Texas Adjuster Practice Test

What does loss history indicate about an insured?

1. Their payment history

2. The quality of their insurance policy

3. Their propensity for future claims

4. The efficiency of their claims handling

The correct answer is: Their propensity for future claims

Loss history refers to the record of claims that an insured has made in the past, reflecting the nature and frequency of those claims. This information is critical for insurance providers when assessing risk and determining premiums for future policies. A comprehensive loss history can indicate how likely an insured is to file claims in the future based on their past behavior. When an insured has a history of frequent or severe claims, it suggests a higher likelihood that they will continue to file claims moving forward. This propensity for future claims can affect not only the risk assessment but also the insurer's pricing strategy for the insured's coverage. Conversely, a clean loss history might indicate a lower risk and lead to better premium rates. In contrast, aspects like payment history, policy quality, and claims handling efficiency pertain to different areas of the insurance process and do not directly reflect the insured's likelihood of future claims. Thus, loss history is particularly linked to predicting future claims based on past experiences.