Chapter 6

Question 1

ways claims reps maintain insurer’s underwriting profit

Answer 1

• Managing all claim function expenses
• Setting appropriate spending policies
• Using appropriately priced providers and services

Question 2

Claims Dept. Structure

Answer 2

• Senior Claim Officer (Dept. Head) reports to CEO, CFO, or CUO)
• Home office claims dept.
• -Regional/divisional offices

Question 3

Third party admin:

Answer 3

an org. that provided admin. services associated with risk financing and insurance

Question 4

Claims rep:

Answer 4

generic title that refers to all who adjust claims, except for public adjusters; fulfills the promise to pay the insured or to pay on behalf of the insured by handling a claim when a loss occurs

Question 5

People who handle claims:

Answer 5

• Staff claim reps
• independent adjusters
• employees of TPAs
• producers

Question 6

Staff claim reps

Answer 6

employees of an insurer; handle most claims

Question 7

Field claims reps

Answer 7

investigate the scene of the loss, meet with insureds, claimants, lawyer, etc., and inspect damage

Question 8

Independent adjusters

Answer 8

• ind. claim rep. who handles claims for insurers for a fee

- Use these when not economically feasible to have claims offices in every state

Question 9

Employees of TPAs

Answer 9

often associated with large ind. adjusting firms or subsidiaries of insurances co.s

Question 10

Public adjuster

Answer 10

rep the interests of insured to the insurer

Question 11

quality performance measures

Answer 11

• best practices
• claim audits
• customer satisfaction

Question 12

Best practices

Answer 12

a system of identified internal practices that produce superior performance

Question 13

Claim audits

Answer 13

used to ensure compliance with best practices and to gather stats info on claims

Question 14

Guidelines

Answer 14

specify how certain claims handling tasks should be performed by setting policies and procedures for claim handling

Question 15

Diary or suspense

Answer 15

a system (used by managers) to remind claims personnel to perform a particular task on a claim

Question 16

Activity log

Answer 16

a record of all the activities and analyses that occur while handling a claim

Question 17

Access security

Answer 17

a security setting (control) that controls an ind. computer user’s ability to review, enter, and change info in a claims info system

Question 18

Authority level

Answer 18

a designated dollar amt. assigned to claims personnel to limit the reserve amounts they can set and the payment amounts the can make (control)

Question 19

Claims audits

Answer 19

a review of claim files to examine the technical details of claim settlements, ensure that claims procedures are followed, and verify that appropriate thorough documentation is included

Question 20

Internal claims audit

Answer 20

a review of claims files conducted by an insurer’s staff to examine the technical details of claim settlements, ensure that claims procedures are followed, and verify that appropriate, thorough documentation is included

Question 21

External claims audit

Answer 21

a review conducted by orgs other than the insurer that involves reviewing overall practices, reserves, and other technical details, investigating consumer complaints, etc.

Question 22

compliance measures

Answer 22

• claims guidelines, policies, and procedures
• controls
• supervisor and manager reviews
• claims audits

Question 23

process of dealing with a claim

Answer 23

• acknowledge and assign the claim
• identify the policy and settle reserves
• contact the insured
• investigate and document the claim
• determine the cause of loss, liability and loss amount

Question 24

Nonwaiver agreement

Answer 24

a signed agreement indicating that during the course of investigation neither the insurer nor the insured waives rights under the policy

Question 25

Reservation of rights letter

Answer 25

an insurer’s letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that the insurer may later deny coverage should the facts warrant it

Question 26

Loss reserve

Answer 26

an estimate of the amount of money the insurer expects to pay in the future for losses that have already occurred and been reported but are not yet settled

Question 27

Average value

Answer 27

establish a predetermined dollar amt to reserve for each claim as its reported

Question 28

Roundtable

Answer 28

use the consensus of two or more claims personnel who have independently evaluated the claims file

Question 29

Individual case

Answer 29

based on the claim’s circumstances and the claims reps experience handling similar claims

Question 30

Expert system

Answer 30

a software application that estimates losses and loss adjustment expenses

Question 31

Formula method

Answer 31

use a mathematical formula

Question 32

Loss ratio

Answer 32

establishes aggregate reserves for all claims for a type of insurance

Question 33

reserving methods

Answer 33

• average value
• roundtable
• individual case
• expert system
• loss ratio

Question 34

Good faith

Answer 34

require by law; the manner of handling claims that requires an insurer to give consideration to the insured’s interests that is at least equal to the consideration it gives its own interests

Question 35

Subrogation

Answer 35

the process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss

Question 36

Coinsurance

Answer 36

an insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for covered loss is reduced

Question 37

Alternative dispute resolution

Answer 37

procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation