Chapter 2 The Claims Environment

Question 1

What happens under the Canadian Inter-Company Arbitration Agreement?

a. Witnesses can be called to testify at the arbitration
b. The insured person is involved in the arbitration
c. Only the interests of the insurers are arbitrated and not the interests of the insured
d. There is no statute of limitations on when a claim can be submitted for arbitration.

Answer 1

c. Only the interests of the insurers are arbitrated and not the interests of the insured

Question 2

When loss adjusters open a particular file, the average cost of reserving is what?

a. Reserves are set up automatically

b. Set up manually

c. Highly unpredictable

d. Produced based on unreliable statistics

Answer 2

a. Reserves are set up automatically

Question 3

What provides that insurance companies must set aside funds to pay future obligations?

a. Statutes

b. Accounting principles

c. Investigation

d. Disclosure

Answer 3

a. Statutes

Question 4

As a representative of the insurance company, what must the loss adjuster be very familiar with?

a. Company protocol for handling claims

b. Competitor’s service standards

c. Underwriter’s experience in writing the policy

d. Company protocol for setting up accounts

Answer 4

a. Company protocol for handling claims

Question 5

Which entity provides cooperation and assistance to Canadian insurers in the detection, investigation, and prevention of insurance fraud?

a. The Insurance Institute of Canada

b. Chartered Insurance Professionals’ Society

c. Équité Association

d. Canadian Insurance Claims Managers Association

Answer 5

c. Équité Association

Question 6

The Intercompany Settlement Chart applies to what types of damage?

a. Third-party non-vehicle property damage

b. First-party bodily injury that does not exceed a threshold

c. Vehicle damage that does not exceed a specified dollar amount

d. Bodily injury, where coordination of benefits is required

Answer 6

c. Vehicle damage that does not exceed a specified dollar amount

Question 7

What correctly describes special investigations units (SIUs) within an insurance company?

a. Prosecute and convict individuals who have defrauded an insurance company

b. Provide training for claimants in relation to their claims

c. Provide training for adjusters and others, and to raise fraud awareness

d. Are paid for by the Insurance Bureau of Canada

Answer 7

c. Provide training for adjusters and others, and to raise fraud awareness

Question 8

What does the CIAA provide leadership through?

a. Due diligence, education, and codes of conduct

b. Advocacy, education, and recognized professional standards

c. Following HR protocol, education, and advocacy

d. Education, due diligence, and government regulation

Answer 8

b. Advocacy, education, and recognized professional standards

Question 9

What program protects policyholders from the financial collapse of an insurer?

a. Personal and Commercial Insurance Company Compensation

b. Property and Casualty Insurance Compensation Company

c. Property and Casualty Insurance Compensation Corporation

d. Property and Claims Insurance Compensation Corporation

Answer 9

c. Property and Casualty Insurance Compensation Corporation

Question 10

Traditionally, for which claims is individual reserving used?

a .Windshield claims

b. Those claims in a particular line of business have produced reliable statistics

c .All claims

d. Individual claims a loss adjuster cannot assess carefully to estimate how much should be put in a reserve

Answer 10

c .All claims

Question 11

Used when only the loss adjuster can effectively estimate a reserve. The loss adjuster assesses each claim carefully in order to estimate how much should be put in reserve.

Answer 11

individual reserving

Question 12

(1) Methods used to deceive to cause an unwarranted favourable decision for one’s own benefit. (2) Deliberate misrepresentation or misstatement. (3) Concealment of facts that should at the time be made known.

Answer 12

fraud

Question 13

A vehicle that does not exist or is already wrecked.

Answer 13

phantom vehicle

Question 14

An amount carried as a liability in an insurer’s balance sheet representing, in respect of each claim, an amount equal to the estimated final settlement cost less any amounts already paid.

Answer 14

loss reserve

Question 15

A federal statute that governs the collection and use of personal information. It states that personal information to be collected must be relevant, and that all information that has been collected, is being collected, or will be collected must be held in the strictest of confidence.

Answer 15

Personal Information Protection and Electronic Documents Act (PIPEDA)

Question 16

One who specializes in the mathematics of insurance, mortality rates, and the like.

Answer 16

actuary

Question 17

The process of compiling and analyzing data to establish rates that accurately reflect the level of risk. Usually performed by actuaries.

Answer 17

ratemaking

Question 18

Set up automatically when loss adjusters open a particular file. Actuaries predetermine a reserve amount for the particular type of claim by using historical data from a large sample of similar claims, noting their settlement amounts, and considering any inflation factors. Also known as a volume reserve.

Answer 18

average cost reserving

Question 19

How do the federal and provincial and territorial governments monitor and regulate the insurance industry?

Answer 19

OSFI Office of superintendent of financial Institution
Statutes provided that insurance companies set aside funds to pay future obligations
PACICC Property and Casualty Insurance Compensation Corporation
Provincial and territorial Insurances act
Privity laws PIPEDA

Question 20

Briefly explain individual reserving and how loss adjusters estimate the amount to be put in reserve. Provide ONE (1) example to illustrate your answer.

