CAIA Regulatory Compliance and Ethics 2 — Questions and Answers
Question 1: An adjuster discovers that a claimant's medical bills were inflated by their provider. What is the adjuster's primary ethical obligation?
- Pay the inflated amount to avoid conflict
- Document the discrepancy and refer it to the Special Investigations Unit (Correct answer)
- Deny the entire claim without investigation
- Advise the claimant to find a different provider
Correct answer: Document the discrepancy and refer it to the Special Investigations Unit
Suspected fraud must be documented and referred to the SIU per most state regulations and ethical standards.
Question 2: Under the Unfair Claims Settlement Practices Act, what is the maximum timeframe most states require for acknowledging a claim after receipt?
- 5 business days
- 10 working days (Correct answer)
- 30 calendar days
- 60 calendar days
Correct answer: 10 working days
Most state versions of the UCSPA require acknowledgment within 10 working days of receiving notice of a claim.
Question 3: A state insurance department sends an examiner to audit a claims file. Which adjuster behavior would most likely be cited as a violation?
- Paying a claim within 30 days
- Documenting all claimant communications
- Routinely denying claims without a written explanation (Correct answer)
- Requiring a signed recorded statement
Correct answer: Routinely denying claims without a written explanation
Denying claims without written explanation of the basis violates UCSPA requirements in virtually every state.
Question 4: Which of the following best describes a conflict of interest for an automotive insurance adjuster?
- Inspecting a vehicle at the claimant's home
- Referring a claim to a repair shop where the adjuster owns a financial interest (Correct answer)
- Using a third-party appraisal tool
- Requesting a police report before settling
Correct answer: Referring a claim to a repair shop where the adjuster owns a financial interest
A financial interest in a referred vendor creates a conflict of interest that must be disclosed or avoided.
Question 5: What does the principle of 'utmost good faith' (uberrimae fidei) require of an automotive insurance adjuster?
- Settling all claims above the policy limit
- Acting honestly and disclosing all material facts relevant to the claim (Correct answer)
- Accepting every claim without investigation
- Prioritizing the insurer's financial interests above all else
Correct answer: Acting honestly and disclosing all material facts relevant to the claim
Utmost good faith obligates both parties — including the adjuster — to act honestly and share all relevant information.
Question 6: An adjuster licensed in Texas handles a claim for a vehicle accident that occurred in California. Which state's regulations primarily govern the claims handling process?
- Texas, where the adjuster is licensed
- California, where the loss occurred (Correct answer)
- The state where the insurer is domiciled
- Federal law supersedes all state rules
Correct answer: California, where the loss occurred
Claims handling is generally governed by the law of the state where the loss occurred.
Question 7: Which action by an adjuster would constitute coercion under most state insurance codes?
- Requesting a vehicle inspection before issuing payment
- Threatening to cancel a policyholder's coverage unless they accept a lowball settlement (Correct answer)
- Requiring proof of ownership before paying a total loss
- Sending a reservation of rights letter
Correct answer: Threatening to cancel a policyholder's coverage unless they accept a lowball settlement
Threatening adverse policy actions to force a claimant to accept an inadequate settlement is coercion, an unfair trade practice.
CAIA Regulatory Compliance and Ethics 2
An adjuster discovers that a claimant's medical bills were inflated by their provider.
What is the adjuster's primary ethical obligation?