Assessment & Evaluation Flashcards

A case reserve on an individual claim represents:

Answer: The adjuster's estimate of the amount needed to settle that claim

A case reserve is the estimated ultimate cost to resolve a specific claim.

Repeatedly raising a reserve in small increments rather than setting an accurate amount early is called:

Answer: Stair-stepping

Stair-stepping distorts loss data and is considered poor reserving practice.

IBNR reserves are established for:

Answer: Losses that have occurred but have not yet been reported

IBNR stands for incurred but not reported, covering losses that have happened but are unknown to the insurer.

Which reserving method assigns the same predetermined amount to every claim of a given type?

Answer: Average value method

The average value method uses a set average for claims with similar characteristics, often small high-volume claims.

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

Answer: Structured settlement

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

When evaluating subrogation potential, the adjuster should primarily determine whether:

Answer: A third party's negligence caused the loss

Subrogation depends on identifying a responsible third party from whom the insurer can recover its payment.

Which factor most directly affects the settlement value of a liability claim beyond the claimant's documented damages?

Answer: The venue's history of jury verdicts

Jurisdictions with high verdict tendencies increase the likely value of a claim if it goes to trial.