Associate in Claims (AIC) Exam — Questions and Answers

Question 1: Which is an example of a lagging indicator of claim quality?

Number of adjuster training hours
Number of supervisor file reviews scheduled
Percentage of files with timely diary entries
Total closed-claim indemnity paid compared with benchmarks (Correct answer)

Correct answer: Total closed-claim indemnity paid compared with benchmarks

Lagging indicators measure outcomes after the fact, such as final paid amounts.

Question 2: A sworn proof of loss in property claims is primarily used to:

Formally state the insured's claimed amount and circumstances of the loss under oath (Correct answer)
Notify the agent that a loss occurred
Assign subrogation rights to the mortgagee
Establish the insurer's reserve

Correct answer: Formally state the insured's claimed amount and circumstances of the loss under oath

A proof of loss is a sworn statement by the insured detailing the loss and the amount claimed, as required by many property policies.

Question 3: Which action BEST demonstrates a commitment to professional standards & ethics in Associate in Claims?

Following only the regulations that are convenient
Addressing compliance issues only when audited
Maintaining current knowledge of all applicable regulations and standards (Correct answer)
Relying on colleagues to interpret regulatory requirements

Correct answer: Maintaining current knowledge of all applicable regulations and standards

Actively maintaining current knowledge of applicable regulations demonstrates genuine commitment to compliance and helps prevent violations.

Question 4: In most jurisdictions, what does the 'eight corners' rule use to decide whether a liability insurer owes a duty to defend?

The policy and the claimant's complaint (Correct answer)
Only the insured's sworn statement
The adjuster's report and the police report
The declarations page and the application

Correct answer: The policy and the claimant's complaint

The duty to defend is decided by comparing the four corners of the complaint with the four corners of the policy.

Question 5: During litigation, what is the purpose of an Examination Under Oath (EUO)?

To assign liability to a third party
To finalize settlement terms
To allow the insurer to formally question the insured about the claim under oath (Correct answer)
To conduct a physical inspection of damaged property

Correct answer: To allow the insurer to formally question the insured about the claim under oath

An EUO is a formal, sworn proceeding where the insurer questions the claimant or insured to gather facts and assess the validity of the claim.

Question 6: Internal customers in a claims organization include:

Only policyholders
Only claimants
Underwriters, agents, and other company departments (Correct answer)
Opposing attorneys

Correct answer: Underwriters, agents, and other company departments

Internal customers are colleagues and departments who rely on the claim professional's work.

Question 7: What role does verification play in claims processing?

It is unnecessary.
It confirms validity and eligibility (Correct answer)
It delays the process intentionally.
It avoids paying claims.

Correct answer: It confirms validity and eligibility

Verification in claims processing is crucial for confirming that a claim is legitimate and falls within the scope of the policy's coverage. This involves checking details like the incident's circumstances, the extent of damages, and the policyholder's eligibility. By verifying these aspects, insurers ensure that only valid claims are paid, preventing fraud and maintaining the integrity of the insurance system.

Question 8: Under an ISO commercial property policy, a building has been vacant for more than 60 consecutive days when a windstorm damages it. How is the covered windstorm loss handled?

Payment is reduced by 50%
It is paid in full with no adjustment
Payment is reduced by 15% (Correct answer)
It is fully excluded

Correct answer: Payment is reduced by 15%

Losses from perils not specifically excluded for vacancy are reduced by 15% once the building has been vacant more than 60 days.

Question 9: Under the most common definition used in property policies, actual cash value (ACV) equals:

Market value of the land and building combined
Original purchase price minus the deductible
Replacement cost plus code-upgrade costs
Replacement cost minus depreciation (Correct answer)

Correct answer: Replacement cost minus depreciation

ACV is typically calculated as replacement cost less physical depreciation and obsolescence.

Question 10: In Associate in Claims, what is the MOST effective approach to communication & collaboration?

Communicating only in writing to avoid misunderstandings
Using technical terminology exclusively
Providing information without seeking feedback
Active listening combined with clear, empathetic communication (Correct answer)

Correct answer: Active listening combined with clear, empathetic communication

Active listening combined with clear, empathetic communication builds trust and ensures mutual understanding between all parties.

Question 11: Which type of question is MOST useful for encouraging a witness to give a full narrative of how an auto accident happened?

