a notation is made into an activity log. This is an example of which one of the following?

claim guidelines

in the claim function, supporting the insurers profit goal is accomplished through

controlling expenses

which one of the following statements is correct with respect to state insurance regulators involvement in the claim handling process

enforcement of controls by state insurance regulators is usually handled under the Unfair Claims Settlement Practices Art or similar legislation

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

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

a supervisor reviews claim files to examine the technical details of claim settlements, ensure that claim procedures are followed, and verify that appropriate, thorough documentation is included. This supervisor is conducting a(n)

internal claim audit

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

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?

one of the primary goals of the claim function is

legal representation generally results in higher insurance settlements for claimants

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

loss ratio

At year-end, SBC Insurance Company posted the following results:

n/a

which one of the following statements is true concerning claim information users

producers must have policyholder loss information to prepare renewal policies properly

people who handle claims may be staff claim representatives, independent adjusters, employers of third-party administrators or

producers who sell policies to insureds

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 first goal of the claim function is to

satisfy the insures obligations to the policyholder

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 insurers continued solvency ability to write new business

which one of the following statements is true concerning claim department contracts

state regulators monitor insurers activities in the claim settlement process

when the policy does not define a cause of loss or another term, which one of the following can the claim representative use to determine the meaning

statutory provisions

which one of the following statements is correct regarding the marketing value of the claim function

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

which one of the following statements is correct regarding the claim function of an insurer

the claim function helps insurers achieve underwriting profit through control of expenses

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

an insurers public image is determined largely by

the claims departments behavior

to determine if a person is a named "insured" under a policy, the claims representative generally need to review

the declarations section and definitions section

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 correctly describe reasons for the use of independent adjusters, EXCEPT:

the insured may retain an independent adjuster when special skills and expertise are needed, for example to investigate aircraft accidents

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

claim representatives begin investigating a claim as soon as it is assigned. Which one of the following statements is correct with respect to investigation

the insurer's claim handling guidelines help determine the type and extent of investigation needed for a satisfactory claim settlement

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

Claim audits are a review of claim files to ensure that claims are being handled properly, and

Can be conducted by an individual other than an insurer's internal personnel.

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 regarding claim department contacts?

Consumer complaints are investigated by the state insurance departments.

Coverage analysis is the process of examining a policy by reviewing all its component parts and applying them to the facts of a claim. Within this analysis, the question "Is the Type of Loss Covered?" helps the claim representative to classify losses as

Direct and indirect.

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.

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.

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.

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.

Angus, a claim representative for Premium Insurance Company, is adjusting a liability claim where his insured, Josephine, lost control of her brother Horace's car and caused $1,500 in damage to a grocery store. Horace has auto coverage with Upland Insurance Company. Seeking to determine whether other coverage applies, Angus refers to the Other Insurance section of Josephine's Personal Auto Policy (PAP) and finds that

Josephine's PAP is excess over Horace's PAP

Which one of the following best describes the purpose of authority levels for claim personnel?

Limiting reserve and payment amounts

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.

The question "Is the location of the loss covered?" is a part of the framework for coverage analysis because the location where the loss occurred must be within the policy's territorial limits. The PAP includes which one of the following locations in the definition of policy territory?

Puerto Rico

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.

Which one of the following statements is true concerning claim department contacts?

State regulators monitor insurers' activities in the claim settlement process.

soon after a loss has been assigned and initial reserve has 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 it potential grounds exist to deny the claim

which one of the following statements is true regarding claim department contacts

consumer complaints are investigated by the state insurance departments

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

Tobias, a claim representative, is handling a very important and very large claim involving sophisticated. To prevent any insiders from accessing his analytical documentation of the claim, Tobias would likely use which one of the following controls?

access security

which one of the following is a claim control used to help meet regulatory complaince

access security

Juanita is the senior claim officer for Worthy Insurance Company, which uses the claim audit as a performance measure for its claim operations. Claim audits usually evaluate both quantitative and qualitative factors. Which one of the following factors is qualitative for Juanita and her staff

accurate evaluation of insured's liability

worthley insurance company uses claim audits to ensure compliance with best practices. These audits evaluate both quantitative and qualitative factors. Which of the factors that Worthley evaluates is a qualitative factor?

accurate evaluation of insured's liability

Jerry is an experienced claim adjuster who handles claims for Jackson Insurance Company during hurricane season when Jackson's staff adjusters need assistance. Jerry is

an independent adjuster

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 the 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

which one of the following statements is correct with respect to claimant's representation by lawyers

for some type of claims and in certain areas of the US, claimants are most likely to hire lawyers

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

An important aspect of acknowledging a claimant's liability claim, upon first contact, is

to try to obtain information on the nature and extent of the injury

state insurance regulators conduct claim audits to ensure

understanding of reserving practices