Chapter 4: Claims Handling Procedures and Related Claims Services - Insurance Claims Handling (non UK)

How long would it take to settle a claim for a minor rear-end collision motor claim where no one was injured?

It could be settled in a few days if the insurer were proactive

How long would it take to settle a claim for a fatal accident under a liability policy?

It may take years to resolve and would require a different level of sophistication and expertise

How does the claims process flow?

1. Notification

2. Review

3. Response to claimant

4. Claim investigation

5. Claim negotiation

6. Claim settlement

7. Recoveries

8. Review

What types of claims are considered personal insurance claims?

• Private motor claims

• Health (personal accident and sickness)

• Household

• Travel

• Extended warranties

What type of personal insurance claim would apply to cars and motor cycles?

Private motor claims

What type of personal insurance claim would apply to contents and buildings?

Household claims

What are the aspects of the claims process for private motor claims?

1. The insured is bound by the claims notification policy condition to report all accidents

2. At notification, the insured may be required to complete an accident report form (ARF) which could be done over the telephone or internet

3. When the insurer has received the necessary information, it will set up a file

4. If a claim is to be made, the insurer will firstly establish whether a policy is in force and whether the insured is entitled to an indemnity

5. If there are claims under other sections of the policy these are reviewed as necessary

6. A third party may claim for damage to their vehicle or there may be damage to other property, such as a boundary fence or hedge

7. If a third party is injured in the accident, claims can be complex and costly to settle

What is true about the first rule of the claims process for private motor claims? (The insured is bound by the claims notification policy condition to report all accidents.)

This applies whether or not they intend to claim or expect a third party to claim against them

What is true about the second rule of the claims process for private motor claims? (At notification, the insured may be required to complete an accident report form (ARF).)

These forms could be completed over the telephone or on the internet

What is true about the third rule of the claims process for private motor claims? (When the insurer has received the necessary information, it will set up a file.)

In practice, this is likely to be electronic and no longer a physical paper file

What is true about the fourth rule of the claims process for private motor claims? (If a claim is to be made, the insurer will firstly establish whether a policy is in force and whether the insured is entitled to an indemnity.)

• Depending on the nature and size of the claim it may be investigated

• This could be done as a desktop exercise by the insurer or else a claims investigator or loss adjuster may interview the drivers and witnesses, as well as visit the accident scene

• If there is a valid claim, repairs to the insured's vehicle will take priority

• The repairs are often carried out at the insurer's own authorized repair centers

What is true about the fifth rule of the claims process for private motor claims? (If there are claims under other sections of the policy these are reviewed as necessary.)

An example of this could be for property in the vehicle that was damaged in the accident

What is true about the sixth rule of the claims process for private motor claims? (A third party may claim for damage to their vehicle or there may be damage to other property, such as a boundary fence or hedge.)

• The third party will generally be required to submit estimates for the repair or replacement of the damaged items, which the insurer will consider and either approve or renegotiate

• It will establish who was at fault or ascertain the degree of negligence by each party

• If the insured is at fault, the insurers may offer to proactively handle the third party claim as a way of controlling costs

What is true about the seventh rule of the claims process for private motor claims? (If a third party is injured in the accident, claims can be complex and costly to settle.)

• The degree of negligence must be established before consideration is given to the extent of the injury, the medical prognosis, and other relevant considerations (e.g. whether the claimant was unable to work, or had required care whilst incapacitated)

• A claims handler must be able to analyze this information and place an accurate valuation against the injuries in line with current damages awarded by the courts in order to negotiate settlement of the claim

• Considering the complexities and the amount involved, opinion of Orthosurgeon or respective specialty can be taken to confirm the diagnosis, nature (temporary/ permanent) and the extent of the disability

What should the insured do if they have non-comprehensive motor cover and are in an accident?

They must still report the incident to their insurer as one of the claims conditions

If the insured has non-comprehensive motor insurance what happens when they report it to the insurer?

The insurer will take no further action in respect of any damage to the policyholder's own property, because they have no cover for this

What types of claims would an insurer deal with if a policyholder has non-comprehensive motor insurance?

Third party claims, subject to liability

If the policyholder is not at fault in an accident and they have non-comprehensive motor insurance what must they do to be indemnified?

Make a claim against the responsible party or their insurer where they would be dealt with as the 'third party'

What happens when an insured has comprehensive cover and has a claim against a liable third party?

Their insurer would utilize the subrogation condition in the policy to recover the costs they have incurred

What type of claims come from personal accident and sickness policies?

Health claims

What is true about the handling of health claims?

It is vastly different from those under indemnity policies

Why is the handling of health claims vastly different from those of indemnity policies?

They are benefit policies and the settlement figure has already been agreed at policy inception

What happens when a health claim is submitted?

The insurer will check that a valid contract was in force and that the policy conditions have been met

For what types of health claims must supporting evidence about the insured be provided?

