Arizona Adjuster Practice Exam

What authority may an adjuster obtain from the insurer to settle a claim?

1. Draft authority

2. Binding authority

3. Adjusting authority

4. Settlement authority

The correct answer is: Draft authority

The correct choice is draft authority, which refers to the specific authorization an adjuster receives to prepare and issue documents related to the settlement of a claim. This allows the adjuster to create drafts of settlement agreements or checks that will facilitate the financial resolution of claims. Draft authority is critical for the smooth operation of the claims process, enabling adjusters to act swiftly and efficiently when working on settlements. It ensures that they have the necessary permission from the insurer to proceed with particular actions, which can help expedite the resolution for policyholders. While options like binding authority, adjusting authority, and settlement authority may sound relevant, they do not specifically capture the function of drafting documents associated with settlements. Binding authority typically refers to the ability to enforce an insurance policy from the moment of agreement, adjusting authority might encompass the broader powers related to evaluating and determining the terms of a claim, and settlement authority, though closely related, may not explicitly imply the authority to create draft documents. Thus, draft authority accurately reflects the specific power needed by an adjuster to settle a claim by preparing relevant settlement documentation.