AIC 30: 1-3 Practice Qs

Which one of the following statements is true concerning the six activities in the claim handling process.

They are not always undertaken sequentially

For reference and advice on how to safely handle contact situations for any hazardous materials that could be present in an auto body shop, a claim representative can request which one of the following from the auto body shop?

A Material Safety Data Sheet

Which one of the following statements regarding competency of insurance professionals is correct?

A change in job responsibilities requires new knowledge and new skills.

Joe who owns a used auto parts store is also a claim representative for an insurance company. To obtain inexpensive parts, Joe often indicates a total loss on a claim so that he has access to more auto parts at private auctions. Joe is involved in

A conflict of interest.

It is important for the claim representative to verify the property damaged and the loss location. This verification can be performed by

A field representative physically viewing the property.

An insurance contract is designed to be all of the following in the event of a claim

A financial mechanism that can benefit policyholders and other claimants. A means to afford peace of mind to the insured. A way to restore a claimant to pre-loss condition.

EXCEPT

A means to provide a profit to the insured

Fred had wind damage to his barn and also to an already damaged pickup truck. Fred knows he can, but should not, report the preexisting damage as a new damage for claim payment by his insurer. Fred is facing

A moral dilemma.

Ultimately, the insurance product is

A promise made by the insurer to the insured.

A statement is a record of the events surrounding an accident as told by the interviewee. Statements are best taken shortly after the loss occurs so that

Time does not diminish the person's memory of the event.

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. What is a qualitative factor for Juanita and her staff?

Accurate evaluation of insured's liability

Many policies allow an insurer to request an injured insured to submit to an in-person examination. This independent medical examination (IME) is listed as a

Policy Condition

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

Which one of the following are included on a notice of loss form?

Agency

As an independent claim adjuster, Peter may bill in tenth-of-an-hour increments. Peter received a three minute phone call from the insured, Ed. Peter billed his insurer for the normal six minute minimum billing. Peter returned the phone call to Ed and spoke only two minutes. Peter could bill this call as a separate increment even though the total five minutes of phone time was less than one-tenth-of-an-hour. Peter is faced with

An ethical dilemma.

After receiving a notice of loss where the damages are severe, the claim manager should assign the claim to

An experienced claim representative licensed in the state where the loss occurred.

An examination under oath (EUO) is a valuable tool to use when

An insured is suspected of submitting a fraudulent claim.

Johnson has a PAP through Peaceful River Insurance Company for his 2007 Ford. He also has coverage with Aim Straight Insurance Company for his 2007 Ford. Both policies have the same effective dates. Johnson hits a tree and totals his Ford. Which one of the following alternative dispute resolution methods should the companies use to determine who should pay and how much?

Arbitration

One benefit of ethical and professional conduct of claim representatives for insurers is that such conduct will typically

Attract investors

Luna is the claim supervisor for Happy Valley Insurance Company. Her area's primary responsibility is adjusting glass claims. When reserving these claims, Luna uses the amount based on previous losses. Which one of the following is the reserve method Luna uses?

Average value method

A bacic identification of the policy should occur

Before the claims investigation begins.

A predisposition to a particular outcome is best identified as which one of the following?

Bias

Ron was investigating an automobile accident and took a statement from the insured. Ron asked questions such as "The light was green wasn't it?" and "You were already through the turn when hit?". These questions would show the investigation to contain which one of the following elements?

Bias

Which one of the following investigative tools could a claim representative use to analyze claims for fraud indicators or coverage issues and then refer the claim to the appropriate party for a response?

Business rule engines.

EXCEPT

By civil authorities

Considerations a claim representative uses when setting reserves on a bodily injury claim using the individual case method include

Claim circumstances and representative's experience.

