CPCU 520 - chapter 6 Analyzing Claims

Which one of the following is a claim control used to help meet regulatory compliance? Select one: A. Access security B. Structured settlements C. Annual Statements D. Special damages

A. Access security

Which one of the following statements regarding authority levels is true? Select one: A. Claim information systems might allow different authority levels for different types of employees. B. Authority levels are used as a training tool for those employees that are making errors when changing information. C. Generally, each claim representative sets his or her own authority level depending on the type of claim. D. If a claim requires little reserves, authority levels ensure that qualified personnel handle those reserves.

A. Claim information systems might allow different authority levels for different types of employees.

In the claim function, supporting the insurer's profit goal is accomplished through Select one: A. Controlling expenses. B. Resisting meritorious claims. C. Underpaying claims. D. Providing prompt, equitable service to policyholders.

A. Controlling expenses

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 cause 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? Select one: A. Determine whether lightning and windstorm are covered causes of loss and whether any exclusions apply B. Verify whether there is a mortgagee on the property that may need to be included in the loss settlement C. Verify that Antonia meets the policy definition of "insured" and is entitled to receive payment for her portion of the loss D. Take detailed statements from firefighters and neighbors to establish what the actual cause of loss was

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

The processing of almost every claim involves which one of the following activities? Select one: A. Determining the amount of damages or extent of loss B. Subrogating C. Sending a reservation of rights letter to the insured D. Salvaging

A. Determining the amount of damages or extent of loss

State insurance regulators conduct claim audits to ensure Select one: A. Fair claim settlement practices. B. Compliance with reinsurance treaties. C. Equal workloads of claim representatives. D. Fair and appropriate pricing.

A. Fair claim settlement practices.

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) Select one: A. Internal claim audit. B. Supervisor review. C. External claim audit. D. Claim procedure.

A. Internal claim audit.

An important aspect of acknowledging a claimant's bodily injury liability claim, upon first contact, is to try to obtain information on the Select one: A. Nature and extent of the injury. B. Claimant's sources of additional income. C. Claimant's medical history. D. Claimant's accident history.

A. Nature and extent of the injury.

Which one of the following statements is true concerning claim information users? Select one: A. Producers must have policyholder loss information to prepare renewal policies properly. B. An insurer's public image is mainly determined by the actions of the underwriting department. C. Marketing establishes reserves for IBNR losses and projects development of claims for which the reserves may change over the life of the claim. D. Actuaries evaluate losses that sometimes reveal an undetected loss exposure.

A. Producers must have policyholder loss information to prepare renewal policies properly.

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? Select one: A. Puerto Rico B. Europe C. Mexico D. Bermuda

A. Puerto Rico

All of the following explain when the use of independent adjusters might be advantageous, EXCEPT: Select one: A. The insured may retain an independent adjuster after becoming dissatisfied with the pace of negotiations with the insurer. B. 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. C. Insurers may use independent adjusters for specific types of losses, for example, aircraft accidents, in which specialized expertise is required to settle the claim. D. 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.

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

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 Select one: A. An adjusting agent. B. A field claim representative. C. A third-party administrator. D. An independent adjuster.

B. A field claim representative.

A reservation of rights letter Select one: A. Lists all of the rights that an insured has under an insurance policy. B. Advises the insured that the insurer is investigating the claim but retains the right to deny coverage later. C. Lists all of the rights that an insurer has under an insurance policy. D. Advises the insurer that the insured has made a claim, but retains the right to withdraw the claim later.

B. Advises the insured that the insurer is investigating the claim but retains the right to deny coverage later.

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 Select one: A. Supervisor and manager review. B. Claim guideline. C. Control. D. Claim audit.

B. Claim guideline.

In handling a property claim under Special Form Coverage, a claim representative should gather facts about the cause of loss and then Select one: A. Determine if the cause of loss applies to the Declarations Page. B. Determine if the cause of loss is excluded in the Special Form Coverage. C. Determine if the cause of loss is a listed covered peril in the Special Form Coverage. D. Determine if the cause of loss is defined in the Definitions Section of the policy.

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

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 Select one: A. Claim handling by producers is immune to regulatory scrutiny. B. If an agent can issue a draft directly to the insured, it reduces the time an insured waits for payment. C. Claim payments by producers are not included in loss ratio calculations. D. It gives agents the option of providing coverage for smaller claims that staff adjusters might deny.

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

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? Select one: A. Determine the loss amount. B. Investigate the claim. C. Confirm the loss reserves with Oscar and Sara. D. Conclude the claim.

B. Investigate the claim.

Work on a new claim begins for the claim representative upon receipt of the notice of loss. The representative obtains initial information and verifies coverage. Next, the representative should Select one: A. Retain causation experts. B. Set a loss reserve. C. Assign the claim to defense counsel. D. Make an offer to settle the claim.

B. Set a loss reserve.

An insurer's public image is determined largely by Select one:. A. Defense attorneys. B. The claim department's behavior. C. State regulators. D. The actuarial department.

B. The claim department's behavior.

Which one of the following statements is correct regarding the claim function of an insurer? Select one: A. By overcompensating the insured or claimant, the insurer keeps customers happy and can lower the cost of insurance. B. The claim function helps insurers achieve underwriting profit through control of expenses. C. An insurer's reputation for providing the service promised does not affect its ability to meet financial goals. D. The two primary goals of the claim function conflict with one another, hindering an insurer's ability to earn a profit.

