CU Claims & Loss Analysis 2

Question 1

A commercial property insurer receives a claim for fire damage. The adjuster discovers the insured had recently increased coverage just before the fire. Which concept should the underwriter investigate?

Accepted Answer

Moral hazard escalation

Answer

A sudden coverage increase shortly before a loss is a classic moral hazard indicator suggesting possible intentional misconduct.

Question 2

In subrogation, after paying a claim, the insurer acquires the right to:

Accepted Answer

Pursue recovery from the responsible third party

Answer

Subrogation allows the insurer to step into the insured's shoes and sue the negligent third party to recover paid losses.

Question 3

An insured suffers a $200,000 loss on a property valued at $500,000, but only carries $300,000 in coverage with an 80% coinsurance clause. What is the insurer's liability?

Accepted Answer

$150,000

Answer

The coinsurance formula: ($300,000 / $400,000 required) × $200,000 loss = $150,000 covered.

Question 4

Which loss development factor concept is used in actuarial analysis to project ultimate claim costs from reported losses?

Accepted Answer

Chain-ladder method

Answer

The chain-ladder method uses historical loss development patterns to project reported losses to their ultimate settled values.

Question 5

A workers' compensation claim involves a permanently injured employee. The insurer must reserve for:

Accepted Answer

Future medical costs and indemnity payments over the claim's lifetime

Answer

Permanent injury claims require long-tail reserves covering lifetime medical expenses and ongoing indemnity benefits.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Claims & Loss Analysis 2