A claim was reassigned to a new representative due to the location of the loss. The loss was for an automobile bodily injury claim where the claimant had sustained severe injuries to the right side of the body. The claimant had completed rehabilitation but continued to struggle to return to work. The new claim representative reviewed the medical records and determined that the 25 year old graduate from the State University had been on track to take on a leadership role for the employer just prior to the accident but due to the injuries the promotion had not taken place. The new claim representative felt that the struggle to fully recover were hampering the claimant's ability to progress at work, amplifying the damages. Therefore, the file reserve was raised. Which one of the six factors from the individual case method were used to amend the file reserve?

Claimant profile

Sarah had been adjusting liability claims for ten years and maintained a log of settlements on her files based on injury, legal involvement, and time of settlement. Sarah was adjusting an injury claim and received notice the claimant had recently hired a local attorney who had a reputation for only taking good cases. Sarah researched her log of like claims for settlement values and considered the reputation of the attorney to adjust the file reserve to $50,000. Which one of the following factors was a focus for adjusting the claim reserve based on the individual case method?

Claimant representation

Which one of the following best identifies a fair duty to cooperate on behalf of the insured based on the policy?

Comply with the insurer's reasonable request

Judy was adjusting a loss for fire damages on a residential property insured by ABC Insurance. She had contacted the insured, inspected the loss, obtained and reviewed the fire report, conducted a cause and origin investigation for the fire. Judy's investigation was indicating the cause was arson and that the insured was involved. Judy contacted the insured and discussed the facts of the loss and coverage under the policy. During the call Judy advised the insured that the claim would be denied. Which one of the following actions would assist in preventing an exposure for lack of good faith in handling this claim?

Consult with legal counsel

Which one of the following creates legal duties for insurers?

Consumer regulations

Ethics and professionalism are important for insurance professionals because

Consumer regulations may define the minimum expected ethical and professional standards.

Ethical and professional conduct can benefit consumers by

Encouraging fair treatment and prompt payment.

Field claim representatives sometimes conduct investigations or inspections in crime-prone areas. An additional technique if safety is an issue besides the claims representative leaving the area immediately is

Ensure that the vehicle to be used is in good working order and has sufficient fuel.

Which one of the following involves applying a set of principles and values in making a choice between an acceptable course of action and a better one?

Ethics

An insurer may be held liable for damages beyond a policy's limits in which one of the following?

Failing to investigate before denying a claim

While investigating a fire loss, claim representative Randy noticed on the itemized inventory that the insured had lost one earring of a diamond set. While on site, Randy found the lost earring and put it in his pocket. Later, he sold the earring for $600, knowing that the insured would be compensated for the lost earring. Randy's action was

Fraudulent.

Once a claim is acknowledged, a claim representative should

Identify the policy, contact the insured, investigate, and document the loss.

Activities in the claim handling process include documenting the claim; determining the cause of loss; identifying the policy; and contacting the insured. Of these four activities, which one is normally performed earliest?

Identifying the policy

Licensure-related ethical dilemmas can arise when a manager or supervisor asks a claim representative to assume claim handling responsibilities

In a territory in which the claim representative is not licensed.

Which one of the following statements is true regarding liability based on statute?

In some states, no-fault laws were enacted to reduce the number of lawsuits resulting from auto accidents.

Bart, a claim representative, was disappointed with his recent performance evaluation and salary rating. Because of what Bart considered an unfair evaluation, he has since expended less effort in his job and has taken less interest in improvement. The factor that most affected Bart's claim handling competency in this situation is

Inequitable rewards and promotions.

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.

A goal of the claims function is to support the profit goal of the

Insurer

Explain when the use of independent adjusters might be advantageous

Insurers may use independent adjusters for specific types of losses, for example, aircraft accidents, in which specialized expertise is required to settle the claim. In the case of a catastrophic loss such as a hurricane, an insurer may not have sufficient staff to manage the claim volume and may temporarily depend upon independent adjusters to handle the excess. In some areas it is not economically feasible to set up remote claim offices and in these areas insurers may depend on independent adjusters to handle their insureds' losses.

correctly describe reasons for the use of independent adjusters

Insurers may use independent adjusters when special skills and expertise are needed, for example to investigate aircraft accidents. n the case of a catastrophic loss such as a hurricane, an insurer may not have sufficient staff to manage the large number of claims, and may use independent adjusters. In some areas it is not economically feasible to set up claim offices, and insurers may contract with independent adjusters to handle claims in these remote areas.

