Insurance Technology & Digital Applications 2 — Questions and Answers
Question 1: What is telematics in the context of auto insurance?
- A system that remotely monitors driving behavior to adjust premiums (Correct answer)
- Software that processes claims automatically
- A GPS tool used by adjusters to locate accident sites
- A digital platform for purchasing coverage online
Correct answer: A system that remotely monitors driving behavior to adjust premiums
Telematics uses onboard devices or smartphone apps to track driving data like speed and braking, allowing insurers to offer usage-based pricing.
Question 2: Which regulation primarily governs how insurers must protect policyholders' personal data in the United States?
- The Gramm-Leach-Bliley Act (GLBA) (Correct answer)
- The Sherman Antitrust Act
- The Fair Credit Reporting Act only
- The Securities Exchange Act
Correct answer: The Gramm-Leach-Bliley Act (GLBA)
The GLBA requires financial institutions, including insurers, to safeguard consumers' nonpublic personal information and provide privacy notices.
Question 3: An insurer uses an algorithm that automatically approves or denies life insurance applications. Which AI concern does this raise most directly?
- Algorithmic bias potentially discriminating against protected classes (Correct answer)
- Excessive premium transparency
- Underwriting staff layoffs only
- Reduced policy portability
Correct answer: Algorithmic bias potentially discriminating against protected classes
Automated underwriting algorithms can embed historical biases, leading to discriminatory outcomes for protected classes if not carefully audited.
Question 4: What does 'API integration' allow in modern insurance ecosystems?
- Different software systems to share data and functions in real time (Correct answer)
- Agents to bypass underwriting guidelines
- Policyholders to self-adjust coverage limits
- Claims to be paid without adjuster review
Correct answer: Different software systems to share data and functions in real time
APIs (Application Programming Interfaces) enable insurers, agents, and third-party vendors to connect systems seamlessly for quotes, billing, and claims.
Question 5: A homeowner's insurer deploys drones after a hurricane. What is the primary advantage for claims handling?
- Faster, safer roof inspections without requiring an adjuster on the damaged property (Correct answer)
- Eliminating the need for written proof of loss
- Automatically generating policy renewals
- Bypassing state catastrophe reporting requirements
Correct answer: Faster, safer roof inspections without requiring an adjuster on the damaged property
Drones allow rapid aerial imaging of storm-damaged roofs, speeding up the claims process while keeping adjusters safe.
Question 6: Which best describes 'InsurTech'?
- Startups and technology innovations designed to disrupt or improve the insurance industry (Correct answer)
- Government technology agencies that regulate insurance carriers
- Internal IT departments within traditional carriers only
- A federal database of policyholder records
Correct answer: Startups and technology innovations designed to disrupt or improve the insurance industry
InsurTech refers to companies and innovations using technology—AI, IoT, blockchain—to modernize insurance distribution, underwriting, and claims.
Question 7: A health insurer uses wearable device data to offer premium discounts. Which ethical concern is most relevant?
- Privacy invasion and potential penalization of individuals with chronic conditions (Correct answer)
- Reduction in claim frequency only
- Over-reliance on paper-based records
- Elimination of deductibles
Correct answer: Privacy invasion and potential penalization of individuals with chronic conditions
Continuous biometric monitoring raises concerns about data misuse and unfair treatment of people whose health conditions are beyond their control.
Insurance Technology & Digital Applications 2
What is telematics in the context of auto insurance?