CII 820 Practice Questions - Advanced Claims (820) Exam

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When an insurer outsources commercial claims handling to a Third-Party Administrator (TPA), what is the primary operational risk regarding regulatory compliance?

The insurer retains ultimate regulatory accountability for TPA conduct and Consumer Duty compliance despite delegating operational execution. The TPA assumes full legal liability for all PRA capital solvency requirements. Outsourcing automatically revokes the insurer's FCA permission to issue insurance contracts. The TPA is legally prohibited from communicating directly with policyholders or loss adjusters.

Correct Answer:

The insurer retains ultimate regulatory accountability for TPA conduct and Consumer Duty compliance despite delegating operational execution.

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