• If the insured has died as a result of an accident or sickness

• If the insured has suffered the loss of a limb or limbs, sufficient proof must be provided

• If the insured is temporarily or permanently disabled

What evidence must be provided for health claims where the insured has died as a result of an accident or sickness?

There may be a coroner's inquest and a post-mortem examination, and a death certificate must be provided

What evidence must be provided for health claims where the insured has suffered the loss of a limb or limbs?

Sufficient proof must be provided

What evidence must be provided for health claims where the insured is temporarily or permanently disabled?

They must provide a medical certificate and be in the care of a registered doctor

What may the insurer wish to do to confirm the extent of any illness or disablement?

Involve its own investigators

Why are personal accident and sickness policies always benefit policies rather than indemnity policies?

Because the loss of a limb or health is something that is impossible to put a financial value on

For household contents claims, what are the categories that contents could be divided into?

• Durable goods

• Consumer goods

For household contents, what contents are things like household furniture, refrigerators and freezers etc.?

Durable goods

For household contents, what contents are the less durable items that are likely to wear out more quickly, such as curtains, towels and clothing?

Consumer goods

Under what basis do most insurers state in their policy wordings that claims for durable goods are generally settled on?

A 'new for old' basis

What does settling a claim on a 'new for old' basis mean?

Damaged goods will be replaced by new items, rather than the claim being settled on an indemnity basis

How are claims for consumer goods generally settled?

• On a 'new for old' basis

OR

• On the basis of the cost of replacement, less wear and tear, according to their age

What is the disadvantage of settling claims for consumer goods on the basis of the cost of replacement, less wear and tear, according to their age?

This is more likely to lead to disagreements between the insurer and the policyholder, unless the policyholder's expectations are well managed

How are claims for buildings on a household policy usually settled?

By repairing the buildings

How is the indemnity sum for the loss or damage to the buildings in a household policy calculated?

At the cost of repair or reinstatement at the time of loss less an allowance for betterment

Who is usually used to provide an expert's opinion as to any substantial damage to a building for a household policy claim?

A loss adjuster

What arises when certain aspects of the repaired property are in a better condition than they were before the loss or the repaired / replaced article is better than the original one was when new?

Betterment

What are examples of betterment?

• The installation of new wiring

• Double glazing replacing an old single-glazed window

What determines the processing of travel claims?

The section of the policy the claim is covering

What are the types of claims that could be made under a travel insurance policy?

• Personal accident or sickness benefits

• Travel interruption or delay

• Medical and associated expenses

• Baggage, personal effects and money

What types of travel insurance claims would the considerations that apply to health claims will generally apply?

Personal accident or sickness benefits

What types of travel insurance claims can the insurer make its own enquiries with the travel authorities or ask that the insured obtains the necessary proof?

Travel interruption or delay

What types of travel insurance claims usually need to be authorized prior to treatment so that costs can be controlled, and emergency medical expenses claimed after treatment are scrutinized prior to payment?

Medical and associated expenses

What types of travel insurance claims will the insurer usually request proof of purchase for the items claimed for, together with confirmation that the loss has been reported to the necessary authorities?

Baggage, personal effects and money

What type of policy has claims where the claims 'settlement' is the result of the covered appliance being repaired or replaced?

Extended warranties

Why are extended warranties claims not subject to fraudulent claims like household or motor insurance?

There is no cash incentive to be gained

Why is it very seldom that a claim form would be required for an extended warranty claim?

• A telephone call to the issuing company is usually the only action required by an insured

• The issuing company will then instruct a repairer to attend the insured's premises and carry out the necessary repairs, which can sometimes be subject to an excess

What type of insurance provides protection to the policyholder in the event that they are unable to repay a loan due to their death, disability or losing their job?

Creditor insurance

What is required before settling any claim on a creditor insurance policy?

• Proof that the insured is not working

• Evidence of the payments that the insured needs to make

What types of claims are considered commercial insurance claims?

• Property claims

• Pecuniary claims

• Liability claims

• Commercial vehicle claims

What type of commercial insurance claim would apply to fire and special perils, all risks, theft, glass and money?

Property claims

What type of commercial insurance claim would apply to legal expenses and business interruption insurance?

Pecuniary claims

What type of commercial insurance claim would apply to employers', public, products and professional indemnity policies?

Liability claims

In the event of loss or damage from a property claim under a fire and special perils policy or all risks policy, what does the insured have the duty to do?

• Notify the insurer immediately

• Mitigate their losses

• Deliver to the insurer full information about the property lost, destroyed or damaged and the amount of damage, in writing

• Provide proof of loss and, if required, complete a statutory declaration of the truth of the claim

What part of the insured duty in the event of loss or damage from a property claim is to carry out, or permit to be carried out, any reasonably practical action to prevent further damage?

Mitigating the losses

What would be an example of a document the insured could provide as proof that a loss or damage has occurred for a property claim?

A builder's estimate for repair

When there is a loss or damage claim made on a fire and special perils policy what must the insurer establish?

