Los Angeles Claims Adjuster Property and Causality Practice Exam

How often are reserves reviewed as a claim progresses?

1. Once a month

2. At the time of loss only

3. Continuously

4. At the point of policy renewal

The correct answer is: Continuously

Reserves are reviewed continuously as a claim progresses in order to ensure that the funds set aside for a claim are adequate and accurately reflect the current circumstances of the case. This ongoing assessment allows claims adjusters to take into account new information, changes in the claim status, and evolving costs associated with the claim. Continuous review is critical for effective claims management because it helps identify any adjustments needed in case estimates. This could involve increasing reserves if additional damages or legal complexities emerge, or decreasing them if claims are resolved more efficiently than anticipated. By maintaining a dynamic reserve strategy, insurance companies can better manage their financial exposure and ensure that they are prepared to address the claim fully as it unfolds. In contrast, a review solely at the time of loss or limited to certain predefined periods, such as the policy renewal frequency, would not provide the flexibility needed to adapt to the various developments that can occur during the claims process. Regular reviews, rather than fixed timelines, support more precise financial planning and risk management for the insurer.