Negotiation and Settlement Flashcards
7 cards from real CAIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Negotiation and Settlement flashcards as text
A claimant rejects your initial offer and presents a demand that exceeds the policy limits. What is the most appropriate next step for the adjuster?
Answer: Document the demand, advise the insured of the excess exposure, and continue negotiating within authority
When a demand exceeds policy limits, the adjuster must document it, notify the insured of potential personal exposure, and continue negotiating within delegated authority.
Which negotiation technique involves deliberately pausing after making an offer to allow the claimant time to respond without pressure?
Answer: Strategic silence
Strategic silence uses deliberate pauses after an offer to create psychological space and encourage the other party to speak or concede.
A claimant has a soft tissue injury claim with no objective medical evidence. What approach best supports a fair settlement evaluation?
Answer: Evaluate based on the claimant's reported symptoms, treatment history, and comparable verdicts in the jurisdiction
Soft tissue claims should be evaluated using reported symptoms, treatment records, and local jury verdict research to determine a fair value.
What is 'bracketing' in the context of insurance claim negotiations?
Answer: Making an offer so that the midpoint between your offer and the claimant's demand equals your target settlement
Bracketing is a technique where the adjuster makes an offer so that the mathematical midpoint between that offer and the claimant's demand is the adjuster's actual target settlement figure.
Under what circumstance is it appropriate for an adjuster to bypass the claimant and negotiate directly with the claimant's attorney?
Answer: Only when the claimant has formally designated the attorney as their authorized representative
Once a claimant retains an attorney and designates them as their representative, the adjuster must direct all settlement communications through the attorney.
A total loss vehicle has an ACV of $18,000 and the insured owes $22,000 on their auto loan. What should the adjuster advise?
Answer: Pay ACV of $18,000 to the lienholder and advise the insured about GAP coverage
The adjuster pays ACV to the lienholder and should advise the insured that GAP insurance, if they have it, may cover the remaining $4,000 deficiency.
What is the primary purpose of a 'reservation of rights' letter during settlement negotiations?
Answer: To notify the insured that the insurer is investigating coverage issues while still defending the claim
A reservation of rights letter allows the insurer to participate in the defense or investigation while preserving the right to later deny coverage if a coverage defense is valid.