AIC 300 CLAIM IN AN EVOLVING WORLD EXAMS, PRACTICE EXAMS AND STUDY GUIDE EXAMS, Exams of Nursing

Download AIC 300 CLAIM IN AN EVOLVING WORLD EXAMS, PRACTICE EXAMS AND STUDY GUIDE EXAMS and more Exams Nursing in PDF only on Docsity! 1 | P a g e AIC 300 CLAIM IN AN EVOLVING WORLD EXAMS, PRACTICE EXAMS AND STUDY GUIDE EXAMS WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED RATIONALES ANSWERS 2024 (NEWEST) ALREADY GRADED A+ 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? Select one: A. Individual case method B. Average value method C. Formula method D. Roundtable method 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 Select one: A. The insurer's case reserves. B. The insurer's profits. C. NAIC model regulations. D. National averages. A. The insurer's case reserves. To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to the insurer's case reserves. Samuel was seriously injured in a car accident caused by a drunk driver. His settlement included payments for repairs to his vehicle, medical bills, pain and suffering, and lost wages. Which one of the payments in Samuel's settlement is considered general damages? Select one: A. Medical bills B. Lost wages C. Repairs to his vehicle D. Pain and suffering 2 | P a g e D. Pain and suffering Pain and suffering, disfigurement, loss of body function, and emotional distress are all forms of general damages. Andrew is a claims representative investigating whether coverage applies to a new claim. To help ensure that he considers every facet of the policy before determining coverage, he might use Select one: A. The CARD method. B. The CARE method. C. The DICE method. D. The DARE method. C. The DICE method. Mitsuki was severely injured when the safety latch on an amusement park ride failed and she was thrown from the ride. In her lawsuit with the amusement park, Mitsuki was awarded payment for pain and suffering, emotional distress, disfigurement, and loss of earnings. Which one of Mitsuki's awards is considered special damages? Select one: A. Loss of earnings B. Emotional distress C. Pain and suffering D. Disfigurement A. Loss of earnings Loss of earnings, medical bills, and lost property payments are all considered special damages. 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? Select one: A. An automotive collision claim. B. A homeowners liability claim due to a slip and fall. C. A homeowners claim due to storm damage. D. A medical malpractice claim. D. A medical malpractice claim. Claims-made forms are most often used for environmental, medical malpractice and directors and officers' policies. The Office of Foreign Assets Control requires claims payors to check payees against a database of Select one: A. Known perpetrators of insurance fraud. B. Policyholders of other insurers. 5 | P a g e C. Using traditional sales techniques A common sales technique is mirroring the behavior of the customer. Greatview Insurance wants to predict which auto liability claims will most likely go to litigation, so it can assign them to experienced adjusters early in the process. There are certain known indicators of litigation that Greatview wants to use in the data mining process. Which one of the following data mining techniques would Greatview's analyst most likely use? Select one: A. Regression analysis B. Association rule learning C. Classification D. Cluster analysis C. Classification Because Greatview wants to use known characteristics, the analyst would most likely use classification to predict which auto liability claims will go to litigation. 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? Select one: A. Statistical relevance B. Information gain C. Lift D. Precision factor B. Information gain Information gain is a measure of the predictive power of one or more attributes. 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. Actuary. B. Data scientist. C. IT professional. D. Ratemaker. B. Data scientist. Data science involves experimenting with data using rapidly evolving methods to learn and provide solutions to complex problems. Which one of the following is a data mining technique an insurer applies when it knows what information it wants to predict? 6 | P a g e Select one: A. Machine learning B. Association rule learning C. Cluster analysis D. Classification D. Classification Classification is a data mining technique an insurer applies when it knows what information it wants to predict. The first step in the data mining process is to Select one: A. Collect the data that will be used. B. Select a data mining technique. C. Understand what a business wants to achieve. D. Prepare the data that will be used. C. Understand what a business wants to achieve. Generally speaking, the most common application of predictive modeling in insurance occurs in Select one: A. Risk selection. B. Marketing. C. Reinsurance. D. Claims handling. A. Risk selection. 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? Select one: A. Actuary B. IT C. Underwriting D. Data science D. Data science Data science team needs to be engaged as soon as the need for a project arises. Part of the continuous cycle of data mining is preparing the data to eliminate missing or inaccurate information. This process is called Select one: A. Machine learning. 7 | P a g e B. Parsing. C. Predictive modeling. D. Cleaning. D. Cleaning. Data should be cleaned as much as possible to eliminate missing or inaccurate information. Which one of the following types of workers compensation claims are the most difficult for insurers to identify at the time of first report? Select one: A. Catastrophic claims B. Medical-only claims C. Potentially minor claims D. Potentially complex claims D. Potentially complex claims Potentially complex claims are the most difficult for insurers to identify at the time of first report. Soft fraud, also called opportunity fraud, occurs when Select one: A. An application for insurance contains untrue information. B. A legitimate claim is exaggerated. C. A loss is triggered intentionally. D. A claim is filed for a loss that did not occur. B. A legitimate claim is exaggerated. Soft fraud, also called opportunity fraud, occurs when a legitimate claim is exaggerated. Carla is investigating a claim for a stolen car. The insured provided a copy of the police report, but she notices that the account in the police report differs from the insured's version of events. At this point, Carla should Select one: A. Refer the case to the SIU. B. Continue with her investigation. C. Deny the claim. D. Contact the police. B. Continue with her investigation. Continue with her investigation. Indicators of fraud are not proof of fraud. Benjamin is with the SIU department of an insurer. His company developed technology to identify patterns related to fraudulent claims activity. He is using a program to analyze claims data to identify similarities or connections that might indicate fraud. Benjamin is utilizing Select one: 10 | P a g e C. Debatable reasonable basis defense. The insurer may establish that defense that it had a reasonable basis for questioning whether a claim was covered. One of Julio's expectations as a claims representative is good-faith claims handling. He keeps insureds informed about the claim because they have that expectation and because they are most likely to make a complaint about bad-faith claim handling. He also wishes to participate in the defense and in discussions about the possibility of settlement. For these reasons, Julio Select one: A. Conducts fair evaluations. B. Maintains complete and accurate documentation. C. Maintains regular and prompt communication. D. Conducts good-faith negotiation. C. Maintains regular and prompt communication. Communicating with all parties to a claim is a crucial aspect of good-faith claims handling and resolution. Which one of the following statements regarding state versions of the NAIC model act is correct? Select one: A. Only insureds may bring lawsuits against insurers. B. Only claimants may bring lawsuits against insurers. C. Both insureds and claimants may bring lawsuits against insurers. D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds. D. Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds. Tobias is a claims representative who understands the importance of good-faith claims handling, including fair evaluation, good-faith negotiation, complete and accurate documentation, and timely contact with all parties to a claim. Which one of Tobias' good-faith claims handling practices helps his employer because the parties will be more likely to remember details of the loss accurately? Select one: A. Fair evaluation B. Complete and accurate documentation C. Timely contact with all parties to a claim D. Good-faith negotiation C. Timely contact with all parties to a claim Timely contact with all parties to a claim helps ensure that parties will be more likely to remember details of the loss accurately. For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and 11 | P a g e Select one: A. The insured must have paid that judgment. B. The amount of the judgment must be in excess of the insured's policy limit. C. Evidence of bad faith must be produced. D. The insurer must have determined that coverage does not apply. B. The amount of the judgment must be in excess of the insured's policy limit. For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and the amount of the judgment must be in excess of the insured's policy limit. The insured is not required to have paid the judgment before bringing suit. Which one of the following best describes the term 'professionalism' as it relates to claims professionals? Select one: A. The behaviors necessary to implement an ethical decision B. Remaining silent when a competitor is disparaged publicly C. Fulfilling the terms of an insurance contract D. A set of principles and values A. The behaviors necessary to implement an ethical decision As a claims representative, some of Sara's goals is to benefit her employer by ensuring the parties to a loss remember details accurately, reassuring the parties that their claims are important, and lessening the chance that the parties will retain attorneys. Sara accomplishes these goals through Select one: A. Effective claims management. B. Regular and prompt communication. C. Complete and accurate documentation. D. Timely contact with all parties to a claim. D. Timely contact with all parties to a claim. Early contact with parties helps to ensure details are correct, parties feel heard, and don't feel the need for attorneys. Erik is a claims manager for Taunton Insurance. He is leading a team of property claims representatives responding to a recent tornado in Kentucky. Before sending the representatives into the field, Erik has decided to use Internet of Things (IoT) technology to assess the damage and danger in the area. Which one of the following IoT devices would Erik most likely use in this situation? Select one: A. Drones B. Sensors C. Smartphones D. Telematics 12 | P a g e A. Drones Erik would most likely use drones to take photos or videos of the difficult-to-reach area and assess the damage and danger. By using the drones, he can assess the danger without risking the safety of the claims representatives. Luke runs his business out of a store front in a commercial building. After a fire destroyed part of the building, Luke made a claim for damages and received a settlement check from the property insurer. This necessarily means that Luke Select one: A. Has business interruption coverage. B. Is named in the policy declarations or an endorsement. C. Has an insurable interest in the damaged property. D. Is the owner of the building. B. Is named in the policy declarations or an endorsement. An individual may have an insurable interest in a building, but not be considered an insured under the policy because the person's name is not listed in the declarations or on an endorsement. Rodrigo manages a claims department for an insurer and uses loss ratio as a measure of the department's performance. Rodrigo calculates loss ratio as Select one: A. Losses divided by written premium. B. Losses and LAE divided by earned premium. C. Losses and LAE divided by written premium. D. Losses divided by earned premium. B. Losses and LAE divided by earned premium. Losses and LAE divided by earned premium. Loss ratio measures losses and loss adjustment expenses against earned premium and reflects the percentage of premiums being consumed by losses. In liability claims, the claims rep will require an authorization from the injured party to Select one: A. Investigate