The purpose of the ______________ is to provide equitable settlements with claimants as well as to control the insurer's claim costs from economic and social inflation.

Question

Options

• AAnnuity method
• BCasualty control method
• Cperiodic payment method
• DLoss reserves

• A
  79% (37)
• B
  13% (6)
• C
  6% (3)
• D
  2% (1)

Explanation

Annuity method is correct because it describes a structured settlement approach where claims are paid in periodic installments rather than a lump sum. This achieves two goals simultaneously: claimants receive payments tailored to their ongoing needs (equitable settlement), and insurers avoid paying inflated lump-sum values by spreading liability over time - directly combating economic and social inflation in claim costs.

Option B (Casualty control method) is not a recognized insurance term; it's a plausible-sounding distractor with no standard definition in claims management.

Option C (Periodic payment method) is tempting because annuities are periodic payments, but this term is too generic and doesn't capture the structured settlement context or the dual purpose of equity and inflation control.

Option D (Loss reserves) are funds insurers set aside to cover future claim obligations - an accounting mechanism, not a settlement method offered to claimants.

Memory tip: Link Annuity to Anti-inflation + Adequate for the claimant - the two "A" purposes match the one "A" answer. Structured settlements lock in payments before inflation can drive up lump-sum demands.

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