CAIA Regulatory Compliance and Ethics 5 — Questions and Answers
Question 1: What is the primary purpose of the NAIC Model Unfair Claims Settlement Practices Act?
- To set uniform premium rates across states
- To establish minimum standards for fair and timely claims handling (Correct answer)
- To require all adjusters to obtain federal certification
- To regulate auto repair shop pricing
Correct answer: To establish minimum standards for fair and timely claims handling
The NAIC Model Act sets baseline standards that states adopt to ensure insurers handle claims fairly and promptly.
Question 2: An adjuster is offered a bonus by their employer for closing the most claims in a month with the lowest payouts. Which ethical concern does this raise?
- It encourages thorough investigation
- It may incentivize undervaluing or improperly denying valid claims (Correct answer)
- It is standard industry practice with no ethical implications
- It only applies to public adjusters
Correct answer: It may incentivize undervaluing or improperly denying valid claims
Financial incentives tied to low payouts can create pressure to underpay valid claims, raising bad faith and ethical concerns.
Question 3: Which of the following is a required element of a proper claim denial letter under most state regulations?
- A list of all claims previously paid by the insurer
- The specific policy provision, exclusion, or condition that supports the denial (Correct answer)
- The claimant's credit score
- A waiver of the insurer's subrogation rights
Correct answer: The specific policy provision, exclusion, or condition that supports the denial
Denial letters must cite the specific policy language relied upon to deny the claim, per UCSPA and most state laws.
Question 4: A claimant is a non-English speaker. What ethical obligation does the adjuster have during the claims process?
- Require the claimant to hire a translator at their own expense before processing the claim
- Take reasonable steps to communicate effectively, including providing a translator if needed (Correct answer)
- Transfer the claim to another adjuster who speaks the claimant's language
- Close the claim as unresponsive after one contact attempt
Correct answer: Take reasonable steps to communicate effectively, including providing a translator if needed
Ethical and regulatory standards require adjusters to make reasonable accommodations to ensure effective communication with all claimants.
Question 5: When an adjuster suspects staged accident fraud, which of the following is the most appropriate next step?
- Immediately deny the claim without documentation
- Settle quickly to avoid further fraudulent claims
- Document suspicions and refer to the Special Investigations Unit (SIU) (Correct answer)
- Contact the claimant and accuse them of fraud directly
Correct answer: Document suspicions and refer to the Special Investigations Unit (SIU)
Suspected fraud must be properly documented and escalated to the SIU, which is equipped to conduct formal fraud investigations.
Question 6: Under the principle of indemnity, what is the maximum amount an insured should receive from a valid automotive insurance claim?
- The full policy limit regardless of actual loss
- An amount that restores the insured to their pre-loss financial position, no more (Correct answer)
- Twice the actual loss as compensation for inconvenience
- Whatever the claimant requests in good faith
Correct answer: An amount that restores the insured to their pre-loss financial position, no more
The principle of indemnity limits recovery to the actual financial loss — preventing unjust enrichment from an insurance claim.
Question 7: Which of the following constitutes a violation of adjuster ethics regarding recorded statements?
- Informing the claimant the statement is being recorded
- Taking a recorded statement after the claimant has retained an attorney without attorney consent (Correct answer)
- Asking the claimant to describe the accident in their own words
- Providing the claimant a copy of the recorded statement upon request
Correct answer: Taking a recorded statement after the claimant has retained an attorney without attorney consent
Once a claimant is represented by an attorney, direct contact — including recorded statements — must go through the attorney.
CAIA Regulatory Compliance and Ethics 5
What is the primary purpose of the NAIC Model Unfair Claims Settlement Practices Act?