the claim. B. Obtain medical records. C. Contact the insured. D. Issue a partial claim settlement. B. Obtain medical records. In liability claims, the claims rep will require an authorization from the injured party to obtain medical records. Mustafa is a data scientist who is working with a team of underwriting, IT, and actuary to develop a predictive analytics model. The main goal of the project is to translate the insights gained from the 15 | P a g e A. Continue for as long as the claim is open. B. Present a chronology of the life of the claim. C. Are potentially discoverable in a trial. D. Must be able to speak for themselves. C. Are potentially discoverable in a trial. Are potentially discoverable in a trial. Seemingly innocuous comments can be devastating when read to a jury. Millstone Insurance wanted to assign its most complex workers compensation claims to experienced claim adjusters as early as possible. The data science team used the classification tree technique to develop a predictive model. When holdout data was used to test the model's predictive accuracy, 45% of the complex claims were assigned to experienced adjusters. When claims were randomly assigned, only 15% of the complex claims were assigned to experienced adjusters. What is the lift provided by the predictive model? Select one: A. 0.333 B. 3 C. 30 D. 45 B. 3 The lift provided by the predictive model is 3. The lift is calculated by dividing the model percentage by the nonmodel percentage. (45/15 = 3) Alva works for an international, multi-line insurer. She helps her company to manage risk selection by working with other underwriters and coordinating decisions about products, pricing, and guidelines. Alva is a Select one: A. Master underwriter. B. Line underwriter. C. Staff underwriter. D. Chief Underwriting Officer. C. Staff underwriter. This describes the duties of a staff underwriter. Line underwriter. 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 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. Maja handled a large liability claim that settled above the policy limits. The insured is now charging the claim was handled in bad faith. During their investigation of the bad-faith claim, Maja and defense 16 | P a g e counsel discovered that the claimant had received the payment from the insurer, but not the amount above the policy limits that was to come from the insured's assets. Which one of the following defenses would Maja's defense most likely invoke? Select one: A. Contributory negligence B. Advice of counsel C. Debatable reasonable basis D. Insured's collusion with claimant D. Insured's collusion with claimant Insured's collusion with claimant. Discovering collusion between the insured and claimant, such as a claimant agreeing not to collect a judgment from the insured's assets, can lead to dismissal of a bad- faith claim. Among the methods used to pay claims are the issuance of checks and bank drafts. The main difference between the two is that Select one: A. Only checks may be used for claim payments in excess of $10,000. B. With a check, the bank must verify that the insurer has authorized payment. C. Only bank drafts may be used for claim payments in excess of $10,000. D. With a bank draft, the bank must verify that the insurer has authorized payment. D. With a bank draft, the bank must verify that the insurer has authorized payment. A claims representative should have the ability to persuade or influence Select one: A. Supervisors. B. Insureds. C. Claimants, insureds, supervisors and others. D. Claimants. C. Claimants, insureds, supervisors and others. The impression that claims reps make on claimants, insureds, and others reflects either favorably or unfavorably on the insurer. In a typical scenario, a summons and complaint initiating litigation is received by these parties in which one of the following sequences? Select one: A. Defense counsel, insured, claims rep B. Defense counsel, claims rep, insured C. Insured, claims rep, defense counsel D. Claims rep, insured, defense counsel C. Insured, claims rep, defense counsel 17 | P a g e A summons and complaint is typically received by the insured, who then shares it with the claims rep, who in turn sends it to the insurer's defense counsel. Bettina's apartment is burglarized and several items are stolen. In filing her claim, she tells her insurer that her stolen television was both newer and larger than it actually was. This constitutes which one of the following types of fraud? Select one: A. Concealment B. Misrepresentation C. False claim D. Soft fraud D. Soft fraud In soft fraud, a legitimate loss occurs but the value of that loss is exaggerated. Adam manages a claims department for an insurer. He measures the department's performance by best practices, claims audits, customer satisfaction data, and loss ratio. Which one of Adam's measures refers to a system of identified internal practices that claims representatives perform to produce superior performance? Select one: A. Customer satisfaction data B. Loss ratio C. Best practices D. Claims audits C. Best practices Best practices generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. Which one of the following elements of a policy can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds? Select one: A. The declarations. B. The conditions. C. An exclusion. D. An endorsement. D. An endorsement. An endorsement can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds. As a claims representative, Joshua frequently requests proofs of loss and affidavits, and conducts examinations under oath and recorded statements. Which one of Joshua's sworn statements is administered by the insurer's attorney at the office of the insurer, attorney, or court reporter? 20 | P a g e B. $250,000 After the SIR limit had been reached, the insurer was obligated to pay up to the occurrence limit. If the decision on a claim settlement is negative, as in a denial, good-faith claims handling requires the claims rep to Select one: A. Explain the rationale behind the decision to the claimant. B. Deliver the decision to the claimant in writing. C. Deliver a hard copy of the decision to the claimant by mail. D. Have a supervisor sign off on the communication to the claimant. A. Explain the rationale behind the decision to the claimant. If the decision on a claim settlement is negative, good-faith claims handling requires the claims rep to explain the rationale behind the decision. While staff claims representatives may have a variety of titles, the role is typically defined by two things: having a primary focus on claims and Select one: A. A focus on inside claims. B. Being an outsourced contractor of the insurer. C. Being an employee of the insurer. D. Having at least five years of claims experience. C. Being an employee of the insurer. The role of staff claims representative is defined by being an employee of the insurer and having a primary focus on handling claims. Ciara is going to college with the goal of working as a data scientist for an insurer. She will need a strong foundation in mathematics and statistics, computer programming, domain knowledge, and data science. Which one of Ciara's skills will require her to understand the insurance profession to which the data is being applied? Select one: A. Mathematics and statistics B. Data science. C. Domain knowledge D. Computer programming C. Domain knowledge Domain knowledge is the understanding of the discipline, profession, or activity to which the data is being applied. Which one of the following methods of establishing case reserves involves a consensus among multiple claims reps? 21 | P a g e Select one: A. Expert system method B. Average value method C. Roundtable method D. Formula method C. Roundtable method With the roundtable method, a consensus reserve figure may be reached following evaluation and discussion among claims reps. Which one of the following can be applied over time to refine a model to better predict results? Select one: A. Association rule learning B. Statistics C. Regression D. Machine learning D. Machine learning An insurer that finds it economically impractical to establish a claims office in a given state is likely to use which one of the following to perform the claims handling function? Select one: A. Producers B. Third-party administrators C. Public adjusters D. Independent adjusters D. Independent adjusters Insurers may contract with independent adjusters to handle claims in strategic locations. Joy Insurance Company is interested in using data mining to solve a problem it is having with claims fraud in one of its product lines. The first step it should take is Select one: A. To understand what it wants to achieve. B. To develop a model to analyze the data. C. To prepare the data by cleaning it. D. To understand the types of data to use. A. To understand what it wants to achieve. Jose is handling a workers compensation claim. The injured worker claims to have strained his back when he lifted a box at work. He waited a day to report the injury because he thought he would be okay. He asked Jose when he would be referred to a back specialist and when he could expect his first check. Which one of the injured worker's actions would be the most pertinent fraud indicator to Jose? Select one: A. Asking for referral 22 | P a g e B. Lifting a box C. Waiting to report D. Asking about check A. Asking for referral Asked for referral could indicate that the worker has knowledge of the workers compensation system because he had been through it before. Daniel is a claims supervisor. One of his responsibilities is to review claim files to monitor the performance of the adjusters and to provide guidance. He also realizes that claims department peers review files as part of roundtable discussions and that state insurance department representatives might review files as part of market conduct studies. For these reasons, Daniel makes sure his direct reports Select one: A. Maintain complete and accurate documentation. B. Provide competent legal advice. C. Make fair evaluations. D. Conduct good-faith negotiations. A. Maintain complete and accurate documentation. Maintain complete and accurate documentation. A claim file must contain a complete and accurate account of the claims rep's activities and actions. Leila is conducting a claims investigation and is taking a recorded statement from the claimant. She wants a simple yes-or-no answer to prevent the interviewee from explaining the answer further. She asks, "You experienced back pain immediately when you lifted the box, didn't you?" Leila has asked a(n) Select one: A. Direct question. B. Indirect question. C. Open-ended question. D. Leading question. D. Leading question. Claims rep Miguel is conducting a settlement with a claimant. He constructs his first offer so that the claimant will likely find it undesirable. This becomes the basis of comparison for the second offer that he makes. Miguel understands that people Select one: A. Feel empowered when given a choice. B. Will typically accept a second offer. C. Are naturally suspicious of an initial offer. D. Are easier to manipulate with choices. A. Feel empowered when given a choice. 25 | P a g e D. Telematics. Attorney Grace is representing an insurer in a case and is preparing a pretrial motion. Her argument is that the court has no jurisdiction for the cause of action brought by the claimant. Grace is preparing a Select one: A. Motion in limine. B. Motion for summary judgment. C. Motion to dismiss. D. Motion to suppress. C. Motion to dismiss. Insurers usually send denial letters Select one: A. By email to ensure prompt receipt by the insured. B. By certified mail with a return receipt requested. C. By overnight courier. D. By registered mail. B. By certified mail with a return receipt requested. Some will also send a copy via regular mail in case the certified letter is not accepted. As methods of communication evolve, it's important for claims professionals to remember that any written claims communication may be Select one: A. Replaced with verbal communication. B. Misinterpreted. C. Edited later. D. Subpoenaed. D. Subpoenaed. Any written claims communication may be subpoenaed. In which one of the following scenarios is a public adjuster most likely to become involved? Select one: A. An insurer finds it financially unfeasible to hire its own claims staff in a given state. B. An insured is unable to afford legal representation to contest a claim. C. A catastrophic disaster strikes, involving damage to many properties. D. An insured's negotiations with the insurer on a complex claim are not going well. D. An insured's negotiations with the insurer on a complex claim are not going well. If a claim is complex, or if settlement negotiations are not progressing with the insurer, the insured may hire a public adjuster to protect his or her interests. 