Answer 20

Individual reserving is used when only the loss adjuster can effectively estimate a reserve
This has been a traditional method used for preserving all claims
Many insured still reserve on a case-by-case basis for property, liability, and injury claims

To estimate how much should be put in reserve, the loss adjuster carefully assessed each claim and examined each type of coverage under a policy separately

Question 21

What is the purpose of the Canadian Inter-Company Arbitration Agreement?

Answer 21

CICMA developed an arbitration mechanism for settling disputes between insurers efficiently and cost-effectively.
The CICMA makes rules and regulations concerning how claims are presented and determined under the CICAA. Members appointed serve without compensation

Question 22

The claims department contributes to the company’s financial reporting process by posting a loss reserve for each claim. Loss reserves give management and regulators information on a company’s financial status. Management relies on reserves to predict business trends, costs, and expenses. Furthermore, actuaries rely on loss reserves to predict future claims costs and provide accurate average reserves.

Answer 22

Loss Reserves

Question 23

List the two main methods used to set up resources for a claim

Answer 23

Average cost reserving
Individual reserving

Question 24

In what provinces are you required to licensed as an adjuster

Answer 24

Quebec, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.

Question 25

Rules of Contract Interpretation in Common Law

Answer 25

Contra proferentem
Coverage provisions construed broadly
Exclusion clauses construed narrowly
Reasonable expectations and intent of the contracting parties

Question 26

What is OSFI?

Answer 26

Office of the Superintendent of Financial Institutions

Primary regulator of federally chartered Canadian and foreign property insurance companies.

Question 27

What is PACICC?

Answer 27

Property and Casualty Insurance Compensation Corporation

Protects policyholders from the financial collapse of an insurer

Question 28

What is PIPEDA?

Answer 28

Personal Information Protection and Electronic Documents Act

Federal statute governs collection and use of personal information

Question 29

What two elements are unique to insurance operations?

Answer 29

Underwriting and claims

Question 30

What are the two main methods to set up reserves for claims?

Answer 30

Average cost reserving (volume reserving)
- Large numbers of claims have produced reliable statistics to accurately state reserves

Individual reserving
- Adjuster can effectively estimate a reserve, estimates based on current coverage under policy

Question 31

What is the Canadian Inter-Company Arbitration Agreement used for?

Answer 31

Insurers can arbitrate their disputes over qualified physical damage subrogation claims among themselves, does not impact the insured

Question 32

What are the six IBC claim agreements?

Answer 32

1) Agreement respecting standardization of claim forms and practices, and guidelines for the settlement of claims
- 60 day reporting period from independent adjusters
- Waives agreements for proof of loss on 1st party auto claims as long as repairs have been completed
- For prop, waives proof of loss for claims not exceeding $5k except for theft, mysterious disappearance or subrogation
- Various rules to interpret subro rights for auto accidents
- Intercompany Settlement Chart; percentage of responsibility in certain situations, chart does not apply for Ontario, New Brunswick or Quebec

2) Agreement of Guiding Principles (prop)
- Where prop policies overlap in coverage

3) Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims
- Agreement is used to resolve claims when liability policies overlap in coverage

4) Agreement Respecting Disputed Losses Between Property Insurance and Boiler and Machinery Insurance Policies
5) Owned and Non-owned Contents Agreement (Quebec)
6) Insurance Industry Alternative Dispute Resolution (ADR) Commitment

Question 33

What are some examples of how fraud can occur?

Answer 33

Property that does not exist or owned by someone else
Misrepresents how property is being used
Staged accidents for injury claims
Staged burglary
Vehicle theft that did not actually happen
Inflates claim or commits arson

Question 34

What does the CIAA lead through?

Answer 34

Advocacy
Education
Recognized professional standards

Question 35

Where do adjusters need to be licensed?

Answer 35

Independent adjusters must be licensed everywhere

Employees of a company are required to be licensed in Quebec, New Brunswick, Newfoundland & PEI

Question 36

What is the Canadian Inter-Company Arbitration Agreement?

Answer 36

The Office of the Superintendent of Financial Institutions (OSFI) is the primary regulator of federally chartered Canadian and foreign property and casualty (P&C) insurance companies. It evaluates their financial soundness and sets their financial reporting requirements.
The property and casualty (P&C) insurance industry funds a special program, approved by government regulators, to protect policyholders from the financial collapse of an insurer.
The Property and Casualty Insurance Compensation Corporation (PACICC) is a non-profit organization that responds to claims of policyholders under most policies issued by P&C insurance companies when an insurer becomes insolvent.
Each province and territory has its own insurance statute to prescribe approved policy forms; the reports insurers must file; the licensing of agents, brokers, and claims adjusters; and financial security requirements for insurers.
Insurance Bureau of Canada (IBC) has developed a guideline to help member companies meet regulatory requirements arising from this law.

Question 37

How is a liability loss finalized with a claimant?

a. Minutes of settlement
b. full and final settlement
c. Release
d. signed document

Answer 37

b. full and final settlement