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's attorney sends a time-limited demand letter requiring settlement within 30 days or they will file suit. How should the adjuster handle this?
Answer: Escalate immediately, investigate thoroughly, obtain authority, and respond within the deadline if possible
Time-limited demands create bad faith exposure if ignored; the adjuster must escalate, investigate, and respond within the deadline or document why more time is needed.
What does 'diminished value' refer to in auto insurance settlements?
Answer: The reduction in a repaired vehicle's market value compared to an undamaged vehicle of the same make and model
Diminished value is the difference between a vehicle's pre-loss market value and its market value after being repaired, reflecting the stigma of an accident history.
Which of the following best describes 'structured settlement' in the context of auto liability claims?
Answer: A settlement where damages are paid in periodic installments over time rather than in a single lump sum
A structured settlement provides periodic payments over time, often used in cases involving significant ongoing medical expenses or long-term disability.
An insured's vehicle is repaired, but the claimant (third party) argues the repair quality is poor. Who is responsible for addressing this complaint?
Answer: The insured's insurer, since they directed repairs or recommended the shop, may share responsibility for repair quality
When an insurer directs or recommends a repair facility, they may assume some responsibility for repair quality and should facilitate resolution of legitimate complaints.
What is the 'zone of possible agreement' (ZOPA) in a negotiation?
Answer: The range between the minimum one party will accept and the maximum the other party will pay
The ZOPA is the overlap between the lowest amount the claimant will accept and the highest amount the adjuster has authority to pay, representing where a deal can happen.
When valuing a total loss vehicle, which source provides the most widely accepted market value reference in US auto claims?
Answer: Published guides such as CCC, Mitchell, or Audatex total loss valuation reports
Industry-standard total loss valuation platforms like CCC, Mitchell, and Audatex use local comparable vehicle sales data and are widely accepted for establishing ACV.
A claimant becomes emotionally distraught during settlement discussions. What is the best adjuster response?
Answer: Remain calm, acknowledge the claimant's feelings, and offer to reschedule if needed
Demonstrating empathy, remaining calm, and offering flexibility shows professionalism and often helps de-escalate emotional situations in claims negotiations.