Compound questions
Closed-ended questions
Open-ended questions (Correct answer)
Leading questions

Correct answer: Open-ended questions

Open-ended questions such as 'Tell me what you saw' invite a complete, unprompted account.

Question 12: Under the ISO CGL, how are defense costs and other supplementary payments generally treated?

They are the insured's responsibility up to the deductible
They reduce the each-occurrence limit
They reduce the general aggregate limit
They are paid in addition to the limits of insurance (Correct answer)

Correct answer: They are paid in addition to the limits of insurance

Supplementary payments, including defense costs, are paid on top of the limits and do not reduce them.

Question 13: Under a standard mortgage clause, what happens to the mortgagee's right to recover if the insured intentionally sets fire to the property?

The mortgagee recovers only the ACV of the building
The mortgagee's recovery is voided too
The mortgagee can still recover if it meets its own policy obligations (Correct answer)
The mortgagee recovers only if it pays a separate premium

Correct answer: The mortgagee can still recover if it meets its own policy obligations

The standard mortgage clause creates a separate contract, so the insured's acts do not defeat the mortgagee's recovery.

Question 14: How does ongoing professional development support professional standards & ethics in Associate in Claims?

It keeps professionals informed of evolving standards and best practices (Correct answer)
It only benefits entry-level professionals
It replaces the need for formal compliance audits
It is irrelevant to compliance outcomes

Correct answer: It keeps professionals informed of evolving standards and best practices

Ongoing professional development ensures that practitioners stay current with evolving regulations, standards, and best practices in their field.

Question 15: What role does the 'insuring agreement' play in an insurance policy?

It lists the premium payment schedule.
It explains how claims are processed.
It contains the policyholder's personal information.
It describes the insurer’s coverage obligations (Correct answer)

Correct answer: It describes the insurer’s coverage obligations

The insuring agreement is a core part of an insurance policy that outlines the insurer's promise to pay for losses or damages under specified conditions. It defines the scope of coverage, detailing what perils are covered, what property is insured, and the types of losses the policy is designed to protect against. This section establishes the fundamental contractual relationship between the insurer and the insured.

Question 16: Why is the concept of 'actual cash value' important in insurance claims?

It is the original purchase price of the insured item.
It only applies to liability claims.
It is replacement cost minus depreciation, impacting claim payments (Correct answer)
It is the amount paid to replace an item without depreciation.

Correct answer: It is replacement cost minus depreciation, impacting claim payments

Actual Cash Value (ACV) is important in insurance claims because it determines the amount an insurer will pay for damaged or lost property. ACV is calculated as the replacement cost of an item at the time of loss, minus depreciation due to age, wear, and tear. This valuation method means the policyholder receives the depreciated value, not the cost to buy a brand-new replacement, unless their policy specifies replacement cost coverage.

Question 17: Most state fair claims regulations require an insurer to acknowledge receipt of a claim notice within roughly what time frame?

60 days
15 days (Correct answer)
90 days
24 hours

Correct answer: 15 days

Many states based on the NAIC model regulation require acknowledgment within about 15 days, though exact deadlines vary by state.

Question 18: Under a modified comparative negligence (51% bar) rule, a claimant found 55% at fault recovers:

45% of damages
Nothing (Correct answer)
Full damages minus a deductible
55% of damages

Correct answer: Nothing

Under the 51% bar rule, a claimant whose fault is 51% or more is barred from recovery.

Question 19: An insured and an insurer agree a fire loss is covered but disagree on the dollar amount. Which policy provision resolves this?

Subrogation
Liberalization
Appraisal (Correct answer)
Arbitration of coverage

Correct answer: Appraisal

Appraisal resolves disputes over the amount of loss: each party picks an appraiser, an umpire breaks ties, and agreement by any two is binding.

Question 20: Under the ISO CGL, the contractual liability exclusion does NOT apply to liability assumed under which of the following?

A liquidated damages clause
Any oral agreement
An 'insured contract' (Correct answer)
A warranty of fitness for the insured's product

Correct answer: An 'insured contract'

Liability assumed under an 'insured contract', such as a tort liability assumed in a business contract, is excepted from the exclusion.

Question 21: How do 'policy limits' impact the coverage of an insurance policy?

They are the same as deductibles.
They set the maximum payout the insurer will provide for claims (Correct answer)
They have no effect on claims.
They represent the minimum payment required from the insured.

