AIC flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Social inflation
- A rise in claim severity caused by larger jury awards, third-party litigation funding, and attorney advertising that outpaces growth in general economic inflation.
- Nuclear verdict
- A jury award far above expected damages, often exceeding ten million dollars, that increases reserve requirements and settlement pressure in liability claims.
- Special investigation unit
- A claims team that investigates suspected fraud using red flags and analytics, then refers cases to regulators or prosecutors when evidence supports it.
- Claim frequency
- The number of claims divided by exposure units for a period; it measures how often losses occur and combines with severity to project total loss costs.
- Claim severity
- Total incurred losses divided by the number of claims; it expresses average cost per claim and drives reserve adequacy and pricing analysis.
- LAE ratio
- Loss adjustment expense divided by incurred losses; it shows how much it costs to handle each dollar of claim and is a key efficiency measure.
- Unfair claims practices act
- State law based on an NAIC model that prohibits conduct such as misrepresenting policy provisions, unreasonable delay, and failing to explain the basis for a denial.
- Market conduct examination
- A regulator's structured review of claim files, practices, and records to test compliance with state law, which can lead to fines and corrective action plans.
- Telematics in claims
- Vehicle sensor data on speed, braking, and location used to reconstruct accidents, verify vehicle usage, and support fraud detection and usage-based insurance.
- Catastrophe response plan
- Pre-agreed staffing, vendor, and communication protocols triggered by a declared event so claim volume surges are handled without service breakdown.
- Predictive claim triage
- Use of statistical models at first notice of loss to route claims by predicted severity, subrogation potential, or likelihood of fraud.
- IBNR reserves
- Incurred but not reported reserves estimate the cost of claims that have already occurred but are not yet known or recorded by the insurer.
- Case reserve
- An adjuster's estimate of the ultimate cost of a specific known claim, updated as investigation reveals liability and damage facts.
- Total cost of risk
- The sum of insurance premiums, retained losses, risk control spending, and administrative costs; claims results directly affect this total.
- Subrogation
- An insurer's right to recover paid claim amounts from the party legally responsible, standing in the insured's shoes after payment.
- Panel counsel
- A pre-approved group of law firms retained under negotiated rates and service guidelines to defend claims for an insurer.
- Early case assessment
- A structured evaluation of liability, damages, and defense strategy completed soon after suit is filed to set reserves and plan the defense.
- Third-party administrator
- An outside firm contracted to perform claims handling functions, monitored through service-level agreements, scorecards, and file audits.
- Claims scorecard
- A dashboard of measures such as cycle time, severity, expense ratio, and recovery rates used to evaluate adjuster and vendor performance.
- Reinsurance cession
- The portion of a loss transferred to a reinsurer under treaty or facultative agreement, which creates notice and documentation duties for claims staff.
- Alternative dispute resolution
- Mediation or arbitration used instead of trial to resolve claims faster and at lower cost while preserving confidentiality and party control.
- Claims as value creator
- The view that claims work generates value through recovery, expense control, retention, and loss-prevention feedback rather than only paying losses.
- Utilitarian test
- A consequentialist framework that judges an action by its results, choosing the option that produces the greatest net benefit for the most people.
- Deontological ethics
- A duty-based framework holding that certain actions are right or wrong regardless of outcome, grounded in rules and respect for persons.
- Virtue ethics
- A framework focused on the character of the decision maker, asking what a person of good character and practical wisdom would do.
- Publicity test
- An ethical check asking whether you would be comfortable if your decision were published or known by family, employer, regulators, and the public.
- Conflict of interest
- A situation in which a personal, financial, or other interest could improperly influence professional judgment, requiring disclosure and active management.
- Fiduciary duty
- A legal and ethical obligation to act in another party's best interest, including loyalty, disclosure, confidentiality, and reasonable care and competence.
- Bad faith claim handling
- Breach of the implied covenant of good faith and fair dealing, which can expose an insurer to damages beyond the policy limits.
- Confidentiality exception
- A circumstance allowing disclosure of client information, such as legal compulsion, client consent, or preventing serious harm to others.
- Ethical decision model
- A repeatable sequence: gather facts, identify stakeholders and standards, list options, evaluate them, decide, act, document, and review the outcome.
- Moral hazard
- The tendency of insureds to take more risk or exaggerate losses because insurance protects them from the full consequences of loss.