Claims Processing & Documentation Flashcards

Which reserving method sets the same average dollar amount for every claim of a certain type when the claim is opened?

Answer: Average value (formula) method

The average value method gives a preset average reserve to claims that are similar and fairly predictable.

An insurer contracts with an outside firm to handle claims in a remote area after a hurricane. Who is that firm's adjuster usually considered to be?

Answer: Independent adjuster

Independent adjusters are paid by insurers to handle claims, often during catastrophes or in areas where the insurer has no staff.

How is a public adjuster different from an independent adjuster?

Answer: A public adjuster represents the insured, not the insurer

Public adjusters are hired by policyholders, usually for a percentage of the settlement, to present and negotiate their claims.

During catastrophe claim handling, why do insurers often issue advance payments before the full loss is settled?

Answer: To cover immediate needs such as additional living expenses while the claim is being adjusted

Advance payments relieve hardship right away and support good faith, and they are credited against the final settlement.

A claim is denied because a policy exclusion applies. What should a proper denial letter include?

Answer: The specific policy language relied on and the facts supporting the denial

Regulations and good-faith standards require denials to cite the specific policy provisions and the facts behind them.

What is the main purpose of a sworn proof of loss in property claims?

Answer: To get the insured's formal, signed statement of the amount and circumstances of the loss

The sworn proof of loss documents the insured's claimed amount and the facts of the loss under oath, as the policy conditions require.

Which practice best protects the insurer when it pays a claim on a building that has a mortgage?

Answer: Naming both the insured and the mortgagee on the check, as the mortgage clause requires

The mortgage clause protects the lender's interest, so loss payments usually name both the insured and the mortgagee.