26 | P a g e Which one of the following statements regarding third-party administrators (TPAs) is most accurate? Select one: A. TPAs are typically used by businesses that have chosen not to self-insure. B. TPAs handle claims, keep claims records, and perform statistical analyses. C. TPAs are generally found in an insurer's claims department. D. TPAs are employed only by independent adjusting firms. B. TPAs handle claims, keep claims records, and perform statistical analyses. 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? Select one: A. Proper releases taken B. Timeliness of reports C. Number of files opened D. Accuracy of data entry A. Proper releases taken Proper releases taken is a qualitative audit factor; the others are quantitative. 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 Select one: A. Staff underwriter. B. Public underwriter. C. Personal lines underwriter. D. Line underwriter. D. Line underwriter. Line underwriter. 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 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. The first key to communicating empathetically as a claims professional is Select one: A. A comprehensive understanding of relevant insurance policies. B. Speaking calmly and clearly. C. Being prepared with all documentation relating to the claim. D. Listening. 27 | P a g e D. Listening. Claims professionals should first listen carefully to understand what the claimant is saying. Mia tracks loss adjustment expense (LAE) as part of her management of the claims department for an insurer. Mia considers LAE to be the Select one: A. Total amount of loss reserves of all claims. B. Paid portion of claims. C. Cost to investigate, defend, and settle claims. D. Total incurred amount of claims. C. Cost to investigate, defend, and settle claims. Cost to investigate, defend, and settle claims. LAE is the expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. In her role with an insurer, Katarina has opportunity to collaborate with not only employees from her company, but also external experts with particular expertise. For example, as part of her investigation, she hired an engineer to conduct a review of a machine that was involved in a personal injury. Katarina is a(n) Select one: A. Medical provider. B. Expert Witness. C. Premium auditor. D. Claim representative. D. Claim representative. Claim reps collaborate with more than other insurer employees. Many insurers employ a panel of experts that the claims rep can select according to the investigation's needs. When Mehmet interviews witnesses as part of his claims investigation, he asks different types of questions based on need, such as open-ended, direct, indirect, and leading. Which type of question should Mehmet ask when he wants to set the interviewee at ease and he is looking for explanation or elaboration of details in the interviewee's own words? Select one: A. Open-ended B. Direct C. Indirect D. Leading A. Open-ended Open-ended questions can be used to clarify an interviewee's statements. 30 | P a g e An internal claims handler will often transfer information to the insurer's standard form, called the first notice of loss (FNOL) form Indemnify To restore a party who has sustained a loss to the same financial position that party held before the loss occurred. Third-party administrator (TPA) An organization that provides administrative services associated with risk financing and insurance. Claims representative A person responsible for investigating, evaluating, and settling claims. Public adjuster An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee. Premium audit Methodical examination of a policyholder's operations, records, and books of account to determine the actual exposure units and premium for insurance coverages already provided. Quantitative Audit Factors Timeliness of reports, reserving and payments Qualitative Audit Factors Realistic reserving, accurate evaluation of insured's liability and follow-up on subrogation opportunity Loss ratio 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) 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. 31 | P a g e B. Line underwriter. 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 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 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. A. TPAs handle claims, keep claims records, and perform statistical analyses. Steps of Making an Initial Claims Assessment 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? 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: 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. Seven-Part Method 32 | P a g e 1. Permission and introduction—date, time, and location of the interview, names of the parties involved in the interview, and an affirmation from the interviewee that the interview is given with permission 2. Identification—identifying information about the person being interviewed, such as name, address, phone number, and driver's license number 3. Setting—answers to questions such as who was involved in the loss, what was involved in the loss, when the loss occurred, where the loss occurred, and why the loss occurred 4. Incident—a step-by-step description of how the loss occurred 5. Post incident injuries/damages—description of the property damage and bodily injuries to individuals 6. Miscellaneous—any information the interviewee wants to add 7. Conclusion—reaffirmation that the statement was taken with permission Reserve The amount the insurer estimates and sets aside to pay on an existing claim. Individual case method a method of setting reserves based on the claim's circumstances and the claim representative's experience in handling similar claims Roundtable method A method of setting reserves by using the consensus of two or more claim personnel who have independently evaluated the claim file Average value method A case reserving method that establishes a predetermined dollar amount of reserve for each claim as it is reported. Formula method A method of setting claim reserves by using a mathematical formula. Expert system method A method of setting reserves with a software application that estimates losses and loss adjustment expenses. 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) Recorded statement 35 | P a g e C. The CARD method. D. The DICE method. D. The DICE method. The Office of Foreign Assets Control requires claims payors to check payees against a database of A. Policyholders of other insurers. B. Those who have collected a payment for the same loss. C. Known perpetrators of insurance fraud. D. Known terrorists and drug traffickers. D. Known terrorists and drug traffickers. Questions for Determining an Acceptable Dollar Amount What is the minimum amount I should pay for this claim in good faith? What is the maximum amount I'm willing to settle this claim for? What is the most the other party might demand for this claim without appearing unreasonable? What is the minimum amount the other party might accept for this claim? What should my initial offer be? Techniques for Negotiating Directly With Claimants Collect and use extraneous information Use tradition sales techniques Perform a needs analysis Set appropriate expectations with the first offer Lean on the evaluation Having investigated the loss, the claims rep usually has more detailed knowledge of the claim than an attorney or public adjuster. When the claimant's attorney demands a large settlement, the rep should avoid an immediate reaction. Instead, the rep should ask the attorney to explain how the settlement demand value was 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 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 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 36 | P a g e 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 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 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? 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 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 A pretrial exchange of all relevant information between the plaintiff and defendant. Summons 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 The allegations made by a plaintiff in a lawsuit. Service of process The delivery of a summons and complaint to a defendant by an authorized person. Allegation 37 | P a g e 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 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 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? 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 Motion to dismiss Motion for summary judgment Motion in limine Stare decisis The principle that lower courts must follow precedents set by higher courts. Motion to dismiss A request that a court terminate an action because of settlement, voluntary withdrawal, or procedural defect. Motion for summary judgment A pretrial request asking the court to enter a judgment when no material facts are in dispute and the moving party is entitled to judgment as a matter of law. Motion in limine A pretrial request that certain evidence be excluded from the trial. Claims rep Lily is negotiating a claim settlement with an unrepresented claimant and wishes to smooth the process. She is matching her demeanor, tone, and mannerisms to those of the claimant. Lily is using which one of the following negotiation techniques? A. Using traditional sales techniques B. Performing a needs analysis C. Collecting extraneous information D. Setting expectations 40 | P a g e The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions. Algorithm An operational sequence used to solve mathematical problems and to create computer programs. Cross Industry Standard Process for Data Mining (CRISP-DM) An accepted standard for the steps in any data mining process used to provide business solutions. Machine learning Artificial intelligence in which computers continually teach themselves to make better decisions based on previous results and new data. Now, let's try a calculation based on what we've discussed. A classification tree model correctly determines that 30 percent of claims will turn out to be complex. Random assignment correctly determines that 15 percent of claims will turn out to be complex. Calculate the lift for the model. The lift is calculated by dividing the model percentage by the nonmodel percentage. Therefore, 30 percent is divided by 15 percent, resulting in a lift of 2. Complex claim A claim that contains one or more characteristics that cause it to cost more than the average claim. Information gain A measure of the predictive power of one or more attributes. Classification tree A supervised learning technique that uses a structure similar to a tree to segment data according to known attributes to determine the value of a categorical target variable. Recursively Successively applying a model. Root node The first node in a classification tree. Combination of nodes A representation of data attributes in a classification tree. Leaf node A terminal node of a classification tree that is used to classify an instance based on its attributes. Training data 41 | P a g e Data that is used to train a predictive model and that therefore must have known values for the target variable of the model. Holdout data In the model training process, existing data with a known target variable that is not used as part of the training data. Lift 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 In model performance evaluation, a model's correct predictions divided by its total predictions. Precision 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? 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 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? 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? All stakeholders should be aligned around these issues before starting a data analytics project: What is the business issue or problem being addressed? 42 | P a g e 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 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 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 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 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 D. Cluster analysis C. Classification Classification is a data mining technique an insurer applies when it knows what information it wants to predict. 