RMI 640 - Claims

Goals of Claim Management

Pay what is owed, no more or no less, to whom it is owed
- Comply with the insurance contract language
- Support the insurer's financial goals
- Do the above efficiently to manage loss adjustment
expenses
- As the face of the company in many respects, interact
effectively with customers and vendors

Contractual Promise of Claims

1. Pay, defend, imdemnify

2. To the insured

3. To the 3rd party against the insured

4. Timely

Supporting the Financial Goals

1. Pay what is owed, no more or less

2. That is what is in the pricing

3. Manage Expenses

4. Minimize legal expenses appropriately and Timely

Risks/Costs of Poor Claims Functions

• Overpaying for claims beyond what’s owed

• Dissatisfied customers if not paying obligations

• Litigation

• Regulatory Oversight and Exam

• Harmed Reputation

Claims Data Users (Internal)

1. Underwriting

2. Rate-making

3. Reserving

4. Marketing / Customer Satisfaction

5. Product Design

Claims Data Users (External)

1. The Public

2. Industry Trade Associations

3. Lawyers

4. Reinsurers

5. Regulators

Claims Department Roles

• Independent Adjusters

• Public Adjusters

• Producers

• Staff Lines

• Third Party Administrators

• Front Line Claims Representatives

Claims Performance Measurers

1. Loss Ratio

2. Loss Adjustment Expense Ratio

3. Customer Satisfaction measures

4. Compliance measurers

Uses of Claim Measuers

• Employee Performance Assessment

• Independent Adjuster Performance

• Third Party Administrator service level

• Employee Incentives

Claims Handling Process

1. Acknowledging and Assigning the claim

2. Identifying the Policy

3. Contacting the insured or the insured’s representative

4. Identifying and Documenting the claim

5. Determining the cause of the loss, liability, and loss amount

6. Concluding the Claim

1. Acknowledging and Assigning the claim

• Acknowledge receipt of claim
- Time notice required for compliance reasons
- Good customer service
- Provide contact info for claimant
• Assign the claim to a representative – but who?
- Geography
- Complexity
- Workload
- Ultimately, who can handle it best
• Rep contracts insured / claimant
- Interim care
- Indicate appraiser or Independent Adjuster (IA) may be used
- Setting expectations

2. Identifying the policy

• Confirm existence of policy in good standing
- Determine that coverage may be available
• Establish a loss reserve (case reserve)
- Key step
- Accurate reserve key part of rep’s job
- Based on coverage, preliminary view, historical experience

3. Contacting the insured or their representative

• Review the initial loss report
• Meet / talk with insured / claimant to discuss facts of the case
• Inform the claimant of:
- The claim process (set expectations)
- Any necessary actions in the meantime (remediation)
- Possible coverage questions, if they exist
- If medical is involved, will need claimant authorizations to get those
- Set timetable and next contact

4. Investigating and Documenting the claim

• Investigate to determine cause of loss, amount of loss and liability
- Follow internal guidelines (helps ensure thorough work and compliance)
• Subrogation?
- Process of recovering payment from a negligent third party
• Salvage
- Insurer takes ownership of damaged property and recovers a portion of the loss by selling the damaged property
• Document to create the Claim File – clear, concise and accurate
- Multiple claims files are being worked on by an adjuster
- Need to be organized with date accuracy (timely) and activity reminders
- Stand up to regulators, lawyers

5. Determining the cause of the loss, liability, and the loss amount

• Facts of case determine the cause
• Claims representative determines the liability
• Claims representative determines loss amount
- Replace or repair property damage (home, auto, business)
- Business income loss in case of certain commercial lines losses

- Injury claims (auto, home, business)
- Software tools exist to provide assistance

6. Concluding the Claim

Pay the Claim
- Make sure right parties are paid (repair shop / claimant / mortgage
company) the right amount
- Timely
- Approval levels?
• Deny the Claim
- Timely
- Approval levels?
- Well documented
- Denial letter communicated
- Ultimately, who can handle it best

Dispute Resolutions of Claims

• Mediation

• Arbitration

• Court

• Appraisals

Claims Quality Control

• Claims Guidelines

• Controls

• Manager Reviews

• Claims Audits

• Special Investigative Unit

• Regulatory Compliance

• Evaluate Loss Experience