11) Valid Claims And Claims Settlement

Question 1

How does the insured prove that there is a need to claim?

Answer 1

• by proving that an insured peril arose

- by proving the amount of loss

Question 2

What are the responsibilities of the insurer if the ph wishes to make a claim?

8 points

Answer 2

• cover was in force at time of loss
• insured is named on the policy
• the peril or event is covered
• the insured has mitigated their loss
• all conditions/warranties have to be compiled with
• duty of fair presentation has not been breached
• no exceptions are appropriate
• the value of the loss is reasonable

Question 3

Why may an insurer partially indemnify a policyholder?

3 points

Answer 3

Can be as a result of the insureds choice, an imposed policy term, or poor insurance arrangements.

• sum insured (property) or limit of liability (liability insurance) limiting recovery amount
• average clause - if a property is underinsured
• voluntary or compulsory Xs’s applicable

Question 4

What is ‘claims procedure’ in terms of conditions the insured is insured against?

4 points

Answer 4

• prompt notification to the insurer
• involvement of police (if appropriate)
• reasonable prevention of further damage
• proof and details of loss in writing within a certain timescale

Question 5

What is the purpose of a claim form?

4 points

Answer 5

• to provide sufficient information to permit the insurer to begin processing a claim
• enable the insurer to take a view as to the severity in terms of potential cost
• enable the insurer to take a preliminary view on whether a tp claim will be received
• enable the insurer to see if any recovery rights exist

Question 6

Name the type of evidence needed for each type of claim:

Theft

Personal injury/sickness

Motor

Answer 6

Theft: claim form/reported to police/ compare details on claim form with details given by insured to the police

Personal injury/sickness: medical evidence/doctors certificate

Motor: v5c if TL

Question 7

What is contribution?

Answer 7

The right of an insurer to call on other insurers similarly, but not always equally.

Applies to policies of indemnity.

At common law the insured has the option to claim the whole sum from either insurer and then insurers having to share the loss between themselves.

The contribution condition limits insurers liability to their rateable proportion of loss when other policies also exist.

This means the insured has to claim proportionately from each insurer.

Question 8

Average?

Answer 8

• mainly includes property

If the sum insurer doesn’t cover the full value of the risk (i.e. under insurance) this will be applied

The insurer only pays a proportion of the loss based on the relationship between the sum insurer and value of the risk insured.

Question 9

What is subrogation?

Answer 9

Under common law the insured can claim against any party that caused loss/damage to recover losses.

The insured may also acquire rights in terms of a statute or contract that has been entered into.

The insurer can take over these rights, but not until the insured has been fully indemnified under the policy.

Under subrogation the insurer is entitled to enforce rights against any party in the name of the insured before or after payment is made by the insurer.

Insurers are not entitled to pursue a recovery before a claim is paid under terms of subrogation until they actually pay the insurers claim.

Question 10

What is arbitration?

Answer 10

It deals with any disputes that arise to the amount to be paid in settlement of a claim under the policy, providing lia is accepted.

Then any disputes which arise as to the amount to be paid is referred to an arbitrator to be appointed by the two parties in accordance with current statutory provisions.

Question 11

Name the benefits of using ‘alternative dispute resolution’ under the civil procedure rules -

Courts are required under a duty to encourage parties to use and ads to facilitate the use of such a procedure if the court considers that appropriate.

Answer 11

Benefits include:

• speed of completion
• can be timed to suit parties involved
• less costly than going to court
• settlements are confidential between the parties and there is no public record

Question 12

Name the two types of ADR

Answer 12

Mediation:

Dispute is settled solely by the parties themselves. The parties select a mediator who makes no decisions. They act as a facilitator to help the parties understand the dispute and make sure each party understands the others position.

Conciliation:

The conciliator leads the parties to a resolution, the parties decide in advance whether they will be bound by the conciliators recommendations.

Question 13

Market agreements

Abu personal effects contribution agreement

3 purposes of this agreement:

Answer 13

• avoid adverse publicity/criticism of the insurance industry caused by insurers referring policyholders to other insurers for payment of all or part of their claim.
• Avoid costly and time consuming handling and the contribution of the payment of small contribution amounts.
• set out rules for contribution between participating insurers.

Question 14

What are Bilateral agreements?