45 | P a g e Any deliberate deception committed against an insurer or an insurance producer for the purpose of unwarranted financial gain. Special investigation unit (SIU) A division set up to investigate suspicious claims, premium fraud, or application fraud. Predictive model A model used to predict an unknown outcome by means of a defined target variable. Blockchain A distributed digital ledger that facilitates secure transactions without the need for a third party. Elements of Fraud - An individual or an organization intentionally makes an untrue representation. - The untrue representation concerns an important or a material fact or event. - The untrue representation is knowingly made. - The untrue representation is intended to deceive. - The victim relies on and acts on the untrue representation. - The victim suffers some detriment, such as loss of money and/or property, as a result of relying on and acting on the untrue representation. 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. 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. 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. This is an intentional loss, a type of hard fraud. Material fact A fact that is significant to a decision or matter at hand. Hard fraud Actions that are undertaken deliberately to defraud. Misrepresentation A false statement of a material fact on which a party relies. Concealment 46 | P a g e An intentional failure to disclose a material fact. Staged accident An accident deliberately caused by a person who intends to feign injury and collect on the ensuing claim. Soft fraud, or opportunity fraud 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 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. Larissa is an auto claim adjuster. Traditionally, she has relied on police reports and witness testimony in her decision making. Recent technological developments give her access to the driver's driving habits, including acceleration, speed, and braking. This data available to Larissa is known as A. Telematics. B. Artificial Intelligence C. Wearables. D. Internet of Things. A. Telematics. How does professionalism relate to ethics? Professionalism requires individuals to act knowledgeably, courteously, and empathetically, behaviors that are necessary to properly implement an ethical decision. Role of Ethics and Professionalism in Good Faith - By satisfying contractual duties and other promises - By maintaining insurers credibility - By complying with legal duty Explain why ethics and professionalism are of utmost importance to claims reps when they are establishing good faith by satisfying contractual duties and other promises. 47 | P a g e Ethics and professionalism are of utmost importance to claims reps because they are bound by the insurance contract to act in good faith, and they must act ethically and professionally in keeping the promises specified in insurance policies, as well as those created by law. In insurance transactions, the insured pays a premium in return for the insurer's promise to handle claims in good faith, and the insurance policy states the terms of that promise. In addition to fulfilling the promises outlined in the insurance contract, claims reps must keep any promises made to insureds, claimants, vendors, and their employers. Ethics The study of what constitutes good and bad behavior, dealing with moral duty and obligation. In investigating a recent liability claim against an insured, Amy, a claims representative, suspected that the claimant was wealthier than his appearance and behavior indicated. After interviewing him about what happened, she failed to add some information in her report to the claim file because she judged it to be false. She also delayed responding to his telephone inquiries. During settlement negotiations, based on her opinion of the claimant's financial situation, Amy rejected his attorney's offer to settle at the policy limits. What elements of good-faith claim handling did Amy violate? Amy violated the element of unbiased investigation by basing decisions about the investigation and negotiation on her perception of the claimant's dishonesty, particularly because the claimant's financial status was irrelevant to the claim. By omitting some of the claimant's statement, she violated the elements of complete and accurate documentation and fair evaluation. Her refusal to settle based on her perception of the claimant's financial status violated the element of good-faith negotiation, and her delay in responding to the claimant's telephone inquiries may have violated the element of regular and prompt communication. Excess Liability Claims - The insurer refuses the opportunity to settle within policy limits - The insurer refuses to pursue settlement - The insurer is subject to strict liability Ananya is a claims representative handling a homeowners claim for Chris, an insured. After carefully reviewing the policy, Ananya finds that Chris does not have coverage for his property damage. She lets him know promptly with a carefully worded claim denial letter. A few days later, Chris calls Ananya to let her know he has hired an attorney. Should Ananya worry that her actions will lead to a bad-faith claim against the insurer? While an attorney's involvement increases the possibility of a bad-faith claim, Ananya should not be overly concerned as long as she has followed good-faith claims handling practices. She fully documented the reason for the coverage denial, which may be important in a lawsuit. Stephanie is a claims representative. She handled a liability claim against an insured small business and was careful to document all correspondence, evidence, estimates, and bills. The claim eventually went to court, the claimant was awarded damages, and the small business sued the insurer for bad faith. Describe how Stephanie's actions may help the insurer defend itself against bad faith. 50 | P a g e A. Maintains complete and accurate documentation B. Maintains regular and prompt communication. C. Conducts good-faith negotiation. D. Conducts fair evaluations. B. Maintains regular and prompt communication. Maintains regular and prompt communication. Communicating with all parties to a claim is a crucial aspect of good-faith claims handling and resolution. Martin is in SIU and helps his employer, a multi-line insurer, to detect fraudulent claims. He is using a technology that enables insurers to share fraud-related information. This distributed digital ledger that facilitates secure transactions without using a third party is known as A. Telematics. B. The Internet of Things C. A predictive model. D. Blockchain. D. Blockchain. 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. Proper releases taken B. Number of files opened C. Accuracy of data entry D. Timeliness of reports A. Proper releases taken Mia tracks loss adjustment expense (LAE) as part of her management of the claims department for an insurer. Mia considers LAE to be the A. Cost to investigate, defend, and settle claims. B. Paid portion of claims. C. Total incurred amount of claims. D. Total amount of loss reserves of all claims. A. Cost to investigate, defend, and settle claims. Kira, a claims representative, receives a summons and complaint from an insured. In reviewing the facts, she has doubts that the insured's applicable policy will provide coverage. She should work with counsel and request a managerial review in order to issue A. A reservation of rights letter. B. An excess letter. 51 | P a g e C. A countersuit. D. A claim denial. A. A reservation of rights letter. As methods of communication evolve, it's important for claims professionals to remember that any written claims communication may be A. Misinterpreted B. Edited later. C. Replaced with verbal communication. D. Subpoenaed. D. Subpoenaed. 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. Data science B. Actuary C. Underwriting D. IT A. Data science Tobias is a claims representative who understands the importance of good-faith claims handling, including fair evaluation, good-faith negotiation, complete and accurate documentation, and timely contact with all parties to a claim. Which one of Tobias' good-faith claims handling practices helps his employer because the parties will be more likely to remember details of the loss accurately? A. Fair evaluation B. Timely contact with all parties to a claim C. Complete and accurate documentation D. Good-faith negotiation B. Timely contact with all parties to a claim The claims litigation process begins with the receipt of A. A civil violation notice. B. A settlement offer. C. A notice of claim D. A summons and complaint. D. A summons and complaint. 52 | P a g e As a claims representative, some of Sara's goals is to benefit her employer by ensuring the parties to a loss remember details accurately, reassuring the parties that their claims are important, and lessening the chance that the parties will retain attorneys. Sara accomplishes these goals through A. Effective claims management. B. Complete and accurate documentation. C. Timely contact with all parties to a claim. D. Regular and prompt communication. C. Timely contact with all parties to a claim. 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. Underwriting B. Actuary C. Data science D. IT C. Data science Generally speaking, the most common application of predictive modeling in insurance occurs in A. Risk selection. B. Claims handling C. Marketing. D. Reinsurance. A. Risk selection. Larissa is an auto claim adjuster. Traditionally, she has relied on police reports and witness testimony in her decision making. Recent technological developments give her access to the driver's driving habits, including acceleration, speed, and braking. This data available to Larissa is known as A. Wearables. B. Internet of Things. C. Telematics. D. Artificial Intelligence. C. Telematics. Kira, a claims representative, receives a summons and complaint from an insured. In reviewing the facts, she has doubts that the insured's applicable policy will provide coverage. She should work with counsel and request a managerial review in order to issue 55 | P a g e Luke runs his business out of a store front in a commercial building. After a fire destroyed part of the building, Luke made a claim for damages and received a settlement check from the property insurer. This necessarily means that Luke A. Is the owner of the building. B. Is named in the policy declarations or an endorsement. C. Has business interruption coverage. D. Has an insurable interest in the damaged property. B. Is named in the policy declarations or an endorsement. Jose is handling a workers compensation claim. The injured worker claims to have strained his back when he lifted a box at work. He waited a day to report the injury because he thought he would be okay. He asked Jose when he would be referred to a back specialist and when he could expect his first check. Which one of the injured worker's actions would be the most pertinent fraud indicator to Jose? A. Waiting to report B. Lifting a box C. Asking for referral D. Asking about check C. Asking for referral Which one of the following is correct with respect to the elements of good-faith claim management? A. When resolving a coverage question, insurers should avoid the appearance of bad faith by dealing only with those lawyers hired to defend the insured. B. If the insured has excess insurance, the claim representative should merely notify the excess insurer of the claim. C. Claim representatives should avoid using policy provisions, such as arbitration clauses, to resolve disputes over the settlement amount. D. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. D. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. For resolving a coverage question, insurers should not use those lawyers hired to defend the insured. Consistent supervision, thorough training, and manageable caseloads help ensure that claim representatives are able to handle claims in good faith. Insurers usually send denial letters A. By registered mail. B. By certified mail with a return receipt requested. C. By overnight courier. D. By email to ensure prompt receipt by the insured. 56 | P a g e B. By certified mail with a return receipt requested. Among the methods used to pay claims are the issuance of checks and bank drafts. The main difference between the two is that A. With a bank draft, the bank must verify that the insurer has authorized payment. While staff claims representatives may have a variety of titles, the role is typically defined by two things: having a primary focus on claims and A. Having at least five years of claims experience. B. Being an employee of the insurer. C. Being an outsourced contractor of the insurer. D. A focus on inside claims. B. Being an employee of the insurer. Sho is a claims representative. With regard to his responsibility for defending his employer against fraud, Sho understands that Paying fraudulent claims affects insureds. Cristobal is negotiating a settlement with a claimant attorney in a workers compensation claim. The attorney has requested 200 weeks of benefits, which was more than Cristobal was hoping to pay. Cristobal countered with an offer to pay the 200 weeks if the worker would sign an agreement to resign his position and to never reopen the claim. Cristobal's negotiation strategy is an example of A. Leaning on the evaluation. B. Timing settlements effectively. C. Enticing a reasonable demand. D. Making concessions cautiously. D. Making concessions cautiously. Making concessions cautiously. Claims reps should only make concessions for specific reasons, the other party has made a concession, or a concession would allow the claim to be settled more quickly The allegations contained in a summons and complaint typically serve four purposes: To give notice, reveal facts, formulate legal causes of action and A. Specify a delivery method for the response. B. State the damages sought. C. Identify the opposing attorney(s). D. Suggest an out-of-court settlement. B. State the damages sought. The allegations contained in a summons and complaint typically give notice, reveal facts, formulate legal causes of action and state the damages sought. 57 | P a g e Conor is a claims representative whose supervisor is reviewing his claim status notes. The supervisor took exception with one of Conor's notes, which read, "The claimant is obviously lying because his account of how the accident happened keeps changing." The supervisor should advise Conor that this statement is inappropriate because it is not A. Clear. B. Objective. C. Concise. D. Accurate. B. Objective. Adam manages a claims department for an insurer. He measures the department's performance by best practices, claims audits, customer satisfaction data, and loss ratio. Which one of Adam's measures refers to a system of identified internal practices that claims representatives perform to produce superior performance? A. Customer satisfaction data B. Best practices C. Loss ratio D. Claims audits B. Best practices Best practices generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. The NAIC model act specifies that its provisions regarding bad-faith claims are to be enforced by A. NAIC personnel. B. Insurer personnel, on the honor system. C. State insurance departments. D. The Federal Trade Commission. C. State insurance departments. DaJuan, a claims representative, sets a low case reserve for a seemingly simple claim. A few weeks later it becomes apparent that the initial reserve was too low, and he increases it in order to issue payments. More bills related to the claim arrive a few months later, and he increases the reserve again. This process is known as A. Incremental reserving B. Stairstepping. C. Readjusting. D. Reopening. B. Stairstepping. 60 | P a g e Are potentially discoverable in a trial. Seemingly innocuous comments can be devastating when read to a jury. Claims rep Miguel is conducting a settlement with a claimant. He constructs his first offer so that the claimant will likely find it undesirable. This becomes the basis of comparison for the second offer that he makes. Miguel understands that people A. Are naturally suspicious of an initial offer. B. Are easier to manipulate with choices. C. Feel empowered when given a choice. D. Will typically accept a second offer. C. Feel empowered when given a choice. Which one of the following methods of establishing case reserves involves a consensus among multiple claims reps? Roundtable method Accuracy In model performance evaluation, a model's correct predictions divided by its total predictions Actuary A person who uses mathematical methods to analyze insurance data for various purposes, such as to develop insurance rates or set claim reserves Algorithm An operational sequence used to solve mathematical problems and to create computer programs Allegation A claim made in the complaint by the plaintiff, specifying what the plaintiff expects to prove to obtain a judgement against the defendant Average value method A case reserving method that establishes a predetermined dollar amount of reserve for each claim as it is reported Big data Sets of data that are too large to be gathered and analyzed by traditional methods Blockchain A distributed digital ledger that facilitates secure transactions without the need for a third party Claims representative A person responsible for investigating, evaluating, and settling claims 61 | P a g e Classification tree A supervised learning technique that uses a structure similar to a tree to segment data according to known attributes to determine the value of a categorical target variable Coinsurance clause A clause that required the insured to carry insurance equal to at least a specified percentage of the insured property's value Combination of nodes A representation of data attributes in a classification tree Comparative negligence A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault Compensatory damages A payment awarded by a court to reimburse a victim for actual harm Complaint The allegations made by a plaintiff in a lawsuit Complex claim A claim that contains one or more characteristics that cause it to cost more than the average claim Concealment An intentional failure to disclose a material fact Contributory Negligence A common-law principle that prevents a person who has been harmed from recovering damages if that person's own negligence contributed in any way to the harm Cross Industry Standard Process for Data Mining (CRISP DM) An accepted standard for the steps in any data mining process used to provide business solutions Data mining The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions Data science 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 Direct loss 62 | P a g e A reduction in the value of property that results directly and often immediately from damage to that property Discovery A pretrial exchange of all relevant information between the plaintiff and defendant Domain knowledge Information related to the context of the information a data scientist is working with Ethics The study of what constitutes good and bad behavior, dealing with moral duty and obligation Expert System method A method of setting reserves with a software application that estimates losses and loss adjustment expenses Federal Rules of Civil Procedure A set of rules established to ensure that civil actions and procedures move through the United States district courts as quickly as possible First notice of loss (FNOL) The initial report notifying the insurer of a claim Formula method A method of setting claims reserves be using a mathematical formula General damages A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific, measurable expenses Hard fraud Actions that are undertaken deliberately to defraud Holdout data In the model training process, existing data with a known target variable that is not used as part of the training data Indemnify To restore a party who has sustained a loss to the same financial position that party held before the loss occurred Indirect loss A loss that arises as a result of damage to property, other than the direct loss to the property 65 | P a g e Root node The first node in a classification tree Roundtable method A method of setting reserves by using the consensus of two or more claims personnel who have independently evaluated the claims file Service of process The delivery of a summons and complaint to a defendant by an authorized person Soft fraud, or opportunity fraud Fraud that occurs when a legitimate claim is exaggerated Special damages 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 Special Investigation unit (SIU) A division set up to investigate suspicious claims, premium fraud, or application fraud Staged Accident An accident deliberately caused by a person who intends to feign injury and collect on the ensuing claim Stare decisis The principle that lower courts must follow precedents set by higher courts Statute of limitations A law that stipulates the length of time after an even during which legal proceedings (such as a lawsuit or criminal charges may be initiated Summons 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 Telematics The use of technological devices to transmit data via wireless communication and GPS tracking Third-party administrator (TPA) An organization that provides administrative services associated with risk financing and insurance Tort 66 | P a g e A wrongful act or an omission, other than a crime or breach of contract, that invades a legally protected right Tortfeasor A person or an organization that has committed a tort Training data Data that is used to train a predictive model and that therefore must have known values for the target variable of the model Wearable sensor tag A sensor attached to or embedded in clothing and accessories 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 Line underwriter Mia tracks loss adjustment expense (LAE) as part of her management of the claims department for an insurer. Mia considers LAE to be the Cost to investigate, defend, and settle claims Which one of the following statements regarding third-party administrators (TPAs) is most accurate? TPAs handle claims, keep claims records, and perform statistical analyses In which one of the following scenarios is a public adjuster most likely to become involved? An insured's negotiations with the insurer on a complex claim are not going well 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? Proper releases taken As methods of communication evolve, it's important for claims professionals to remember that any written claims communication may be Subpoenaed The first key to communicating empathetically as a claims professional is Listening In her role with an insurer, Katarina has opportunity to collaborate with not only employees from her company, but also external experts with particular expertise. For example, as part of her investigation, she hired an engineer to conduct a review of a machine that was involved in a personal injury. Katarina is a(n) 67 | P a g e Claim representative When Mehmet interviews witnesses as part of his claims investigation, he asks different types of questions based on need, such as open-ended, direct, indirect, and leading. Which type of question should Mehmet ask when he wants to set the interviewee at ease and he is looking for explanation or elaboration of details in the interviewee's own words? Open-ended 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? Average value method One of Juan's responsibilities as a claims representative is to prepare internal reports, such as preliminary, interim, large loss, and captioned. Which one of the reports Juan prepares is required for claims with reserves that exceed a specified threshold? Large loss Charlotte is handling a new claim and she has set the initial reserves at $1,000,000. She has been asked to complete an internal report summarizing all the file status information for distribution to management and updated as more information is received. The report Charlotte is completing is most likely a Large loss report In claims investigation, all bodily injury claims require A medical investigation In the process of assigning a claim, an internal claims handler will often transfer information to the insurer's standard form, called the First notice of loss (FNOL) form To determine whether an insurer typically underreserves or overreserves claims, actuaries compare the insurer's paid losses to The insurer's case reserves In which one of the following scenarios is the right of subrogation most likely to be employed by the insurer? A claims rep discovers that their insured's car accident was caused by a road contractor who left equipment lying in the travel lanes of a highway Before making initial contact with an insured or claimant, a claims representative should Prepare a list of questions for the insured 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 70 | P a g e The first step in the data mining process is to Understand what a business wants to achieve Carla is investigating a claim for a stolen