Insurance Technology & Digital Applications 3 — Questions and Answers
Question 1: What is the purpose of a digital Certificate of Insurance (COI)?
- To provide electronic proof of coverage that can be shared instantly with third parties (Correct answer)
- To replace the actual insurance policy contract
- To authorize automatic claim payments
- To serve as a premium receipt only
Correct answer: To provide electronic proof of coverage that can be shared instantly with third parties
A digital COI is an electronic document summarizing key policy details, allowing policyholders to quickly verify coverage with lenders, landlords, or clients.
Question 2: How does blockchain technology enhance transparency in insurance claims?
- By creating an immutable, shared ledger that all authorized parties can audit (Correct answer)
- By automatically settling all claims without human review
- By encrypting data so only the insurer can view it
- By replacing state guaranty funds
Correct answer: By creating an immutable, shared ledger that all authorized parties can audit
Blockchain's distributed ledger records claim events in a tamper-proof way, reducing fraud and disputes by giving all parties a single verifiable record.
Question 3: What is 'straight-through processing' in insurance claims?
- Automated claim adjudication from first notice of loss to payment with minimal human intervention (Correct answer)
- Manual review of every claim by a senior adjuster
- A process requiring three separate approval signatures
- Filing claims through a paper mail system
Correct answer: Automated claim adjudication from first notice of loss to payment with minimal human intervention
Straight-through processing uses rules engines and AI to handle routine claims end-to-end automatically, dramatically cutting settlement time.
Question 4: Which cyber liability coverage component pays for notifying customers after a data breach?
- Notification and crisis management coverage (Correct answer)
- Professional liability endorsement
- Business interruption only
- Umbrella liability
Correct answer: Notification and crisis management coverage
Notification and crisis management coverage reimburses the cost of mandatory breach notifications, credit monitoring services, and public relations expenses.
Question 5: An insurer's mobile app allows policyholders to file claims via photo submission. What technology underpins automated damage assessment in this workflow?
- Computer vision and machine learning models trained on damage images (Correct answer)
- Manual review by offshore adjusters only
- Blockchain smart contracts
- GPS triangulation
Correct answer: Computer vision and machine learning models trained on damage images
Computer vision AI analyzes submitted photos to estimate repair costs, enabling faster preliminary assessments without an in-person inspection.
Question 6: Which term describes the practice of insurers selling coverage entirely online without agent involvement?
- Direct-to-consumer (DTC) distribution (Correct answer)
- Reinsurance treaty placement
- Broker of record arrangement
- MGA delegated authority
Correct answer: Direct-to-consumer (DTC) distribution
DTC distribution lets consumers obtain quotes, bind coverage, and manage policies entirely through digital channels without an intermediary agent.
Question 7: What is a key compliance risk when insurers use external data sources (social media, IoT) in underwriting?
- Using prohibited rating factors that violate state insurance regulations (Correct answer)
- Reducing the number of available coverage options
- Increasing agent commissions unnecessarily
- Lowering overall claims costs
Correct answer: Using prohibited rating factors that violate state insurance regulations
External data may inadvertently incorporate race, religion, or other prohibited factors, exposing the insurer to regulatory penalties and discrimination claims.
Insurance Technology & Digital Applications 3
What is the purpose of a digital Certificate of Insurance (COI)?