AIC cheat sheet

Claim frequency = number of claims ÷ exposure units; severity = incurred losses ÷ number of claims; expected loss cost = frequency × severity.

LAE ratio = loss adjustment expense ÷ incurred losses; total claims cost = paid losses + loss reserves + LAE.

Social inflation raises claim severity through larger jury awards, third-party litigation funding, attorney advertising, and broader case framing; it is measured separately from economic inflation.

Catastrophe management runs in phases - preparedness, response, recovery, review - with pre-agreed surge staffing, vendor panels, and communication channels triggered by a declared event.

Fraud red flags include a claim filed shortly after inception, prior loss history, missing or altered documentation, and resistance to inspection; a pattern of indicators plus evidence triggers SIU referral.

State unfair claims practices acts, modeled on NAIC language, prohibit misrepresenting policy provisions, unreasonable delay, failure to affirm or deny within a reasonable time, and failing to explain the basis for a denial.

Claims technology set: drones and satellite imagery for property damage, photo-based AI estimating, telematics for auto liability, and predictive models for triage, subrogation scoring, and fraud detection.

Market conduct examinations sample claim files for compliance; findings produce fines, corrective action plans, reputational harm, and pricing impact.

Workforce risk comes from retiring adjusters and thin bench depth; mitigations include knowledge transfer, blended staffing with catastrophe independents, and competency-based licensing and continuing education.

Total cost of risk = insurance premiums + retained losses + risk control spending + administrative costs; claims results lower it through recovery, expense control, and loss-prevention feedback.

Total reserves = case reserves + IBNR; IBNR is estimated with loss development triangles and expected loss ratios, then tested for adequacy.

Subrogation decision rule: pursue when expected recovery exceeds handling cost, liability evidence is preserved, and the limitation period is tracked from the date of loss.

Claims KPIs: frequency, severity, report-to-close cycle time, LAE ratio, closure rate, recovery dollars, litigation rate, and customer retention or satisfaction scores.

Litigation management levers: panel counsel with negotiated rates, early case assessment, written litigation plans and budgets, and ADR (mediation or arbitration) before trial.

TPA oversight uses service-level agreements, scorecards, file audits, and stewardship reports; accountability for the claim stays with the insurer even when handling is outsourced.

Claims data feeds underwriting and actuarial pricing through loss trends, large-loss reports, and risk-quality feedback - the claims-to-underwriting feedback loop.

Reinsurance cessions require timely notice, proper documentation, and adherence to treaty terms; ceded recoverables are balance-sheet assets that must be billed and collected.

Claim audits, internal or external, sample files for reserve adequacy, coverage analysis, documentation quality, and compliance; results set training priorities and adjuster authority limits.

Law sets the minimum standard of conduct; ethics asks whether an act is fair, honest, and in the client's interest even when it is legally permitted.

Three core frameworks: consequentialism/utilitarianism (judge by outcomes), deontology (judge by duties and rules), and virtue ethics (judge by the character of the actor).

Practical tests include publicity (front-page), golden rule, mirror, best-friend, and 'would my manager approve'; failing any test signals the decision needs re-examination before acting.

Ethical decision model: identify facts, stakeholders, and applicable standards; list and evaluate options; decide; act; document; review the result.

Fiduciary duty components: loyalty, obedience to lawful instructions, full disclosure of material facts, confidentiality, accounting for funds, and reasonable care and competence.

Conflicts of interest are managed by disclosure, recusal, or independent review; the ethical failure is the undisclosed conflict, not the existence of the conflict.

Unfair claims practices: misrepresenting coverage, unreasonable delay, failure to conduct a reasonable investigation, offering substantially less than is owed, and failing to explain denial reasons.

Bad faith exposure arises from breach of the implied covenant of good faith and fair dealing and can produce extra-contractual damages beyond policy limits.

Gifts and entertainment: accept only nominal value, never during an active negotiation or claim decision, and always within employer policy and disclosure requirements.