car. The insured provided a copy of the police report, but she notices that the account in the police report differs from the insured's version of events. At this point, Carla should Continue with her investigation Benjamin is with the SIU department of an insurer. His company developed technology to identify patterns related to fraudulent claims activity. He is using a program to analyze claims data to identify similarities or connections that might indicate fraud. Benjamin is utilizing Data mining Soft fraud occurs when a claim is exaggerated and is also referred to as Opportunity fraud As a claims representative, Beatrice is on the front lines for protecting her employer from insurance fraud. Beatrice should understand that insurance fraud Costs roughly $40 billion per year, excluding health insurance Larissa is an auto claim adjuster. Traditionally, she has relied on police reports and witness testimony in her decision making. Recent technological developments give her access to the driver's driving habits, including acceleration, speed, and braking. This data available to Larissa is known as Telematics Soft fraud, also called opportunity fraud, occurs when A legitimate claim is exaggerated Which one of the following best describes the term 'professionalism' as it relates to claims professionals? The behaviors necessary to implement an ethical decision One of Julio's expectations as a claims representative is good-faith claims handling. He keeps insureds informed about the claim because they have that expectation and because they are most likely to make a complaint about bad-faith claim handling. He also wishes to participate in the defense and in discussions about the possibility of settlement. For these reasons, Julio Maintains regular and prompt communication For an excess liability claim to be filed, a final judgment or settlement must have been entered against the insured, and The amount of the judgment must be in excess of the insured's policy limit 71 | P a g e Tobias is a claims representative who understands the importance of good-faith claims handling, including fair evaluation, good-faith negotiation, complete and accurate documentation, and timely contact with all parties to a claim. Which one of Tobias' good-faith claims handling practices helps his employer because the parties will be more likely to remember details of the loss accurately? Timely contact with all parties to a claim Which one of the following statements regarding state versions of the NAIC model act is correct? Some states allow insureds and claimants to bring lawsuits against insurers, while others allow only insureds Not long after Valteri issued a denial and closed the claim, the insured sued for coverage and alleged bad-faith claim handling against the insurer. Valteri was able to demonstrate for his superiors that he had made a good-faith investigation and determined that the claim was not covered by the policy. The insurer maintains that Valteri had reasonable justification in fact for denying the claim. The insurer is employing the Debatable reasonable basis defense Ella sued her insurer and alleged bad-faith claim handling after the insurer settled a claim against her that Ella thought should have been denied. As a result of the settlement, Ella's premium increased. In her suit, Ella claimed that the insurer rushed the investigation and did not take all of her facts into consideration in her defense. While the court found that Ella's argument had merit, it did not award her the full value because it found that Ella had not provided her information to the insurer in a timely manner. The insurer used the defense of Comparative negligence An insurer has received a claim related to an accident involving a hoverboard, and an investigation is needed to process the claim. However, the company doesn't have any claims representatives who are knowledgeable about handling hoverboard claims. What type of claims professional should the company hire to help with this investigation? Independent adjuster Natalie is a claims representative attempting to settle a complex claim for an insured. Unfortunately, the insured is dissatisfied with the way settlement negotiations are progressing. Whom might the insured hire to make sure that his interests are protected? Public adjuster Leila was recently hired as a claims representative for an insurer. How will Leila help underwriters, and how will underwriters rely on Leila? It helps underwriters by ensuring that claims are paid fairly and according to their respective policy. The Claims Department relies on underwriters for thorough, accurate data about the circumstances under which coverage was written As a claims representative, who might Geoffrey collaborate with in addition to other employees of the insurer? 72 | P a g e Geoffrey might collaborate with an expert to evaluate the cause or value of a loss, investigate the possibility of fraud by an insured or a third-party claimant, or provide legal advice. What sets the tone for the claims adjustment process? Claims rep's initial contact with the insure When do claims reps have the greatest opportunity to positively influence others? During catastrophes, when their help is needed most What are a loss ratio and a loss adjustment expense (LAE)? A loss ratio is a ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses. LAE is the expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. An insurer's management team is evaluating the organization's financial wellbeing and wants to determine whether the Claims Department is functioning properly, whether the Underwriting Department is selecting appropriate loss exposures, and whether the Actuarial Department is pricing the insurance products correctly. What is the profitability measure that can help management make these determinations? The loss ratio can help the management team make these determinations. The loss ratio compares an insurer's losses and LAE to its collected premiums and reveals the percentage of premiums being consumed by losses. What is the first activity in the claims handling process? Acknowledging receipt of the claim What must a claims representative determine after confirming that a policy was in force on the date of the loss? Whether the loss occurred within the policy period, coverage exists under the policy for the type of loss reported, and the insured followed the policy's terms and conditions. How do recorded statements and examinations under oath differ? 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. What qualities do effective statements exhibit? • 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 Jenny is in an automobile accident and files a claim. What information should the claims representative consider when investigating the accident scene? 75 | P a g e A claims rep receives a summons and complaint. It alleges that the insured caused a motor vehicle accident in which the plaintiff was injured and demands $800,000 in damages. The insured's personal auto policy has a $100,000 liability limit. The claims rep has determined that the policy covers the allegations and has referred the lawsuit to defense counsel. What additional action does the claims rep need to take? If it appears that the damages could exceed the limits of the insured's policy, the claims rep should notify the insured in an excess letter, which may also serve to inform the insured that he or she has the option of hiring separate defense counsel. Mary is a claims rep who is not actively engaged in litigation or trial preparations. Why is it a good idea for Mary to read up on case law and court opinions related to the types of claims she usually handles? Mary may find it helpful to stay abreast of recent court opinions and changes in case law related to the types of claims she usually handles so she knows how specific types of claims and legal defenses are likely to be dealt with in the courtroom moving forward. Victor is an insured defendant in a lawsuit that alleges negligence on his part for failing to stop at a red light, which caused a traffic accident resulting in a serious head injury to the plaintiff, Max. Defense counsel proposes filing a motion to dismiss the lawsuit before the start of the trial. How should the claims rep respond to the defense counsel's proposal? The claims rep should ask the defense counsel what basis will be used for the motion to dismiss. Unless a good legal basis exists, the claims rep should recommend against it because of the expense in filing a motion that is virtually certain to be denied and the risk of sanctions for filing a frivolous motion. The claims rep should also consider asking to review the intended motion before it's filed to determine its merit. What is an example of a technology that can glean insights from data collected from Internet of Things (IoT) and telematics devices? Artificial intelligence (AI) What can telematics in automobiles assist with? By tracking and measuring an automobile's acceleration, speed, braking, distance traveled, and other actions, telematics can assist claims reps by providing detailed information about an insured's behavior behind the wheel. Jerry wears a health tracker at work. What are the types of measurements it can provide? Heart rate and steps walked What is the purpose of data mining? To analyze large amounts of data to find new relationships and patterns that will assist in developing business solutions. What are the basic techniques of data mining? 76 | P a g e • Classification—Categorizing members of a dataset based on known characteristics. • Regression analysis—A statistical technique that predicts a numerical value given characteristics of each member of a dataset. • Association rule learning—Examining data to discover new and interesting relationships. • Cluster analysis—Using statistical methods, a computer program explores data to find groups with common and previously unknown characteristics. When would an insurer use the techniques of classification and regression analysis? An insurer would use the techniques of classification and regression analysis when it knows what information it wants to predict. When would an insurer use the techniques of association rule learning and cluster analysis? An insurer would use the techniques of association rule learning and cluster analysis when it wants to explore data to make discoveries. The purpose of association rule learning and cluster analysis is to discover relationships and patterns in the data and then determine whether that information is useful for making business decisions. Why would Three Hills Insurance want to identify potentially complex claims within a short time after they are reported? Three Hills Insurance would want to identify potentially complex claims within a short time after they are reported so that it could quickly assign experienced claims adjusters and other appropriate resources to them. How are the attributes of complex claims used in developing a classification model? Attributes of complex claims are used to develop a classification model in this way: Each attribute is independently analyzed for the information gain it provides in classifying a claim within a week of first report as "complex" or "not complex." The attributes are then ranked according to their relative information gain. How can a classification tree model to predict complex claims be improved after the model is developed and deployed? A classification tree model to predict complex claims can be improved after the model is developed and deployed in this way: Through machine learning, the model adjusts the weights assigned to each of the attributes to better predict complexity. As it is being used, machine learning will continually improve the model. What role do data scientists play in insurance and risk management? 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. Why do you think a claims representative would be a valuable member of a data science team? A claims rep can 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. 