Study 2: The Claims Environment - Key terms

Question 1

Loss reserve

Answer 1

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.

Question 2

Personal Information Protection and Electronic Documents Act (PIPEDA)

Answer 2

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.

Question 3

Average cost reserving

Answer 3

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.

Question 4

Individual reserving

Answer 4

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.

Question 5

Fraud

Answer 5

(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.