Correct answer: They set the maximum payout the insurer will provide for claims

Policy limits are crucial because they define the maximum amount of money an insurance company will pay out for a covered loss or over a specific policy period. These limits can apply per occurrence, per person, or as an aggregate total. Understanding policy limits is essential for policyholders to know the extent of their financial protection and potential out-of-pocket exposure beyond these maximums.

Question 22: A claim representative discovers several red flags, including a recently increased policy limit and an insured who is pushing hard for a quick cash settlement. What should the representative do?

Refer the claim to the special investigation unit (SIU) per company guidelines (Correct answer)
Cancel the policy retroactively
Settle quickly to avoid a bad-faith claim
Deny the claim immediately

Correct answer: Refer the claim to the special investigation unit (SIU) per company guidelines

Red flags are not proof of fraud; they warrant referral to the SIU for further investigation in line with company procedures.

Question 23: Which of the following is MOST important for a claims manager to model in order to build an ethical claims culture?

Focusing only on cycle-time metrics
Delegating ethics questions to the legal department
Consistently showing fair, honest, good-faith claim handling (Correct answer)
Settling every claim for the lowest possible amount

Correct answer: Consistently showing fair, honest, good-faith claim handling

Leaders shape culture through their own conduct, and good-faith handling is central to ethical claims practice.

Question 24: What is the main purpose of setting expectations early in the claims process?

To reduce misunderstandings about timelines, steps, and documents needed (Correct answer)
To discourage the claimant from filing
To shorten the policy period
To avoid having to document the file

Correct answer: To reduce misunderstandings about timelines, steps, and documents needed

Explaining the process up front prevents surprises and builds trust, which lowers complaints.

Question 25: Why might a claims department track the reopened-claim rate as a quality measure?

It measures underwriting profitability
It shows how many claims were reported late
It determines reinsurance recoveries
High reopen rates can signal claims were closed prematurely or incompletely (Correct answer)

Correct answer: High reopen rates can signal claims were closed prematurely or incompletely

Frequent reopenings may indicate files were closed before all issues were resolved.

Question 26: Many states based their insurer cybersecurity requirements on the NAIC Insurance Data Security Model Law. A key requirement is that licensees must:

Maintain a written information security program based on a risk assessment (Correct answer)
Store all data only on paper
Encrypt nothing unless the regulator asks
Use only federally approved vendors

Correct answer: Maintain a written information security program based on a risk assessment

The model law requires a risk-based written information security program, oversight of third-party providers, and notice of cybersecurity events.

Question 27: Because insurers draft the policy wording and insureds cannot negotiate it, courts generally resolve ambiguities in favor of the insured. This is because an insurance policy is a contract of:

Conditional performance
Adhesion (Correct answer)
Utmost good faith
Indemnity

Correct answer: Adhesion

Insurance policies are contracts of adhesion, so ambiguous language is construed against the drafter (the insurer).

Question 28: How often should quality assurance & improvement metrics be reviewed in Associate in Claims?

Regularly at defined intervals with additional reviews triggered by significant events (Correct answer)
When external audits are scheduled
When problems are reported
Only during annual performance reviews

Correct answer: Regularly at defined intervals with additional reviews triggered by significant events

Regular scheduled reviews ensure ongoing monitoring while event-triggered reviews capture the impact of significant changes.

Question 29: What is the primary role of a coverage counsel in complex insurance litigation?

To manage subcontractor relationships
To negotiate salvage values
To handle day-to-day claims adjusting
To provide legal opinions on whether a policy covers a particular claim or loss (Correct answer)

Correct answer: To provide legal opinions on whether a policy covers a particular claim or loss

Coverage counsel analyzes policy language, endorsements, and applicable law to advise the insurer on whether coverage exists for a disputed claim.

Question 30: What is an 'excess judgment' in insurance litigation?

A court verdict that exceeds the insured's policy limits (Correct answer)
A judgment against a third-party claimant
A judgment awarded only for punitive damages
The amount the insured must pay before coverage applies

Correct answer: A court verdict that exceeds the insured's policy limits

An excess judgment is a court award that surpasses the insured's policy limits, potentially exposing both the insured and insurer to personal liability claims.

Question 31: An insurer fails to keep the defective water heater that caused a covered loss, and so loses its subrogation case against the manufacturer. What problem does this show?