77 | P a g e Barry, an insured, is defrauding his insurance company by inflating the value of his stolen property to make up for high premiums he has paid in the past. What is this type of fraud called? Barry is engaging in padding, which is when insureds increase the amount of a claim to make up for deductibles or past premiums paid. What are the two costliest white-collar crimes in the United States? Tax evasion is the costliest white-collar crime in the U.S. Insurance fraud is the second most costly. Mark, a claims rep, is analyzing a claim for fraud. What elements should he be looking for? • An individual or an organization that has intentionally made an untrue representation • An untrue representation that concerns an important or a material fact or event • An untrue representation that was knowingly made • An untrue representation that was intended to deceive • Whether the victim relied and acted on the untrue representation • Whether the victim suffered some detriment, such as loss of money and/or property, as a result of relying and acting on the untrue representation Why is soft fraud also known as opportunity fraud? A perpetrator of soft fraud uses the "opportunity" of a legitimate claim to obtain greater reimbursement than would be received for the actual loss. In order to collect insurance benefits, Maria lied and said her wedding ring was stolen from her home, when in fact it was not stolen. Why is this a false claim? This is a false claim because Maria is intentionally trying to deceive her insurance company in order to gain financially. What tool do many insurers use to detect characteristics that are common to fraudulent claims? Many insurers use computer programs and data analytics to detect characteristics that are common to fraudulent claims. How do some state governments help claims representatives detect and investigate fraud? Many state governments have enacted laws that help claims reps by providing some form of protection and guidance. These include extending claims investigation time limits and not disclosing to an insured that fraud is suspected if there is already evidence. Often, the evidence must be available for state authorities. Why does Emma, a claims representative, need to understand the importance of ethics in good-faith claims handling? Emma should understand that ethics is particularly important in good-faith claims handling because she may face numerous ethical dilemmas while trying to balance the interests of her customers, the insureds and claimants, and those of the insurer, who is her employer. What is professionalism, and how does it relate to ethics? Professionalism requires individuals to act knowledgeably, courteously, and empathetically. These behaviors and qualities are necessary to properly implement an ethical decision. 80 | P a g e A claims representative should have the ability to persuade or influence Claimants, insureds, supervisors and others. Joy Insurance Company is interested in using data mining to solve a problem it is having with claims fraud in one of its product lines. The first step it should take is To understand what it wants to achieve. Cristobal is negotiating a settlement with a claimant attorney in a workers compensation claim. The attorney has requested 200 weeks of benefits, which was more than Cristobal was hoping to pay. Cristobal countered with an offer to pay the 200 weeks if the worker would sign an agreement to resign his position and to never reopen the claim. Cristobal's negotiation strategy is an example of Making concessions cautiously Adam manages a claims department for an insurer. He measures the department's performance by best practices, claims audits, customer satisfaction data, and loss ratio. Which one of Adam's measures refers to a system of identified internal practices that claims representatives perform to produce superior performance? Best practices Which one of the following terms encompasses types of fraud including false claims and intentional losses? Hard fraud Daniel is a claims supervisor. One of his responsibilities is to review claim files to monitor the performance of the adjusters and to provide guidance. He also realizes that claims department peers review files as part of roundtable discussions and that state insurance department representatives might review files as part of market conduct studies. For these reasons, Daniel makes sure his direct reports Maintain complete and accurate documentation. Jose is handling a workers compensation claim. The injured worker claims to have strained his back when he lifted a box at work. He waited a day to report the injury because he thought he would be okay. He asked Jose when he would be referred to a back specialist and when he could expect his first check. Which one of the injured worker's actions would be the most pertinent fraud indicator to Jose? Asking for referral Tonya is a claims representative tasked with determining whether coverage applies to a new claim. To ensure that she considers all facets of the claim, she uses the DICE method, which stands for declarations, insuring agreement, conditions and Exclusions. Erik is a claims manager for Taunton Insurance. He is leading a team of property claims representatives responding to a recent tornado in Kentucky. Before sending the representatives into the field, Erik has 81 | P a g e decided to use Internet of Things (IoT) technology to assess the damage and danger in the area. Which one of the following IoT devices would Erik most likely use in this situation? Drones Millstone Insurance wanted to assign its most complex workers compensation claims to experienced claim adjusters as early as possible. The data science team used the classification tree technique to develop a predictive model. When holdout data was used to test the model's predictive accuracy, 45% of the complex claims were assigned to experienced adjusters. When claims were randomly assigned, only 15% of the complex claims were assigned to experienced adjusters. What is the lift provided by the predictive model? 45/15=3 Thomas is an attorney who is defending an insurer in a litigated case. He has located documents that show the insured was aware of the issue that cause the injury to the claimant before the accident. Thomas is concerned that this evidence will hurt his case. He should Preserve the evidence as part of the record. Rodrigo manages a claims department for an insurer and uses loss ratio as a measure of the department's performance. Rodrigo calculates loss ratio as Losses and LAE divided by earned premium Through data mining, Goshen Mutual discovers that customers who insure two or more vehicles on a personal auto policy are very likely to buy a personal umbrella policy. Algorithms are then used to identify potential customers who might be interested in purchasing both personal auto and umbrella policies. Which one of the following data mining techniques did Goshen Mutual use? Association rule learning In liability claims, the claims rep will require an authorization from the injured party to Obtain medical records In her investigations into fraudulent claims, Laura uses information about the driver's history and driving habits to determine factors such as speed, acceleration, and location. Laura is using Telematics. As a part of the first contact with an insured on a property damage claim, a claims representative may provide a blank First notice of loss form The NAIC model act specifies that its provisions regarding bad-faith claims are to be enforced by State insurance departments Which one of the following statements regarding subrogation is most accurate? 82 | P a g e Most policies require the insured to cooperate with the insurer in recovering payment through subrogation, to include testifying or appearing in court. If the decision on a claim settlement is negative, as in a denial, good-faith claims handling requires the claims rep to Explain the rationale behind the decision to the claimant. Sho is a claims representative. With regard to his responsibility for defending his employer against fraud, Sho understands that Paying fraudulent claims affects insureds. Claims rep Miguel is conducting a settlement with a claimant. He constructs his first offer so that the claimant will likely find it undesirable. This becomes the basis of comparison for the second offer that he makes. Miguel understands that people Feel empowered when given a choice. Among the methods used to pay claims are the issuance of checks and bank drafts. The main difference between the two is that With a bank draft, the bank must verify that the insurer has authorized payment DaJuan, a claims representative, sets a low case reserve for a seemingly simple claim. A few weeks later it becomes apparent that the initial reserve was too low, and he increases it in order to issue payments. More bills related to the claim arrive a few months later, and he increases the reserve again. This process is known as Stairstepping Ida was named in a bad-faith lawsuit as the claims representative who handled the file. The court dismissed the suit, however, because the statute of limitations had expired. This means that Too much time had expired after the claim concluded Conor is a claims representative whose supervisor is reviewing his claim status notes. The supervisor took exception with one of Conor's notes, which read, "The claimant is obviously lying because his account of how the accident happened keeps changing." The supervisor should advise Conor that this statement is inappropriate because it is not Objective. Which one of the following methods of establishing case reserves involves a consensus among multiple claims reps? Roundtable method Which one of the following elements of a policy can include coverage that is otherwise excluded, exclude coverage that is otherwise included, or add or delete insureds? An endorsement. 85 | P a g e to a system of identified internal practices that claims representatives perform to produce superior performance? A. Claims audits B. Best practices C. Loss ratio D. Customer satisfaction data B. Best practices Best practices generally refers to a system of identified internal practices that are shared with claims reps and produce superior performance. DaJuan, a claims representative, sets a low case reserve for a seemingly simple claim. A few weeks later it becomes apparent that the initial reserve was too low, and he increases it in order to issue payments. More bills related to the claim arrive a few months later, and he increases the reserve again. This process is known as Select one: A. Readjusting. B. Stairstepping C. Reopening. D. Incremental reserving. B. Stairstepping. Correct. The process of repeatedly increasing the reserve for a claim is called stairstepping. Olivia is careful to keep proper claim status notes when she handles a claim. For example, she makes sure to only include neutral, objective comments about the parties involved. This is because claim notes Select one: A. Are potentially discoverable in a trial. B. Continue for as long as the claim is open. C. Present a chronology of the life of the claim. D. Must be able to speak for themselves. A. Are potentially discoverable in a trial. Correct. Are potentially discoverable in a trial. Seemingly innocuous comments can be devastating when read to a jury. Ciara is going to college with the goal of working as a data scientist for an insurer. She will need a strong foundation in mathematics and statistics, computer programming, domain knowledge, and data science. Which one of Ciara's skills will require her to understand the insurance profession to which the data is being applied? Select one: A. Mathematics and statistics B. Data science 86 | P a g e C. Computer programming D. Domain knowledge Domain knowledge ...is the understanding of the discipline, profession, or activity to which the data is being applied. rin helps her employer, a multi-line insurer, to determine actual exposure and premium for coverage. She does this by conducting detailed examinations of policyholder operations, records, and accounting. Erin is a(n) Select one: A. Underwriter B. Premium auditor. C. Claims adjuster. D. Producer. Premium auditor. Premium auditors provide inventory values, contractors' equipment lists, and other facts that are important to the claims function. Erik is a claims manager for Taunton Insurance. He is leading a team of property claims representatives responding to a recent tornado in Kentucky. Before sending the representatives into the field, Erik has decided to use Internet of Things (IoT) technology to assess the damage and danger in the area. Which one of the following IoT devices would Erik most likely use in this situation? Select one: A. Drones B. Telematics C. Smartphones D. Sensors Drones Erik would most likely use drones to take photos or videos of the difficult-to-reach area and assess the damage and danger. By using the drones, he can assess the danger without risking the safety of the claims representatives. Telematics devices are used in automobiles to create a picture of driving patterns. Mustafa