• Whether the policy is in force

• Whether the claim is valid

• Whether the policy covers the loss

What does it mean for a claim to be valid?

An insured peril caused the loss

What happens if the fire and special perils claim is large?

The insurer will usually appoint an independent loss adjuster

What is the purpose of the loss adjuster?

• To investigate the loss and prepare a report recommending the amount payable under the terms of the policy

• To investigate the cause of the loss as well as its extent

• To check that the insured has complied with any related endorsements or warranties

• To advise on any recovery prospects

Who can the insured appoint to act on their behalf and negotiate with the adjuster and/or the insurers?

A loss assessor

How can an insured expect to be reimbursed from a fire and special perils claim?

• Monetary payment

• Reinstating the building

• Replacing, repairing or restoring the property as appropriate

What does it mean to reinstate a building?

To restore it to its original condition after it has been altered, damaged, or demolished

For all risks claims why does an insurer appoint a loss adjuster?

They will ensure the claim is valid and negotiate settlement on the insurer's behalf

What is the insured required to do for a theft claim?

Notify the appropriate authorities of the theft

What would insurers often request of the insured when a theft claim is made?

A police report

When would an insurer hire a loss adjuster for a theft claim?

If the theft claim is large

Who would an insurer hire if they suspect a theft claim has fraud involved?

A specialist claims investigator

Why do insurers usually liaise with the police when a theft claim is made?

If the stolen goods are recovered, the insurer can claim them as salvage

For what type of commercial policy claim is it usual for insures to have approved repairers for?

Glass claims

When there is a glass claim made why will the repair usually be authorized once the insurer has satisfied itself that the claim is covered?

There is little financial incentive to be gained and claims can rarely be 'overstated'

What happens when a glass claim has been authorized by the insurer?

The invoice from the repairer will be sent directly to the insurer

Why are glass claims usually subject to a small excess?

To avoid small claims

When a money insurance claim is made, when the insurer has completed its standard investigations in respect of cover, what will it request for proof of loss?

• Proof that the money, checks or stamps etc. were on the premises

• Details of the occurrence

• Confirmation that the matter has been reported to the authorities

Why do insurers want assurance that there is no fraud involved in a money insurance claim?

There is great scope for abuse

What will insurers do if they believe there is fraud in a money insurance claim?

Enlist specialist investigators to assist their enquiries

Why are claims under legal expense policies different from other claims?

An insurer can assess its potential liability before the claim commences

What does the insured have an obligation to do in the event of a legal expenses claim?

Notify their insurers before action is commenced so the insurer can then take any steps it deems appropriate

What are the steps that an insurer can deem to be appropriate for a legal expenses claim?

• Appointing its own solicitors

• Cooperating with the insured in attempting to reach a settlement before court action starts

What insurance covers the insured's loss of profits following damage to their property caused by the action of an insured peril?

Business interruption insurance

Since a claim for business interruption insurance covers the insured's loss of profits following damage to their property caused by the action of an insured peril, what is always included in these policies?

A property damage proviso

What does a property damage proviso mean?

The underlying property must be insured before an interruption policy is issued

Why are both the property insurance and business interruption insurance usually placed with the same insurer?

So the policies can run in conjunction with each other to minimize the amount of time the business is unable to function

What makes business interruption insurance claims unique?

At the proposal stage questions are asked about how the proposer will react in the event of a claim

What are questions that would be asked at the proposal stage of a business interruption insurance that would show how the proposer will react in the event of a claim?

• Have they got alternative premises

• How soon can they get up and running

• Is there a detailed disaster recovery plan

Why is the insurer able to 'participate' in the claim for business interruption insurance?

• The indemnity period selected represents the maximum length of the claim

• The insurer can, and often does, have representation to minimize the loss

What are the most common indemnity periods for business interruption insurance?

• 12 months

• 24 months

• 36 months

What types of claims arise out of legal liability for incidents involving injury to third parties (including employees) or damage to their property?

Liability claims

What covers indemnity against bodily injury or disease sustained by the insured's employees arising out of, and in the course of, their employment?

Employers' liability

What policies is it common to see combined together?

• Employers' liability

• Public liability

• Products liability

What are employers' liability claims particularly concerned with?

Industries with a high incidence of accidents or disease, like mining

What covers losses or damages to third party property and/or third party injury caused by the insured's negligence or breach of statutory duty?

Public liability insurance

What differentiates products liability insurance from public liability insurance?

It provides cover for losses arising out of the sale or supply of the insured's product

What type of policy protects the insured against their legal liability towards third parties for injury, loss or damage arising from their own professional negligence, or that of their employees?

Professional indemnity insurance

How does the liability that is claimed on a professional indemnity policy usually arise?

From a breach of contract, though it can also arise from negligent misstatements or a breach of the duty of care

On what basis is professional indemnity insurance generally written on?

A claims-made basis

What does it mean for a policy to be written on a claims-made basis?

Provided a claim is made during the period of insurance, it does not matter when the event leading to the loss took place