Anti-stacking
Contribution by equal shares
Spoliation of evidence (Correct answer)
Waiver by estoppel

Correct answer: Spoliation of evidence

Spoliation is the destruction or loss of evidence, and it can wreck subrogation and expose the insurer to sanctions.

Question 32: Which factor BEST indicates mastery of core principles & fundamentals in Associate in Claims?

Years of experience in a single setting
The ability to adapt knowledge and skills to varying contexts while maintaining standards (Correct answer)
Number of certifications held
Speed of task completion

Correct answer: The ability to adapt knowledge and skills to varying contexts while maintaining standards

True mastery is demonstrated by the ability to apply knowledge flexibly across different contexts while consistently maintaining quality standards.

Question 33: Which of the following is a noninsurance risk transfer technique?

Using a hold-harmless agreement in a contract (Correct answer)
Buying a commercial general liability policy
Self-insuring workers' compensation
Installing sprinklers

Correct answer: Using a hold-harmless agreement in a contract

Hold-harmless and indemnity clauses shift financial responsibility to another party by contract, not by insurance.

Question 34: What is the MOST effective way to stay current with developments in core principles & fundamentals for Associate in Claims?

Following a single expert opinions
Reading only internal communications
Relying on experience gained early in career
Participating in professional development, industry events, and peer collaboration (Correct answer)

Correct answer: Participating in professional development, industry events, and peer collaboration

A multi-faceted approach including formal development, industry events, and peer collaboration provides the broadest perspective on current developments.

Question 35: Which statement best shows empathy without admitting liability?

We will definitely pay for everything.
I'm sorry you're going through this; let's work through the next steps together. (Correct answer)
Our insured clearly caused this accident.
This should never have happened to you because of our driver.

Correct answer: I'm sorry you're going through this; let's work through the next steps together.

Empathy recognizes the person's situation without making promises about coverage or fault.

Question 36: What is 'collateral estoppel' and how does it affect insurance litigation?

A policy exclusion for intentional acts
A defense available only in contract disputes
A legal doctrine that prevents re-litigation of issues already decided in a prior proceeding (Correct answer)
A type of punitive damages cap

Correct answer: A legal doctrine that prevents re-litigation of issues already decided in a prior proceeding

Collateral estoppel bars a party from re-litigating a factual or legal issue that was already fully decided in a prior case between the same parties.

Question 37: A claims-made CGL policy has a retroactive date of January 1, 2023. Which claim is most likely covered under the 2026 policy period?

Injury in 2022, claim first made in 2026
Injury in 2024, claim first made in 2027 after the policy lapsed with no tail
Injury in 2025, claim first made in 2025 under the prior policy
Injury in 2024, claim first made in 2026 (Correct answer)

Correct answer: Injury in 2024, claim first made in 2026

Coverage needs the injury to occur on or after the retroactive date and the claim to be first made during the policy period.

Question 38: Which channel is usually best for confirming settlement terms the parties agreed to by phone?

A follow-up written confirmation such as a letter or email (Correct answer)
A voicemail
A text message with emojis
No confirmation is needed

Correct answer: A follow-up written confirmation such as a letter or email

Written confirmation creates a clear record and prevents disputes about what was agreed.

Question 39: Under workers' compensation law, what is the 'exclusive remedy' doctrine?

The insurer must settle claims exclusively through mediation
Workers' compensation benefits are the sole remedy an injured employee has against the employer for work-related injuries (Correct answer)
The claimant must use only one doctor
Only one adjuster may handle each claim

Correct answer: Workers' compensation benefits are the sole remedy an injured employee has against the employer for work-related injuries

The exclusive remedy doctrine bars employees from suing their employer in tort for workplace injuries, making workers' compensation the sole source of recovery.

Question 40: The CGL 'expected or intended injury' exclusion contains an exception for bodily injury resulting from what?

Use of reasonable force to protect persons or property (Correct answer)
Injuries the insured did not report within 30 days
Acts of employees outside their job duties
Any act done under the influence of alcohol

Correct answer: Use of reasonable force to protect persons or property

The exclusion doesn't apply to bodily injury resulting from the use of reasonable force to protect persons or property.

Question 41: Under an open perils (special form) policy, who generally has the burden of proving that an exclusion applies?

The independent appraiser
The insured
The insurer (Correct answer)
The producer

Correct answer: The insurer

Under open perils coverage, any direct physical loss is covered unless excluded, so the insurer must prove an exclusion applies.

Question 42: An adjuster continues investigating a claim but tells the insured in writing that the insurer may later deny coverage based on a late-notice condition. What is this communication called?

Proof of loss
Reservation of rights letter (Correct answer)
Release
Declination letter

Correct answer: Reservation of rights letter

A reservation of rights letter lets the insurer keep investigating or defending without waiving its right to deny coverage later.

Question 43: Which leadership style is MOST likely to work well during a catastrophe event, when a claims unit must quickly deploy adjusters and set priorities?

Laissez-faire
Servant leadership with no deadlines
Directive (autocratic) (Correct answer)
Purely democratic consensus

Correct answer: Directive (autocratic)

In urgent, high-pressure situations, a directive style gives the fast decisions and clear coordination that are needed.

Question 44: A workers' compensation claims unit reviews loss runs to find the most frequent injury types and recommends ergonomic changes to the employer. This activity is primarily:

Retention funding
Risk avoidance
Claim subrogation
Loss prevention and reduction (Correct answer)

Correct answer: Loss prevention and reduction

Analyzing loss data to reduce the frequency or severity of future losses is loss control.

Question 45: A claims supervisor pressures an adjuster to close files by denying claims without investigation to meet monthly targets. What is the best ethical response?

Refuse to deny without a reasonable investigation and escalate the concern through appropriate channels (Correct answer)
Close files as pending without notifying claimants
Deny only the smaller claims
Comply because supervisors set policy

Correct answer: Refuse to deny without a reasonable investigation and escalate the concern through appropriate channels

Refusing to pay claims without conducting a reasonable investigation is an unfair practice regardless of internal pressure.

Question 46: A claimant speaks limited English. What is the most professional approach?

Arrange qualified interpretation or translated materials to ensure clear communication (Correct answer)
Proceed in English and assume understanding
Delay the claim until the claimant learns English
Ask the claimant's minor child to translate legal terms

Correct answer: Arrange qualified interpretation or translated materials to ensure clear communication

Ensuring the claimant understands the process and documents supports fair treatment and accurate statements.

Question 47: A settlement providing periodic payments over time, often funded with an annuity, is a:

Nonwaiver agreement
Structured settlement (Correct answer)
Advance payment
Lump-sum release

Correct answer: Structured settlement

Structured settlements spread payments over time, commonly through an annuity purchased by the insurer.

Question 48: Two liability policies use contribution by equal shares: Policy A has a $50,000 limit and Policy B a $150,000 limit. How is a $120,000 loss split?

A $50,000; B $70,000 (Correct answer)
A $60,000; B $60,000
A $40,000; B $80,000
A $30,000; B $90,000

Correct answer: A $50,000; B $70,000

Each pays equally until A's $50,000 limit runs out, then B pays the remaining $20,000, for $70,000 total.

Question 49: What is a 'declaratory judgment action' in insurance?

A lawsuit filed to obtain a court ruling on whether a policy covers a particular claim (Correct answer)
A regulatory order requiring the insurer to pay
A settlement agreement approved by a judge
A court order to pay a claim immediately

Correct answer: A lawsuit filed to obtain a court ruling on whether a policy covers a particular claim

A declaratory judgment action allows an insurer or insured to ask a court to interpret the policy and declare the rights and obligations of the parties.

Question 50: When an insurer denies a claim, best practice and most state regulations require the denial to be:

Delayed until the statute of limitations expires
Communicated verbally to preserve flexibility
In writing, citing the specific policy provisions relied upon (Correct answer)
Sent only to the agent of record

Correct answer: In writing, citing the specific policy provisions relied upon

Unfair claims practices laws generally require a written denial that references the specific policy language or facts relied on.

Question 51: Which tool is a fishbone diagram also known as?

Ishikawa or cause-and-effect diagram (Correct answer)
Histogram
Scatter plot
Gantt chart

Correct answer: Ishikawa or cause-and-effect diagram

The fishbone diagram, developed by Kaoru Ishikawa, maps potential causes of a problem.

Associate in Claims (AIC) Exam

The Associate in Claims (AIC) designation demonstrates a professional's fundamental knowledge of property and casualty claims handling, including investigation, evaluation, negotiation, and settlement.

Questions

60 min

Time Limit

70%

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These practice questions were written with AI tools. They are not real exam questions. Exam facts are checked against the official sources listed below. Not reviewed by a subject-matter expert. Editorial policy

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