CIA Claims Investigation & Reporting Standards 2 — Questions and Answers
Question 1: When an insurer receives a first notice of loss (FNOL), what is the primary purpose of the immediate acknowledgment requirement?
- To deny liability before investigation begins
- To comply with state prompt-payment statutes and preserve the claimant's rights (Correct answer)
- To transfer the claim to a third-party administrator
- To calculate the reserve before any facts are gathered
Correct answer: To comply with state prompt-payment statutes and preserve the claimant's rights
State prompt-payment laws require timely FNOL acknowledgment to protect claimant rights and trigger investigation timelines.
Question 2: A property adjuster discovers that a claimant's recorded statement contradicts physical evidence at the loss scene. The BEST next step is to:
- Immediately deny the claim based on the contradiction
- Document the discrepancy and conduct further investigation to reconcile the conflict (Correct answer)
- Accept the physical evidence and discard the statement
- Close the file as a fraudulent claim
Correct answer: Document the discrepancy and conduct further investigation to reconcile the conflict
Contradictions between statements and evidence require additional investigation rather than premature denial or acceptance.
Question 3: Which document is typically used to formally transfer a claimant's right of recovery against a third party to the insurer after the insurer pays the claim?
- Proof of Loss
- Subrogation Receipt or Assignment (Correct answer)
- Reservation of Rights Letter
- Non-Waiver Agreement
Correct answer: Subrogation Receipt or Assignment
A subrogation receipt or assignment formally conveys the insured's right of action against responsible third parties to the insurer.
Question 4: Under the Unfair Claims Settlement Practices Act (UCSPA) model, which of the following constitutes an unfair claims practice?
- Requesting additional documentation to verify a complex loss
- Failing to acknowledge communications within a reasonable time period (Correct answer)
- Conducting an on-site inspection before issuing payment
- Offering a settlement slightly lower than the claimed amount
Correct answer: Failing to acknowledge communications within a reasonable time period
Failing to acknowledge communications within a reasonable timeframe is a defined unfair practice under most states' UCSPA statutes.
Question 5: A claimant presents a claim for theft of business equipment. The adjuster should request which document to establish the value of the stolen items?
- Homeowners declarations page
- Original purchase invoices, receipts, or purchase orders (Correct answer)
- The claimant's personal tax return
- A general business license
Correct answer: Original purchase invoices, receipts, or purchase orders
Original purchase invoices and receipts are the primary documentation to establish actual cash value or replacement cost of stolen business property.
Question 6: In the context of liability claims investigation, what is the purpose of obtaining a 'preservation of evidence' letter?
- To demand the claimant drop the lawsuit
- To formally notify a party to retain physical evidence relevant to the claim (Correct answer)
- To authorize an independent medical examination
- To request an appraisal of disputed damages
Correct answer: To formally notify a party to retain physical evidence relevant to the claim
A preservation letter formally directs a party to retain potentially relevant evidence, reducing the risk of spoliation claims.
Question 7: When an insurer issues a reservation of rights (ROR) letter, it is communicating that:
- The claim has been accepted and payment will follow
- It is defending the insured while reserving the right to deny coverage if facts support it (Correct answer)
- All policy benefits are being suspended pending litigation
- The insured must retain independent counsel at their own expense immediately
Correct answer: It is defending the insured while reserving the right to deny coverage if facts support it
An ROR letter allows the insurer to provide a defense while preserving its right to contest coverage based on the investigation's outcome.
CIA Claims Investigation & Reporting Standards 2
When an insurer receives a first notice of loss (FNOL), what is the primary purpose of the immediate acknowledgment requirement?