B. The claim function helps insurers achieve underwriting profit through control of expenses.

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? Select one: A. Tracking system B. Authority level C. Access security D. Manager review

C. Access security

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 to Anil's loss. Which one of the following will be the first step Melissa takes? Select one: A. Verify that Anil's automobile policy covers vandalism damage. B. Verify that Anil reported the loss to the police. C. Acknowledge receipt of the claim to Chad and enter the claim information into ABC's computer system. D. Call Anil and take a statement regarding the details of the claim.

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

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 Select one: A. Named peril and direct physical. B. Named peril and open peril. C. Direct and indirect. D. Specified and named peril.

C. Direct and indirect

Which one of the following statements is correct with respect to claimants' representation by lawyers? Select one: A. Legal representation generally results in higher insurance settlements for claimants. B. When claimants hire lawyers, the insurer must pay the claimants' lawyer fees in addition to the settlement amount. C. For some types of claims, claimants are more likely to hire lawyers. D. Legal representation of claimants generally guarantees a faster claim settlement.

C. For some types of claims, claimants are more likely to hire lawyers.

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? Select one: A. Is the mall parking lot a covered location? B. Does the loss meet the policy definition of "collision"? C. Is Carla covered as a driver of the damaged vehicle? D. Does any other insurance apply to this loss?

C. Is Carla covered as a driver of the damaged vehicle?

For liability claims, damages for which the insured may be found liable include compensatory and Select one: A. Negligence. B. Liability. C. Punitive. D. Specific.

C. Punitive.

The purpose of an activity log is to Select one: A. Document a manager's review of a claim representative's performance. B. Log all activities of a claim representative for billing purposes. C. Record all activities and analysis of a particular claim. D. Remind claim representatives to perform a particular task.

C. Record all activities and analysis of a particular claim.

The first goal of the claim function is to Select one: A. Pay as little as possible when settling covered losses. B. Be sensitive and empathetic to those who have suffered a loss. C. Satisfy the insurer's obligations to the policyholder. D. Look for reasons to avoid paying reported claims.

C. Satisfy the insurer's obligations to the policyholder.

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 Select one: A. Exclusion-limited coverage. B. Specified perils coverage. C. Special form coverage. D. The coverage description.

C. Special form coverage.

One of the primary goals of the claim function is Select one: A. Informing producers of court rulings that affect the insurer's loss exposures or pricing. B. Reviewing post-loss evaluations with the underwriting department. C. Supporting the insurer's financial goals. D. Sharing accurate loss information with an insurer's actuarial department.

C. Supporting the insurer's financial goals.

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 Select one: A. Staff claim representatives. B. Independent adjusters. C. Third-party administrators. D. Claim managers.

C. Third-party administrators.

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 Select one: A. The claim will be handled by an independent adjuster. B. The claim is in excess of the deductible. C. The policy may not be renewed due to loss frequency. D. A coverage problem may exist.

D. A coverage problem may exist.

Because claim representatives handle a large volume of claims, which one of the following claim procedures is a crucial record of analyses that occurred on each claim? Select one: A. Simple diary B. Automated suspense C. Access security control D. Activity log

D. Activity log

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 Select one: A. A hurricane adjuster. B. A public adjuster. C. A third-party adjuster. D. An independent adjuster.

D. An independent adjuster.

Claim audits are a review of claim files to ensure that claims are being handled properly, and Select one: A. Are used by most insurers as a type of cost-savings measure. B. May be reviewed by an actuary to see what coverages are purchased the most. C. Are only used for electronic claim files because of the ease of accessing data. D. Can be conducted by an individual other than an insurer's internal personnel.

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

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? Select one: A. He would check whether the dealership has insurance to cover damage to Jessica's new truck. B. He would advise Jessica that there is no coverage because the pickup is not listed on the policy. C. He would set a liability reserve for general damages arising from the accident. D. He would confirm that a "newly acquired auto" meets the policy definition of "your covered auto."

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

Which one of the following statements is correct with regard to the various users of claim information? Select one: A. The three primary departments that receive claim information are purchasing, underwriting, and actuarial. B. Post-loss evaluation is not important for underwriting management because claim adjusters alert underwriters to any negative trends. C. In order to project the development of open claims and establish reserves for IBNR claims, actuaries need paid losses, but not losses that are on reserve. D. Individual underwriters are interested in claim information for the specific accounts they have underwritten.

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

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? Select one: A. Verify whether any exclusions apply B. Advise the agent that the policy is in force C. Verify that Alexis owns the cottage D. Set preliminary loss reserves

D. Set preliminary loss reserves

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? Select one: A. Best practices B. Underwriting guidelines C. Miscellaneous provisions D. Statutory provisions

D. Statutory provisions

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: Select one: A. The individual must suffer a financial loss as a result of a covered occurrence. B. The individual must fall within the definition of "insured" under the policy. C. The individual must have an insurable interest in the damaged or destroyed property. D. The individual must provide the systematic framework for coverage to the claim representative.

D. The individual must provide the systematic framework for coverage to the 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 Select one: A. The loss of income while he replenishes his stock. B. There is no direct loss in this example. C. The loss of customers who go to his competitors. D. The loss of his merchandise and damage to the store.

D. The loss of his merchandise and damage to the store.