Claims & Loss Analysis Flashcards
7 cards from real CU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Claims & Loss Analysis flashcards as text
An insurer discovers the insured made material misrepresentations on the application after a large loss occurs. The insurer's most likely remedy is:
Answer: Rescind the policy ab initio and deny the claim
Material misrepresentation allows the insurer to void the policy from inception (ab initio), as if it never existed, and deny the claim.
In analyzing a workers' compensation loss run, a high number of cumulative trauma claims (repetitive stress injuries) suggests the underwriter should focus on:
Answer: Ergonomics, job rotation practices, and early return-to-work programs
Cumulative trauma claims indicate systemic workplace ergonomic issues; effective programs include job rotation, ergonomic equipment, and aggressive return-to-work management.
The 'reservation of rights' letter in claims handling serves to:
Answer: Notify the insured that the insurer is investigating while preserving its right to deny coverage later
A reservation of rights letter allows the insurer to defend or investigate a claim without waiving coverage defenses that may apply.
When a commercial property suffers a total loss, the insurer pays actual cash value (ACV). ACV is calculated as:
Answer: Replacement cost minus physical depreciation
ACV equals the cost to replace damaged property with like kind and quality minus depreciation for age, wear, and obsolescence.
An insured has a $1 million per-occurrence limit and a $3 million aggregate limit. After two $1 million claims, a third $1 million claim occurs. The insurer pays:
Answer: $0 — aggregate exhausted
After two $1M claims, the full $3M aggregate is exhausted; no coverage remains for the third claim under this policy.
Which method of claims reserving uses historical settlement patterns to statistically estimate future claim costs without individual case evaluation?
Answer: Bulk or formula reserving
Bulk or formula reserving applies statistical formulas based on historical averages to groups of claims rather than evaluating each claim individually.
A professional liability claim arises from alleged negligent advice given 18 months ago, but the policy has since lapsed. Coverage depends on whether the insured purchased:
Answer: Extended reporting period (tail) coverage before lapsing
Without tail coverage, claims-made policies provide no coverage for incidents reported after expiration, regardless of when the error occurred.