Study 3 Flashcards
(15 cards)
How is a report that compares indemnity payments to earned premiums useful to management?
a. It shows the company’s financial health.
b. It confirms the claims department’s effectiveness.
c. It reveals any shortcomings in the company’s strategies.
d. It demonstrates the claims department’s commitment to company goals.
a. It shows the company’s financial health.
A report that compares indemnity payments to earned premiums demonstrates a loss ratio that is useful to all managers because it is a way to show how well the company is doing financially.
What best describes a quantitative measure?
a. It is always objective.
b. It is stated numerically.
c. It is unchanging.
d. It is used by management.
b.It is stated numerically.
Quantitative measures are stated numerically, so managers tend to think they are objective, but there is a need for subjective reasoning to determine whether the number is reasonable based on the type and level of investigation sought.
Why do insurers use various control protocols for file documentation?
a. To reduce the amount of paper used
b. To minimize storage space
c. To encourage the complete documentation of a file
d. To justify the value of the file
c. To encourage the complete documentation of a file
Various control protocols can be used to encourage the complete documentation of a file and to ensure that the quality of the record is adequate.
What best describes an insurance company’s unallocated expenses?
a. Claims expenses that are unexpected
b. Claims expenses that cannot be allocated to a particular claim
c. Claims expenses that are non-budgeted
d. Claims expenses that cannot be calculated until the end of the year
b. Claims expenses that cannot be allocated to a particular claim
Unallocated expenses are those not allocated to individual files but rather charged to the operating budget of the claims department as a whole.
When an insurance company is decentralizing its operations, what methodology might it choose to prepare the budget?
a. Baseline budget
b. Zero-based approach
c. Performance-based budget
d. Hybrid approach
d. Hybrid approach
There are many internal and external factors that can affect operational costs, such as the need for additional staff to work in decentralized offices. Many companies use a hybrid system of budgeting, which usually involves more than baseline budgeting (using prior years’ budgets) and may include aspects of zero-based budgeting, typically used when opening a new office or expanding the operations, and/or performance-based budgeting.
What is the most cost-effective approach to staffing when managing a gradual change in new business and the resulting potential for new claims?
d. Monitor new claims closely and use both internal adjusters and independent adjusters as the business grows.
When making decisions on what type of adjuster to use on claims, a manager must consider many different aspects around not only the cost but also the service, the familiarity of the business, and reinsurance. With new lines of business, the best approach is to monitor and manage as the business grows.
Deciding what type of adjuster to use on a claim typically involves what types of consideration?
a. Hiring process, customer preference, broker involvement
b. Next adjuster on the list of suppliers, local resources, number of claims received that month
c. Volume of claims, long- and short-term effects, and familiarity with wordings and line of business
d. Number of policies written, the amount of premium, the broker’s preference
c. Volume of claims, long- and short-term effects, and familiarity with wordings and line of business
Typically, to make the decision on whether to use independent or staff adjusters and, therefore, how much to budget for expenses, an insurer will examine the following aspects: expected claims volume, long- and short-term effects, and familiarity with wording and procedures.
Typically, when the objectives of a supplier management program are met, what does the insurer do?
a. Fulfills its policy obligations to the customer
b. Reduces its employee costs
c. Increases its future growth targets
d. Makes the reinsurers happy
a. Fulfills its policy obligations to the customer
Typically, when these objectives are met, the contractual conditions are fulfilled, the insurer has managed its loss costs, and the policyholder experiences enhanced claims service, enabling the insurer to meet its promise for claims excellence.
Which tool do insurers use to control fraud?
a. Employing police officers
b. Allowing adjusters to become cynical
c. Reviewing social media sites
d. Having managers review all files
c. Reviewing social media sites
Social media has become an important element in the fight against insurance fraud. Sites allow an adjuster, if lucky, to access pictures and timeline posts of what the insured is doing.
Why do insurers use various control protocols for file documentation?
a. To reduce the amount of paper used
b. To minimize storage space
c. To encourage the complete documentation of a file
d. To justify the value of the file
c.To encourage the complete documentation of a file
Various control protocols can be used to encourage the complete documentation of a file and to ensure that the quality of the record is adequate.
Where does the Investigative Services Division operate?
a. As the risk management division of the insurance company
b. As part of local police forces
c. As a department within the RCMP
d. As a division of the IBC
d.As a division of the IBC
The Investigative Services Division operates under the umbrella of the Insurance Bureau of Canada (IBC).
When would you use an independent adjuster?
When it’s in a rural area
To handle more complex claims.
When you have a specific type of claim.
When it is a remote area
To meet the customer’s needs
For specific typees of claims where expertise is needed
Hiring and training staff is too cumbersome
When does it make sense to use a staff Adjuster
Locally, where the highest frequencies of claims occure
Handle routine cliams
Used in areas with high frequency of claims
Easer to install a claimes philosophy in staff than independet adjusters.
Save on allocated expenses.
When it comes to decision making staff v independent appraisers what should be considered?
Expected volume of claims
Long tern nd short term effects.
Familiarity with wording and procedure
Outcome
Compare allocated expenses to unallocated expenses. Provide one example for each type of expense.
Allocated expenses are paid by the claims. Handler on a particular file.
While unallocated expenses are charged to the operation budget department as a whole, not to a particular file.
For example, for an allocated expense, you could say Engineers fee, defense, fee, appraisal, fee.
an example of unallicated expenses could be salaries or furniture, education, rent.