The purpose of an insurer acknowledging a claim

Is to let the insured know it has been received.

Which one of the following is correct with respect to contractual liability?

It arises when someone's rights under a contract's terms are violated.

A claim representative who believes in high quality claim practices should

Keep in mind the perspectives of the claimants and insureds.

Field claim representatives may conduct investigations or inspections in crime-prone areas. If the claim representative feels unsafe, he or she should

Leave the area immediately.

All of the following are provisions of prohibited practices enumerated under a typical unfair claim settlement practices law,

Making claim payment without indicating the coverage invoked. Failing to provide necessary claims forms promptly. Failing to promptly acknowledge claims communications.

The first step in confirming coverage is

Matching the information on the loss notice to the relevant policy.

One of the most common alternative dispute resolution methods is

Mediation

Which one of the following alternative dispute resolution methods enables parties to test the validity of their positions and continue negotiations?

Mini-trial

A file had come across the claim manager's desk after six months. The claim was a liability loss where the insured reported a break in and that he shot the 'robber' in self defense. The other party presented a claim for injuries from the shooting and advised that the only action taken that night was to knock on the door of the wrong home. The insured was noted to have been drinking that night and did not have a permit for a personal fire arm. The insured also had a reputation among the neighbors to have a quick temper. Based on the facts of the loss the claim manager raised the reserve to $100,000. Which one of the following six factors did the claim manager use from the individual case method to increase this reserve?

Miscellaneous factors

A choice between keeping the money in a found wallet versus returning it to the owner is an example of which one of the following types of dilemmas?

Moral dilemma

Harry was handling an automobile claim that involved physical damage to the insured's automobile and a bodily injury claim for a passenger of the auto. This was a single car accident where the insured driver lost control of the vehicle and struck a tree. The passenger suffered a broken leg and severe head trauma even though the passenger was restrained with a seatbelt. Harry determined that the policy limits were at risk due to the unknown factors of the head trauma and set the reserve at $500,000.00. Which one of the six factors of the individual case method did Harry use to determine the file reserve?

Nature & extent of injuries

All of the following are common ways a loss is reported to an insurer

On an ACORD form, By telephone, Through a lawsuit

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.

EXCEPT

Placing the insurer's interest on equal footing with the insured's interests.

On the ACORD General Liability Loss Notice, the claim representative needs to confirm the type of liability and information regarding the nature and extent of the injury or property damage. Which one of the following is a type of liability heading indicated on the ACORD General Liability Loss Notice?

Premises

Some jurisdictions have found certain practices in claim handling to be the unauthorized practice of law. An typical example is

Providing direction on legal strategies.

Liability based on negligence must be established by four elements. Which one of the following describes one of those elements?

Proximate causation

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 personal auto policy includes which one of the following locations in the definition of policy territory?

Puerto Rico

Which one of the following documents reserves the insurer's and policyholder's rights under the policy?

Reservation of rights letter

For commercial policies, the claim representative may best gain insight into the type of business the insured operates and what other types of losses the insured has had by

Reviewing the insured's policy and underwriting file

Hannah received a claim assignment for her insured, Josie, who had lost control of her vehicle and totaled her car injuring two passengers. Josie's premium check had been returned for insufficient funds. Coverage may not be available for Josie, depending on the results of Hannah's investigation into whether a proper cancellation occurred. Hannah's next step in handling the claim should be to

Send Josie a reservation of rights letter.

A claims representative is investigating a tort claim where the insured is reluctant to allow the carrier to inspect the site. Thinking that coverage may be an issue, the representative should

Send a nonwaiver agreement to the insured, as the insured is not complying with the policy conditions of cooperation and inspection.

