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AIC Study Guide Review Practice Test. What is the difference between first party and third party? - CORRECT ANSWER Property insurance is considered first-party insurance because the insurer, or second party, makes payment for covered losses directly to the policyholder, or first party. Liabilit...

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  • December 15, 2024
  • 22
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • aic study guide review practice test

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AIC Study Guide Review Practice Test.
What is the difference between first party and third party? - CORRECT ANSWER Property insurance is
considered first-party insurance because the insurer, or second party, makes payment for covered losses
directly to the policyholder, or first party. Liability insurance is considered third-party insurance because
the insurer makes payments on behalf of the policyholder to a claimant (third party) who is injured or
whose property is damaged by the policyholder.



Claims Personnel - CORRECT ANSWER A variety of insurance professionals can handle claims, such as
staff claims representatives, independent adjusters, employees of TPAs, and producers. Public adjusters
also handle claims by representing the interests of insureds to the insurer.



Musgriff Insurance has received a claim related to an accident that involved an aircraft, and an
investigation is needed to process the claim. However, the company doesn't have any claims
representatives with knowledge about handling aircraft claims. What type of claims professional should
the company hire to help with the investigation? - CORRECT ANSWER Independent adjuster. Insurers
use independent adjusters when their staff claims representatives are too busy to meet customer needs
or when specialized skills are needed.



Producers - CORRECT ANSWER The term "producer" includes agents, brokers, sales representatives, and
intermediaries who place insurance with insurers.



Imagine you are a claims representative attempting to settle a complex claim for an insured.
Unfortunately, the insured is not satisfied with the way settlement negotiations are progressing. Whom
might the insured hire to ensure that his or her interests are protected? - CORRECT ANSWER The
insured might hire a public adjuster. A public adjuster is an outside organization or person who
represents the insured in a claim.



Indemnify - CORRECT ANSWER 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) - CORRECT ANSWER An organization that provides administrative
services associated with risk financing and insurance.

,Claims representative - CORRECT ANSWER A person responsible for investigating, evaluating, and
settling claims



Producer - CORRECT ANSWER Any of several kinds of insurance personnel who place insurance and
surety business with insurers and who represent either insurers or insureds, or both



Public adjuster - CORRECT ANSWER An outside organization or person hired by an insured to represent
the insured in a claim in exchange for a fee



Underwriting - CORRECT ANSWER the Claims Department relies on underwriters for thorough, accurate
data about the circumstances under which coverage was written. Claims personnel help underwriters by
ensuring that claims are paid fairly and according to their respective policy. Proper, consistent, and
efficient claims handling enables underwriters to evaluate, select, and appropriately price loss
exposures.



Producer - CORRECT ANSWER Any of several kinds of insurance personnel who place insurance and
surety business with insurers and who represent either insurers or insureds, or both.



Premium audit - CORRECT ANSWER 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.



What do you think sets the tone for the claims adjustment process? - CORRECT ANSWER The claims
rep's initial contact with the insured sets the tone for the adjustment process.



When do you think claims reps have the greatest opportunity to positively influence others? - CORRECT
ANSWER One of the times when claims reps have the greatest opportunity to positively influence others
is during catastrophes.



Profitability Measures - CORRECT ANSWER A loss ratio compares an insurer's losses and loss adjustment
expenses (LAE) with its collected premiums and reveals the percentage of premiums being consumed by
losses. An increasing loss ratio could indicate that the insurer isn't performing the claims function
properly. Increasing losses could also mean that the Underwriting Department elected to cover loss
exposures that were more costly or occurred more frequently than it estimated or that the Actuarial
Department failed to price the insurer's products correctly.

, Quality Measures - CORRECT ANSWER Three frequently used tools provide quality measures of a Claims
Department's performance: best practices, claims audits, and customer satisfaction data.



"best practices" generally refers to a system of identified internal practices that are shared with claims
reps and produce superior performance.



Claims Department best practices are often based on legal requirements. For example, a Claims
Department may have a best practice stating that claims will be acknowledged within 24 hours of
receipt. This time frame may have been selected because of a regulation, law, or court decision.



Insurers use claims audits to ensure compliance with best practices and to gather statistical information
on claims. A claims audit is performed by evaluating information in a number of open and closed claim
files.



Claims audits usually evaluate both quantitative and qualitative factors.



quantitative vs qualitative - CORRECT ANSWER quantitative = timelinedd of reports, reserving, payment,
number of files, percentaged, etc



qualitative = realistic reserves, accurate evaluation, follow up, correct coverage evals, throrough
investigations, etc



An insurer's management team is evaluating the organization's financial well-being 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. Describe the profitability measure that can help management make these
determinations. - CORRECT ANSWER 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.



Loss ratio - CORRECT ANSWER A ratio that measures losses and loss adjustment expenses against
earned premiums and that reflects the percentage of premiums being consumed by losses

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