CU Claims & Loss Analysis 3

Question 1

A liability insurer pays defense costs that erode the policy limit. This is known as:

Accepted Answer

Defense within limits or 'burning limits' coverage

Answer

Defense within limits (burning limits) policies reduce the available indemnity limit as defense costs are paid, unlike supplementary payment provisions.

Question 2

The incurred but not reported (IBNR) reserve represents:

Accepted Answer

Losses that have occurred but haven't yet been reported to the insurer

Answer

IBNR reserves account for losses that have already occurred in the real world but haven't yet been reported to the insurance company.

Question 3

Which of the following best describes 'severity' in claims analysis?

Accepted Answer

The average cost per claim

Answer

Claim severity measures the average dollar amount per claim, while frequency measures the number of claims.

Question 4

A property claim involves both structural damage and business interruption. Which valuation approach applies to the business interruption portion?

Accepted Answer

Net profit plus continuing fixed expenses

Answer

Business interruption losses are typically measured as net profit that would have been earned plus continuing fixed expenses during the interruption period.

Question 5

In claims-made liability policies, the 'retroactive date' serves to:

Accepted Answer

Eliminate coverage for losses occurring before that date

Answer

The retroactive date bars coverage for claims arising from incidents that occurred before that date, even if reported during the policy period.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Claims & Loss Analysis 3