AIC PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ Internet of Things (IoT).
Answer: A network of objects that transmit data to each other and to central
hubs through the internet
◍ An insurer's management team is evaluating the organization's financial
wellbeing and wants to determine whether the Claims Department is
functioning properly, whether the Underwriting Department is selecting
appropriate loss exposures, and whether the Actuarial Department is pricing
the insurance products correctly. What is the profitability measure that can
help management make these determinations?.
Answer: The loss ratio can help the management team make these
determinations. The loss ratio compares an insurer's losses and LAE to its
collected premiums and reveals the percentage of premiums being
consumed by losses.
◍ Mia tracks loss adjustment expense (LAE) as part of her management of the
claims department for an insurer. Mia considers LAE to be the.
Answer: Cost to investigate, defend, and settle claims
◍ Telematics.
Answer: The use of technological devices to transmit data via wireless
communication and GPS tracking
◍ Producer.
Answer: Plain-English: Agent, broker, or intermediary who places
insurance.• Why it matters: May receive summons and complaint first.•
Real-world: Insured forwards lawsuit to producer.• Memory Hack: Producer
Produces Policies
◍ As methods of communication evolve, it's important for claims
, professionals to remember that any written claims communication may be.
Answer: Subpoenaed
◍ What is a Public Adjuster?.
Answer: A professional hired by the insured to represent their interests in a
claim negotiation.Why it matters: They protect the insured, not the
insurer.Example: Insured unhappy with settlement → hires public
adjuster. Memory Hack: Public Adjuster = "Protect the Policyholder"
◍ Which one of the following methods of establishing case reserves is used
most often when there are small variations in loss size for a particular type
of claim?.
Answer: Average value method
◍ Premium Audit.
Answer: • Plain-English: Post-policy review adjusting premium based on
actual exposure.• Why it matters: Ensures insurer collected correct
premium.• Real-world: WC payroll higher than estimated → additional
premium.• Memory Hack: Estimate Now, Audit Later
◍ What are the basic techniques of data mining?.
Answer: • Classification—Categorizing members of a dataset based on
known characteristics. • Regression analysis—A statistical technique that
predicts a numerical value given characteristics of each member of a dataset.
• Association rule learning—Examining data to discover new and interesting
relationships. • Cluster analysis—Using statistical methods, a computer
program explores data to find groups with common and previously unknown
characteristics.
◍ Formula method.
Answer: A method of setting claims reserves be using a mathematical
formula
◍ Punitive Damages.
Answer: • Definition: Damages meant to punish the wrongdoer for reckless,
malicious, or intentional misconduct.• Why it matters: Often excluded under
, policies. Major coverage issue.• Example: Drunk driver racing at 90 mph
causes catastrophic injury.• Memory Hack: Punitive = Punish.
◍ Root node.
Answer: The first node in a classification tree
◍ Soft fraud occurs when a claim is exaggerated and is also referred to as.
Answer: Opportunity fraud
◍ The NAIC model act specifies that its provisions regarding bad-faith claims
are to be enforced by.
Answer: State insurance departments
◍ Which one of the following methods of establishing case reserves involves a
consensus among multiple claims reps?.
Answer: Roundtable method
◍ Reserve.
Answer: The amount the insurer estimates and sets aside to pay on an
existing claim
◍ Antonia has a general liability policy with a self-insured retention of
$50,000. The policy has an occurrence limit of $250,000 and an aggregate
limit of $500,000. She had submitted one prior claim this policy term for
which $100,000 was paid by the insurer. How much will Antonia's insurer
pay on a subsequent claim under the same policy period that is valued at
$400,000?.
Answer: $250,000
◍ Aaron works for a multi-line insurer. He works with insurance producers
and applicants to evaluate new business submissions and conduct renewal
underwriting. Aaron is a.
Answer: Line underwriter
◍ Linnea, a new claims representative, wants to know what elements should
be reflected in claims file status notes? What would you tell her?.
Answer: • Clear, concise, and accurate information • Timely claims handling
, • A fair and balanced investigation that considers the insured's and insurer's
interests • Objective comments about the insurer, insured, or other parties
associated with the claim • A thorough good-faith investigation
◍ One of Juan's responsibilities as a claims representative is to prepare internal
reports, such as preliminary, interim, large loss, and captioned. Which one
of the reports Juan prepares is required for claims with reserves that exceed
a specified threshold?.
Answer: Large loss
◍ Average value method.
Answer: A case reserving method that establishes a predetermined dollar
amount of reserve for each claim as it is reported
◍ Leila was recently hired as a claims representative for an insurer. How will
Leila help underwriters, and how will underwriters rely on Leila?.
Answer: It helps underwriters by ensuring that claims are paid fairly and
according to their respective policy. The Claims Department relies on
underwriters for thorough, accurate data about the circumstances under
which coverage was written
◍ Information Gain.
Answer: Plain-English: Measures how much an attribute improves claim
classification accuracy.• Why it matters: Helps identify complex claims
early.• Real-world: Injury type improves prediction of claim complexity.•
Memory Hack: Gain = How Much It Helps the Guess
◍ Why does Emma, a claims representative, need to understand the
importance of ethics in good-faith claims handling?.
Answer: Emma should understand that ethics is particularly important in
good-faith claims handling because she may face numerous ethical
dilemmas while trying to balance the interests of her customers, the insureds
and claimants, and those of the insurer, who is her employer.
◍ In liability claims, the claims rep will require an authorization from the
injured party to.
