Insurance Quality Control & Assurance 5 — Questions and Answers
Question 1: Which of the following scenarios represents a 'proactive' quality assurance approach in insurance?
- Reviewing claims after a market conduct exam reveals deficiencies
- Building automated compliance checks into the claims system before errors occur (Correct answer)
- Responding to policyholder complaints with corrective action
- Auditing files only after a lawsuit is filed
Correct answer: Building automated compliance checks into the claims system before errors occur
Proactive QA prevents errors by embedding controls at the point of decision-making rather than discovering them after the fact.
Question 2: An insurer's QA program shows a high rate of 'reserve adequacy' errors. This most directly affects:
- Marketing budget allocations
- The accuracy of the company's financial statements and solvency reporting (Correct answer)
- Agent licensing renewal timelines
- The number of new policies issued
Correct answer: The accuracy of the company's financial statements and solvency reporting
Inadequate reserves misstate liabilities on financial statements and can jeopardize an insurer's reported solvency position.
Question 3: Under ISO 9001 quality management standards, which element is central to a quality management system (QMS)?
- Maximizing shareholder dividends
- Continuous improvement through the Plan-Do-Check-Act (PDCA) cycle (Correct answer)
- Eliminating all customer complaints immediately
- Outsourcing all non-core functions
Correct answer: Continuous improvement through the Plan-Do-Check-Act (PDCA) cycle
ISO 9001 is built around the PDCA cycle, which drives ongoing evaluation and improvement of quality processes.
Question 4: A 'peer review' QA model in insurance means:
- Management reviews all files before payment
- Adjusters review each other's claim files to provide feedback and identify errors (Correct answer)
- An outside law firm reviews all denied claims
- A reinsurer audits primary carrier files
Correct answer: Adjusters review each other's claim files to provide feedback and identify errors
Peer review leverages adjuster expertise by having colleagues evaluate each other's work, promoting knowledge sharing and catching errors.
Question 5: Which of the following best illustrates 'benchmarking' as a QA tool in insurance?
- Setting internal goals based solely on last year's results
- Comparing your claims closure rates against industry averages or best-in-class competitors (Correct answer)
- Reviewing only the largest claims each quarter
- Auditing only catastrophe claims following a hurricane
Correct answer: Comparing your claims closure rates against industry averages or best-in-class competitors
Benchmarking evaluates performance relative to external standards or competitors, providing context that purely internal metrics cannot.
Question 6: When a state insurance department issues a 'cease and desist' order related to claims practices, the insurer's QA department's immediate role should be to:
- File an appeal without reviewing internal processes
- Conduct an urgent internal audit to identify the scope of non-compliant practices and implement remediation (Correct answer)
- Reduce claim payments to offset potential fines
- Transfer all claim files to outside counsel
Correct answer: Conduct an urgent internal audit to identify the scope of non-compliant practices and implement remediation
A cease and desist triggers an immediate internal review to understand where practices failed and enact controls to prevent recurrence.
Question 7: Which data point would a QA manager most likely monitor to detect potential bad faith claims handling?
- Number of agents appointed in a state
- Rate of claims where investigation exceeded statutory response deadlines (Correct answer)
- Average premium collected per policy
- Number of new policy applications received monthly
Correct answer: Rate of claims where investigation exceeded statutory response deadlines
Consistently missing statutory response deadlines can constitute bad faith, making deadline compliance a critical QA indicator.
Insurance Quality Control & Assurance 5
Which of the following scenarios represents a 'proactive' quality assurance approach in insurance?