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AIC 300 CLAIMS IN AN EVOLVING WORLD
EXAM AND STUDY GUIDE (ALL WHAT YOU
NEED) | ALL QUESTIONS AND CORRECT
ANSWERS WITH RATIONALES | ALREADY
GRADED A+ | LATEST EDITION 2024
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. -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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 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. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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.
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. -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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 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. Actuary. B. IT. C. Underwriting. D. Data science. -----CORRECT ANSWER----------------A. Actuary. Actuaries are critically important to this process because they understand the business and the analytics. 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. Reservation of rights form. B. Proof of loss form.
C. First notice of loss form. D. Nondisclosure form. -----CORRECT ANSWER----------------B. 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. 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. The limits of the policy had been exceeded. C. There was no basis to pierce the corporate veil. D. She was immune to prosecution as an employee. -----CORRECT ANSWER------------ ----A. Too much time had expired after the claim concluded. 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. 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. Stairstepping. B. Reopening. C. Readjusting. D. Incremental reserving. -----CORRECT ANSWER----------------A. Stairstepping. Erin 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. Producer. B. Claims adjuster. C. Premium auditor. D. Underwriter. -----CORRECT ANSWER----------------C. Premium auditor.
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. B. 3 C. 30 D. 45 -----CORRECT ANSWER----------------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) 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. -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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. ----- CORRECT ANSWER----------------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. 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. -----CORRECT ANSWER--- -------------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 -----CORRECT ANSWER----------------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.
C. Premium auditor. D. Claim representative. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------A. Open-ended Open-ended questions can be used to clarify an interviewee's statements. 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 Select one: A. Status report. B. Summarized report. C. Preliminary report. D. Large loss report. -----CORRECT ANSWER----------------D. Large loss report. Most insurers have guidelines outlining when and under what circumstances large loss reports should be prepared. In which one of the following scenarios is the right of subrogation most likely to be employed by the insurer? Select one: A. An insured files a homeowners claim for stolen jewelry. An investigation reveals that the jewelry is still in the insured's possession. B. An investigation reveals that an insured set her own business on fire. C. An insured files a claim for collision damage from a hit and run accident, when in fact he backed into a utility pole.
D. 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. -----CORRECT ANSWER----------------D. 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. The right of subrogation allows an insurer to recover payment from a negligent third party. In claims investigation, all bodily injury claims require Select one: A. Statements from all witnesses. B. Multiple claims payments C. An attorney. D. A medical investigation. -----CORRECT ANSWER----------------D. A medical investigation. All bodily injury claims, including workers compensation claims, require a medical investigation. Before making initial contact with an insured or claimant, a claims representative should Select one: A. Research similar losses in the same geographical area. B. Contact company counsel for a reservation of rights letter. C. Prepare an approximate estimate based on similar losses. D. Prepare a list of questions for the insured. -----CORRECT ANSWER----------------D. Prepare a list of questions for the insured. Before making initial contact with an insured or claimant, a claims representative should prepare a list of questions for the insured, along with information on how the claim will be handled. 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) Select one: A. Affidavit. B. Deposition. C. Recorded statement.
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. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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. C. Those who have collected a payment for the same loss. D. Known terrorists and drug traffickers. -----CORRECT ANSWER----------------D. Known terrorists and drug traffickers. Failure to check a master list of known terrorists and drug traffickers may result in substantial penalties. Claims may be paid in any of three ways: by check, by bank transfer or Select one: A. In a direct transfer of goods or services, as with a contractor performing repairs. B. By electronic funds transfer. C. By the issuance of a credit on the premium for the next policy period. D. In cash. -----CORRECT ANSWER----------------B. By electronic funds transfer.
The insurer will issue a reservation of rights letter stating that it will provide defense only until it can establish that there is no coverage. The claims litigation process begins with the receipt of Select one: A. A notice of claim. B. A civil violation notice. C. A summons and complaint. D. A settlement offer. -----CORRECT ANSWER----------------C. A summons and complaint. The claims litigation process begins with the receipt of a summons and complaint announcing the initiation of a lawsuit. Linnea is an attorney who is preparing to defend an insurer in a workers compensation case. Discovery produced several documents that are being presented as witnesses statements, but the witnesses admit in the statements to not actually seeing the accident. Linnea would like to omit these statements from the proceedings, so she is filing a Select one: A. Motion to dismiss. B. Motion to strike. C. Motion in limine. D. Motion to suppress. -----CORRECT ANSWER----------------C. Motion in limine. This is a pretrial request that certain evidence be excluded from the trial because it is irrelevant or prejudicial. 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? Select one: A. Setting expectations B. Performing a needs analysis C. Using traditional sales techniques D. Collecting extraneous information -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------B. Data scientist. Data science involves experimenting with data using rapidly evolving methods to learn and provide solutions to complex problems.
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. B. Parsing. C. Predictive modeling. D. Cleaning. -----CORRECT ANSWER----------------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 -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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. -----CORRECT ANSWER----------------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: A. Data mining. B. Telematics. C. Claims audits. D. Wearables. -----CORRECT ANSWER----------------A. Data mining. Data mining. This is using computers to analyze vast amounts of data to detect trends. Soft fraud occurs when a claim is exaggerated and is also referred to as Select one: A. Victimless fraud. B. Reimbursement fraud. C. Opportunity fraud. D. Financial fraud. -----CORRECT ANSWER----------------C. Opportunity fraud. 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 Select one: A. Artificial Intelligence. B. Telematics. C. Wearables. D. Internet of Things. -----CORRECT ANSWER----------------B. Telematics. Telematics are used to collect data on personal autos, commercial vehicles, products, shipments, machinery, smart devices, and workers.