is a data scientist who is working with a team of underwriting, IT, and actuary to develop a predictive analytics model. The main goal of the project is to translate the insights gained from the model they develop into business action. In Mustafa's experience, the team member that can provide the bridge between the analytics and the business is Select one: A. Underwriting. B. Data science C. Actuary. D. IT. 87 | P a g e Actuary. Actuaries are critically important to this process because they understand the business and the analytics. The allegations contained in a summons and complaint typically serve four purposes: To give notice, reveal facts, formulate legal causes of action and Select one: A. State the damages sought B. Suggest an out-of-court settlement. C. Identify the opposing attorney(s). D. Specify a delivery method for the response. A. State the damages sought. Correct. The allegations contained in a summons and complaint typically give notice, reveal facts, formulate legal causes of action and state the damages sought. Joy Insurance Company is interested in using data mining to solve a problem it is having with claims fraud in one of its product lines. The first step it should take is Select one: A. To develop a model to analyze the data. B. To understand the types of data to use. C. To understand what it wants to achieve D. To prepare the data by cleaning it. To understand what it wants to achieve Leila is conducting a claims investigation and is taking a recorded statement from the claimant. She wants a simple yes-or-no answer to prevent the interviewee from explaining the answer further. She asks, "You experienced back pain immediately when you lifted the box, didn't you?" Leila has asked a(n) Select one: A. Indirect question. B. Leading question. C. Open-ended question. D. Direct question. Leading Question Which one of the following can be applied over time to refine a model to better predict results? Select one: A. Association rule learning B. Regression C. Statistics D. Machine learning 90 | P a g e only 15% of the complex claims were assigned to experienced adjusters. What is the lift provided by the predictive model? Select one: A. 0.333 B. 3 C. 30 D. 45 B. 3 Correct. The lift provided by the predictive model is 3. The lift is calculated by dividing the model percentage by the nonmodel percentage. (45/15 = 3) Luke runs his business out of a store front in a commercial building. After a fire destroyed part of the building, Luke made a claim for damages and received a settlement check from the property insurer. This necessarily means that Luke Select one: A. Is named in the policy declarations or an endorsement. B. Is the owner of the building. C. Has business interruption coverage. D. Has an insurable interest in the damaged property. A. Is named in the policy declarations or an endorsement. Is named in the policy declarations or an endorsement. An individual may have an insurable interest in a building, but not be considered an insured under the policy because the person's name is not listed in the declarations or on an endorsement. In a typical scenario, a summons and complaint initiating litigation is received by these parties in which one of the following sequences? Select one: A. Defense counsel, insured, claims rep B. Defense counsel, claims rep, insured C. Claims rep, insured, defense counsel D. Insured, claims rep, defense counsel D. Insured, claims rep, defense counsel Incorrect. A summons and complaint is typically received by the insured, who then shares it with the claims rep, who in turn sends it to the insurer's defense counsel. Which one of the following terms encompasses types of fraud including false claims and intentional losses? Select one: A. Soft fraud B. Staged fraud 91 | P a g e C. Willful fraud D. Hard fraud Hard Fraud Through data mining, Goshen Mutual discovers that customers who insure two or more vehicles on a personal auto policy are very likely to buy a personal umbrella policy. Algorithms are then used to identify potential customers who might be interested in purchasing both personal auto and umbrella policies. Which one of the following data mining techniques did Goshen Mutual use? Select one: A. Cluster analysis B. Association rule learning C. Classification D. Regression analysis B Jose is handling a workers compensation claim. The injured worker claims to have strained his back when he lifted a box at work. He waited a day to report the injury because he thought he would be okay. He asked Jose when he would be referred to a back specialist and when he could expect his first check. Which one of the injured worker's actions would be the most pertinent fraud indicator to Jose? Select one: A. Lifting a box B. Waiting to report C. Asking about check D. Asking for referral D. Asking for referral ...could indicate that the worker has knowledge of the workers compensation system because he had been through it before. A claims representative should have the ability to persuade or influence Select one: A. Claimants, insureds, supervisors and others. B. Claimants. C. Supervisors. D. Insureds. A. Claimants, insureds, supervisors and others. Correct. The impression that claims reps make on claimants, insureds, and others reflects either favorably or unfavorably on the insurer. While staff claims representatives may have a variety of titles, the role is typically defined by two things: having a primary focus on claims and Select one: A. Being an employee of the insurer. 92 | P a g e B. Being an outsourced contractor of the insurer. C. A focus on inside claims. D. Having at least five years of claims experience. A. Being an employee of the insurer. Correct. The role of staff claims representative is defined by being an employee of the insurer and having a primary focus on handling claims. Alva works for an international, multi-line insurer. She helps her company to manage risk selection by working with other underwriters and coordinating decisions about products, pricing, and guidelines. Alva is a Select one: A. Staff underwriter. B. Master underwriter. C. Chief Underwriting Officer. D. Line underwriter. A. Staff underwriter. Correct. Staff underwriter. This describes the duties of a staff underwriter. Line underwriter. 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 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. Because a full or partial denial of a claim may result in a bad-faith lawsuit, a claims representative should Select one: A. Carefully document their reasoning for denial. B. Check with the reinsurer before denying a claim. C. Seek a supervisor's approval before denying a claim. D. Make every effort to approve each claim. A. Carefully document their reasoning for denial. Claims reps should carefully document their reason(s) for fully or partially denying a claim. hich one of the following statements regarding subrogation is most accurate? Select one: A. The insured typically must cooperate with the insurer in recovering payment through subrogation, but is not required to testify or appear in court. B. The insured is typically under no obligation to cooperate with the insurer in recovering payment through subrogation. C. Most policies require the insured to cooperate with the insurer in recovering payment through subrogation, to include testifying or appearing in court. 95 | P a g e A. Public adjusters B. Third-party administrators C. Independent adjusters D. Producers C. Independent adjusters Correct. Insurers may contract with independent adjusters to handle claims in strategic locations. In her investigations into fraudulent claims, Laura uses information about the driver's history and driving habits to determine factors such as speed, acceleration, and location. Laura is using Select one: A. Telematics. B. Internet of Things. C. Blockchain. D. Predictive models. A. Telematics. Correct. Telematics. This offers insurers increasing amounts of data, some of which can be used to prevent fraud. Tonya is a claims representative tasked with determining whether coverage applies to a new claim. To ensure that she considers all facets of the claim, she uses the DICE method, which stands for declarations, insuring agreement, conditions and Select one: A. Exclusions. B. Endorsements. C. Extras. D. Encumbrances. A. Exclusions. Correct. The DICE method reminds a claims professional to check declarations, insuring agreement, conditions and exclusions. James works for a multi-line insurer. He is responsible for investigating claims that raise suspicion of fraud. James is in the Select one: A. Claims department. B. Legal department. C. Special Investigation Unit. D. Loss control department. C. Special Investigation Unit. 96 | P a g e Correct. Special Investigation Unit. Insurers have created SIUs to help claims reps detect and report insurance fraud. Conor is a claims representative whose supervisor is reviewing his claim status notes. The supervisor took exception with one of Conor's notes, which read, "The claimant is obviously lying because his account of how the accident happened keeps changing." The supervisor should advise Conor that this statement is inappropriate because it is not Select one: A. Concise. B. Objective. C. Accurate. D. Clear. B. Objective. Claim status notes should contain objective comments about the parties. As a part of the first contact with an insured on a property damage claim, a claims representative may provide a blank Select one: A. Proof of loss form. B. First notice of loss form. C. Nondisclosure form. D. Reservation of rights form. A. Proof of loss form A claims representative may provide a blank proof of loss form and any necessary written instructions so the insured can document the claim. If the decision on a claim settlement is negative, as in a denial, good-faith claims handling requires the claims rep to Select one: A. Explain the rationale behind the decision to the claimant. B. Have a supervisor sign off on the communication to the claimant. C. Deliver the decision to the claimant in writing. D. Deliver a hard copy of the decision to the claimant by mail. A. Explain the rationale behind the decision to the claimant. Correct. If the decision on a claim settlement is negative, good-faith claims handling requires the claims rep to explain the rationale behind the decision. Sho is a claims representative. With regard to his responsibility for defending his employer against fraud, Sho understands that Select one: A. Fraud indicators are proof of fraud. 97 | P a g e B. Claims reps are the last defense against fraud. C. Insurers rely only on SIU to defend against fraud. D. Paying fraudulent claims affects insureds. D. Paying fraudulent claims affects insureds. Correct. Paying fraudulent claims affects insureds. An insurer that pays a high number of fraudulent claims will have to raise its premiums. Cristobal is negotiating a settlement with a claimant attorney in a workers compensation claim. The attorney has requested 200 weeks of benefits, which was more than Cristobal was hoping to pay. Cristobal countered with an offer to pay the 200 weeks if the worker would sign an agreement to resign his position and to never reopen the claim. Cristobal's negotiation strategy is an example of Select one: A. Timing settlements effectively. B. Leaning on the evaluation. C. Making concessions cautiously. D. Enticing a reasonable demand. C. Making concessions cautiously. Incorrect. Making concessions cautiously. Claims reps should only make concessions for specific reasons, the other party has made a concession, or a concession would allow the claim to be settled more quickly Ida was named in a bad-faith lawsuit as the claims representative who handled the file. The court dismissed the suit, however, because the statute of limitations had expired. This means that Select one: A. Too much time had expired after the claim concluded. B. There was no basis to pierce the corporate veil. C. The limits of the policy had been exceeded. D. She was immune to prosecution as an employee. A. Too much time had expired after the claim concluded. Correct. Too much time had expired after the claim concluded. A statute of limitations is a law that stipulates the length of time after an event during which legal proceedings may be initiated. Bettina's apartment is burglarized and several items are stolen. In filing her claim, she tells her insurer that her stolen television was both newer and larger than it actually was. This constitutes which one of the following types of fraud? Select one: A. Soft fraud B. Concealment C. False claim D. Misrepresentation