QUESTIONS WITH ANSWERS GRADED A+
◍ Internet of Things (IoT).
Answer: A network of objects that transmit data to each other and to central
hubs through the internet
◍ An insurer's management team is evaluating the organization's financial
wellbeing and wants to determine whether the Claims Department is
functioning properly, whether the Underwriting Department is selecting
appropriate loss exposures, and whether the Actuarial Department is pricing
the insurance products correctly. What is the profitability measure that can
help management make these determinations?.
Answer: The loss ratio can help the management team make these
determinations. The loss ratio compares an insurer's losses and LAE to its
collected premiums and reveals the percentage of premiums being
consumed by losses.
◍ Mia tracks loss adjustment expense (LAE) as part of her management of the
claims department for an insurer. Mia considers LAE to be the.
Answer: Cost to investigate, defend, and settle claims
◍ Telematics.
Answer: The use of technological devices to transmit data via wireless
communication and GPS tracking
◍ Producer.
Answer: Plain-English: Agent, broker, or intermediary who places
insurance.• Why it matters: May receive summons and complaint first.•
Real-world: Insured forwards lawsuit to producer.• Memory Hack: Producer
Produces Policies
◍ As methods of communication evolve, it's important for claims
, professionals to remember that any written claims communication may be.
Answer: Subpoenaed
◍ What is a Public Adjuster?.
Answer: A professional hired by the insured to represent their interests in a
claim negotiation.Why it matters: They protect the insured, not the
insurer.Example: Insured unhappy with settlement → hires public
adjuster. Memory Hack: Public Adjuster = "Protect the Policyholder"
◍ Which one of the following methods of establishing case reserves is used
most often when there are small variations in loss size for a particular type
of claim?.
Answer: Average value method
◍ Premium Audit.
Answer: • Plain-English: Post-policy review adjusting premium based on
actual exposure.• Why it matters: Ensures insurer collected correct
premium.• Real-world: WC payroll higher than estimated → additional
premium.• Memory Hack: Estimate Now, Audit Later
◍ What are the basic techniques of data mining?.
Answer: • Classification—Categorizing members of a dataset based on
known characteristics. • Regression analysis—A statistical technique that
predicts a numerical value given characteristics of each member of a dataset.
• Association rule learning—Examining data to discover new and interesting
relationships. • Cluster analysis—Using statistical methods, a computer
program explores data to find groups with common and previously unknown
characteristics.
◍ Formula method.
Answer: A method of setting claims reserves be using a mathematical
formula
◍ Punitive Damages.
Answer: • Definition: Damages meant to punish the wrongdoer for reckless,
malicious, or intentional misconduct.• Why it matters: Often excluded under
, policies. Major coverage issue.• Example: Drunk driver racing at 90 mph
causes catastrophic injury.• Memory Hack: Punitive = Punish.
◍ Root node.
Answer: The first node in a classification tree
◍ Soft fraud occurs when a claim is exaggerated and is also referred to as.
Answer: Opportunity fraud
◍ The NAIC model act specifies that its provisions regarding bad-faith claims
are to be enforced by.
Answer: State insurance departments
◍ Which one of the following methods of establishing case reserves involves a
consensus among multiple claims reps?.
Answer: Roundtable method
◍ Reserve.
Answer: The amount the insurer estimates and sets aside to pay on an
existing claim
◍ Antonia has a general liability policy with a self-insured retention of
$50,000. The policy has an occurrence limit of $250,000 and an aggregate
limit of $500,000. She had submitted one prior claim this policy term for
which $100,000 was paid by the insurer. How much will Antonia's insurer
pay on a subsequent claim under the same policy period that is valued at
$400,000?.
Answer: $250,000
◍ Aaron works for a multi-line insurer. He works with insurance producers
and applicants to evaluate new business submissions and conduct renewal
underwriting. Aaron is a.
Answer: Line underwriter
◍ Linnea, a new claims representative, wants to know what elements should
be reflected in claims file status notes? What would you tell her?.
Answer: • Clear, concise, and accurate information • Timely claims handling
, • A fair and balanced investigation that considers the insured's and insurer's
interests • Objective comments about the insurer, insured, or other parties
associated with the claim • A thorough good-faith investigation
◍ One of Juan's responsibilities as a claims representative is to prepare internal
reports, such as preliminary, interim, large loss, and captioned. Which one
of the reports Juan prepares is required for claims with reserves that exceed
a specified threshold?.
Answer: Large loss
◍ Average value method.
Answer: A case reserving method that establishes a predetermined dollar
amount of reserve for each claim as it is reported
◍ Leila was recently hired as a claims representative for an insurer. How will
Leila help underwriters, and how will underwriters rely on Leila?.
Answer: It helps underwriters by ensuring that claims are paid fairly and
according to their respective policy. The Claims Department relies on
underwriters for thorough, accurate data about the circumstances under
which coverage was written
◍ Information Gain.
Answer: Plain-English: Measures how much an attribute improves claim
classification accuracy.• Why it matters: Helps identify complex claims
early.• Real-world: Injury type improves prediction of claim complexity.•
Memory Hack: Gain = How Much It Helps the Guess
◍ Why does Emma, a claims representative, need to understand the
importance of ethics in good-faith claims handling?.
Answer: Emma should understand that ethics is particularly important in
good-faith claims handling because she may face numerous ethical
dilemmas while trying to balance the interests of her customers, the insureds
and claimants, and those of the insurer, who is her employer.
◍ In liability claims, the claims rep will require an authorization from the
injured party to.