Answer 14

• some insurers subscribe to the motor insurance subrogation portal
• the insurers enter details of claims against another insurer as they are reported

If liability is agreed, OL is uploaded and non fault insurer will receive settlement - this should be quick and avoid further evidencing

Question 15

Who/ what is the MIB

Answer 15

• set by the government and motor insurers
• operates on a central fund that insurers pay into
• compensates for injury/damage following a motor accident where it cannot be obtained from another source

Question 16

What is the uninsured drivers agreement?

Answer 16

• MIB members pay for where there is a policy in force and at the time of the accident due to a breach of terms the policy doesn’t indemnify the motorist involved.
• the MIB deals with cases where there is no policy whatsoever

Question 17

Untraced drivers agreement - who/what does this cover?

Answer 17

• covers hit and run cases where the driver cannot be traced
• covers death and injury
• this comes into force if the accident is non fault
• MIB pays for TPPD up to 1.2 million where the at fault vehicle is unidentifiable - only if an injury claim is paid for the same acc
• £300 minimum Xs applicable
• acc after 1st March 2017 have a different set of agreements

Question 18

Summarise uninsured drivers agreement 2017 differences

Answer 18

• exclusion of liability for damage to a vehicle which was also uninsured
• terrorism exclusion

Question 19

Summarise uninsured drivers agreement 2017 differences

Answer 19

• no exclusion for vehicle damage claims where the damaged vehicle was uninsured
• Property damage Xs of £400
• property damage is recoverable if accompanied by significant injury
• no exclusion for death/injury/damages caused by or in the course of terrorism
• children and protected parties can claim if approved by an arbitrator (all cases)

Question 20

Claims settlement - ways a claim could be settled

Answer 20

• cash / cheque / bacs to ph
• can ask for est in writing and pay repairers direct
• insurers can replace damaged or lost goods
• insurers can use reinstatement however this is quite rare

Question 21

Payment to third parties - rights against insurers act 2010?

Answer 21

• TP doesn’t need to obtain a judgement against the ph before claiming against insurers
• TPS can request insurance info from insurers providing they can prove liability is owed by an insured
• a dissolved insurer does not need to be restored to the register of companies for its insurers to be pursued

Question 22

What is the enterprise act 2016?

Answer 22

• requires re insurers to pay sums following a claim in reasonable time.
• gives the ph a right to claim damages if a re insurers unreasonable delay causes additional loss

Question 23

What is salvage?

Answer 23

• the insurer can acquire recover rights out of the subject matter of insurance
• the insurer can retain salvage and the claim payment is reduced significantly

I.e total loss vehicle

Question 24

What is the reserving process?

Answer 24

• when a claim is notified to the insurer they put a realistic estimate on the claim
• insurers have to submit financial statements each year to the prudential regulation authority
• estimated claims costs help u/w set realistic premium rates
• reserves are set using data from existing claims to predict future costs

Question 25

What is contribution?

In terms of claims recovery?

Answer 25

• once the insurer settles the ph claim in full they can recover the same loss from the fault insurer
• usually insurers write to the other insurer with claims details/costs

Question 26

What is right of recovery?

Answer 26

The insurer usually prefers to have the claim money reimbursed to them and for the insured to keep the recovered item.

Sometimes if the recovered item is replaced with the proceeds of the original claim payment the insurer will allow the insured first refusal on taking back the recovered item.

Question 27

What does the insurance act 2015 say regarding fraudulent claims?

Answer 27

The insurer has no liability for fraudulent claims occurring after a fraudulent act.

The insurers should meet legitimate claims before this.

Question 28

Who are the IFB?

Answer 28

The insurance fraud bureau

They are focused on preventing organised and cross industry fraud

Question 29

Who are the IFIG?

Answer 29

The insurance fraud investigators group

This is dedicated to the detection and prevention of insurance fraud

Question 30

Who are the IFR?

Answer 30

The insurance fraud register

An individual who had been detected acting fraudulently towards insurers will have their identity added to the IFR by their insurer

Question 31

Name 4 measures used to identify fraud in the insurance industry:

Answer 31

1) CUE
2) ALR - art loss register - increase recovery rates of stolen art and antiques / deter theft by making resale of stolen articles more difficult
3) MIAFTR
4) Claims handler

Question 32

Name 3 consequences of fraud

Answer 32

• less profit for insurers
• increased premiums
• everyone will incur more costs
• the fraudulent party of successful will have more temptation to be fraudulent in the future