State Farm Auto Insurance Practice Test

What is the function of the Business Claim Indicator in the loss history report?

1. To limit driver-based claims

2. To increase policyholder premiums

3. To categorize commercial vehicle claims

4. To identify frequent drivers

The correct answer is: To limit driver-based claims

The Business Claim Indicator in a loss history report serves the purpose of categorizing claims related specifically to commercial vehicles and business use. This categorization is crucial because business-related claims often involve different risks and liabilities compared to personal vehicle claims. By identifying these claims, insurers can assess the risk profile of a commercial vehicle more accurately, which may lead to tailored coverage solutions and premium calculations that reflect the particular exposure associated with business usage. Recognizing commercial claims helps in understanding the dynamics of vehicle usage and its impact on overall claims frequency and severity, which is essential for risk assessment. The other options do not align with the core function of the Business Claim Indicator as it is not directly designed to limit driver-based claims, increase premiums, or identify frequent drivers. Instead, its primary role is focused on the categorization of claims related to commercial vehicles, facilitating a more precise understanding of risks associated with business operations.