A claims representative is beginning to investigate a claim and wants to be sure not to waive the company's rights to deny coverage at a later date. The representative should

Send the insured a nonwaiver agreement or reservation of rights letter.

Which one of the following is true regarding laws regulating claims handling?

Some claim laws are created by the state and some are federal.

Which one of the following databases should a claim representative review prior to issuing a claim payment?

State databases for delinquent child support payments

When a severe hurricane comes ashore in the southeast, the wind and water damage are extensive. Best Insurance Company's regional claim office is overwhelmed and cannot keep up with the volume of claims. The company's home office temporarily assigns claim representatives from across the country to the southeast region to assist. Which one of the following is correct concerning potential ethical or professional dilemmas associated with this situation?

States often grant temporary licenses to out-of-state claim representatives for catastrophe claim handling.

Glenda recently had her brakes repaired on her 1972 Ford at Go's Garage. Glenda left the garage and drove into a tree. Glenda claimed her brakes failed. She submitted a claim for the damage to her car to her auto insurer. Glenda's claim representative may need to consider which one of the following types of investigation?

Subrogation

John slipped and fell on the steps to Mary's home while delivering a package. During the process of determining whether there was any negligence on Mary's part, it was found that there was a defect in the steps and that the defect did cause John to fall. Which one of the following would have to be shown in addition to these facts before John would be able to collect from Mary?

That John suffered damages

A claim representative acknowledging receipt of a claim should advise

That the claim was received and provide the name of the claim representative, his or her telephone number and the claim number.

Information gained during the investigation of a claim helps the claims representative to determine

The cause of loss, liability for the loss, and the amount of loss.

After an interview, a claims representative documented a claim file with the following comment, "My insured is a disreputable businessman and is lying through his teeth." Which one of the following is true regarding the comment?

The comment is inappropriate because it is not an objective comment about the insured.

Which one of the following statements is true regarding file status notes?

The file status notes must contain concise and accurate information documenting claim file decisions.

EXCEPT

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

a reason when an IA should NOT be used

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

Mary refuses to give testimony to assist her insurer in a subrogation claim against the liable third party involved in her auto accident. Which one of the following describes the recourse that may be available to the insurer?

The insurer may pursue Mary to pay the amount that the insurer could have collected from the liable third party.

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.

During the handling of a theft claim the claim representative requested that the insured submit receipts for all jewelry that she owned, an appraisal for the items reported as stolen, the police report, and that the insurer come into the office to provide a recorded statement. Which one of the following best identifies a reason for the insured to have no duty to cooperate with these requests?

The request for all jewelry receipts is not relevant to the claim.

Lou is a claim manager at a small property-casualty insurance company. Lou takes pride in the fact that because of his leadership, his company has gained a public reputation for resisting legitimate claims. Ultimately, this reputation

Undermines the effectiveness of his company's advertising.

ABC Insurance Company is reviewed by state auditors and found to have understated reserves. Which one of the following indicates how this situation can affect the company?

Understated reserves may cause errors in ratemaking, eventually affecting an insurer's ability to write business competitively and ultimately affecting its solvency.

Claim representative Johnny promised 88-year-old Nelda that he would provide her with full payment of her claim on a specific date because he knew she needed the settlement money to pay her overdue rent. However, on the date he was to deliver the payment, Johnny decided instead to attend a beach party. Nelda was disappointed and unhappy because she incurred a $50 late fee. Johnny's actions in this situation were

Unprofessional.

If the first report of loss indicates that damage to a structure occurred because of faulty sprinklers, the claim representative should pay particular attention to the

Water damage portions of the policy.

During a property inspection if clean-up or repair work has already begun, the claims representative should do which one of the following to ensure physical safety?

Wear protective gloves

The average value method of reserving is useful in setting reserves

When there are small variations in the loss amounts paid for specific types of claims.