RIBO Claims Management and Handling 1 — Questions and Answers
Question 1: When a client notifies a broker of a potential claim, what is the broker's primary responsibility?
- Advise the client to contact the insurer directly without broker involvement
- Document the claim details and promptly notify the insurer on behalf of the client (Correct answer)
- Wait to confirm the claim is valid before taking any action
- Refer the client immediately to a public adjuster
Correct answer: Document the claim details and promptly notify the insurer on behalf of the client
The broker must document the claim and promptly notify the insurer to protect the client's interests and ensure timely processing under the policy.
Question 2: What is subrogation in the context of insurance claims?
- The insurer's right to cancel a policy after a major claim is paid
- The insurer's right to pursue a negligent third party to recover claim payments made to the insured (Correct answer)
- The insured's right to claim the same loss from multiple insurers simultaneously
- The process of reducing a claim payment to account for depreciation
Correct answer: The insurer's right to pursue a negligent third party to recover claim payments made to the insured
Subrogation transfers the insured's right of recovery against a negligent third party to the insurer after the insurer has paid the claim.
Question 3: Under the Ontario Insurance Act, what is a 'Proof of Loss'?
- A document proving the insured has paid all premiums on time
- A statutory sworn statement the insured must submit detailing the circumstances and amount of a loss (Correct answer)
- An insurer's written confirmation that a valid policy exists at the time of loss
- A certificate issued by the adjuster confirming the claim settlement amount
Correct answer: A statutory sworn statement the insured must submit detailing the circumstances and amount of a loss
A Proof of Loss is a sworn statement required by the Ontario Insurance Act's Statutory Conditions that the insured must submit within 60 days of the loss, detailing the facts and amount claimed.
Question 4: What is the primary role of an insurance adjuster in the claims process?
- To sell additional coverages to the claimant following a loss
- To investigate the loss, evaluate damages, and negotiate a fair settlement on behalf of the insurer (Correct answer)
- To determine whether a policy should be cancelled following a claim
- To collect outstanding premiums from the policyholder before processing a claim
Correct answer: To investigate the loss, evaluate damages, and negotiate a fair settlement on behalf of the insurer
An adjuster's role is to investigate the facts, assess the value of the loss, and negotiate a settlement that is fair and consistent with the policy terms.
Question 5: What does the principle of 'indemnity' mean in insurance?
- Paying the insured more than their actual loss to incentivize risk prevention
- Restoring the insured to the same financial position they were in immediately before the loss (Correct answer)
- Providing the insured with a financial profit following a covered loss
- Reimbursing the insured for anticipated future losses based on current values
Correct answer: Restoring the insured to the same financial position they were in immediately before the loss
The principle of indemnity ensures the insured is neither better nor worse off financially after a loss—they are simply restored to their pre-loss position.
Question 6: In property insurance claims, what is 'betterment'?
- A premium discount applied to policies with no claims history
- A deduction applied when repairs or replacements improve the property beyond its pre-loss condition (Correct answer)
- Additional coverage automatically provided for property improvements after a loss
- The increased market value of a property after a claim has been fully settled
Correct answer: A deduction applied when repairs or replacements improve the property beyond its pre-loss condition
Betterment is applied to prevent the insured from profiting from a loss—if new materials replace old ones, the insurer deducts the value of the improvement consistent with the indemnity principle.
Question 7: What is the primary purpose of a deductible in an insurance policy?
- To penalize the insured financially for reporting any type of claim
- To share risk between the insurer and insured and discourage small or frivolous claims (Correct answer)
- To cover the adjuster's investigation and travel costs for each claim filed
- To fund the insurer's general operating and administrative expenses
Correct answer: To share risk between the insurer and insured and discourage small or frivolous claims
A deductible requires the insured to absorb the first portion of each loss, promoting shared responsibility and reducing the frequency of minor claims.
RIBO Claims Management and Handling 1
When a client notifies a broker of a potential claim, what is the broker's primary responsibility?