AIC 30 Flashcards
Claims Handling Principles & Practices
What is a 1st party claim?
Made by insd against their policy
What is a 3rd party claim
Made by a clmt and to whom an insd may be liable
Who is a claimant
A party that makes a claim (either 1st or 3rd)
What is a claims representative?
The person responsible for investigating, evaluating l, and settling claims
What are 2 primary goals of the claims function?
- Compliance with the contractual promise
2. Supporting the insurers profit goal
Explain the contractual promise an insurer agrees to fulfill and how it fulfills this promise
The insurer agrees to pay, defend, or indemnify the insd in the event of a covered loss.
This is done by providing fair, prompt, and equitable service to the policyholder, either directly for 1st party, or indirectly for 3rd party
Describe how a claims manager helps the insurer generate an underwriting profit
Managing all claims function expenses, setting appropriate spending policies, and using appropriately priced providers and services.
Describe how claims staff help the insurer generate an underwriting profit
Avoiding overspending on costs of handling claims, claims operations, and other expenses
Describe how a claims rep helps the insurer generate an underwriting profit
working to settle claims fairly, thus reducing possibility of costly litigation and regulatory oversight or penalties.
What are the specific ways that a claims representative can help the insurer comply with its contractual promise and support its profit goals.
Contractual promise: Handling claims in a way that promotes peach of mind for the policyholder and that quickly restores a claimant to his or her pre-loss condition.
Insurer’s profit goal: avoiding overspending on claims handling, operations, and other expenses. Avoiding costly litigation, regulatory oversight, and penalties by treating claimants fairly.
What is a Third-party administrator?
An organization that provides administrative services associated with risk financing and insurance
What is a producer?
Also known as an agent. The personnel who place insurance and surety business. Can represent insurers, insured’s, or both
What is an Independent Adjuster?
Hired on a case-by-case basis. They are not staff and handle claims for insurers for a fee
What is a Public Adjuster?
Outside an organization or a person hired by an INSURED to represent them in a claim in exchange for a fee
What is the Loss Ratio?
A ratio that measures losses and loss adjustment expenses.
(Losses + Loss adjustment expenses) - premium
What is the loss adjustment expense (LAE)?
Expenses used to investigate, defend, and settle claims. E.g. PSI, towing, police reports.
Describe a Staff claims representative
They are employees of an insurer and handle most claims. May include inside claim reps, and field claim reps.
Identify the two (2) types of performance measures used to evaluate a Claims Departments performance
- Profitability measures
2. Quality measures
Describe why ethics is particular important in good-faith claims handling
Because claim reps face numerous ethical dilemmas trying to balance the interest of the insureds and claimants, as well as the insurers.
Explain professionalism and how it relates to ethics
Requires individuals to act knowledgeably, courteously, and empathetically.
What are ethics and professionalize important when claim reps are establishing good faith by satisfying contractual duties and other promises
Because they are bound by the insurance contract to act in good faith, and State laws, and must act ethically and professionally.
When the needs of the parties conflict, claims reps may be faced with dilemmas that require their understand of, and ability to, apply ethical and professional policies.
Why do bad faith claims handling of unprofessional and unethical claims reps cause claimants to become distrustful and suspicious?
Even one (1) incident that violates the publics expectations of ethical or professional conduct can receive wide publicity, damage insurer’s credibility, and the public’s trust.
What is a Conflict of interest?
When your decision can benefit you or someone you know.
Identify three (3) types of ethical concerns claim reps may face that arise from potential conflicts of interest
- Incentives for referring businesses
- Purchasing salvage
- Multiple coverages for more than one insd
List the five (5) factors that can affect the claims handling competency of claims reps
- Changes in the claim environment
- Change in job responsibilities
- Attrition of knowledge over time
- Limited insurer resources
- Rewards and promotions
Explain the importance of continued education for claims representatives.
- Maintaining competency (ethical responsibility)
- Compliance with State requirements
Keeping knowledge and skills current.
Describe a claim reps ethical duty regarding provider billing practices.
- To make sure services providers and experts follow insurer billing guidelines
- Understand the scope of their ssigned duties so bills are not inappropriate or excess
How does working in a State without having a license cause an ethical concern?
Licensure-related ethical concerns can arise when a claim rep assumes claims handling responsibilites in a territory in which he/she is not licensed.
Check the State laws and guidelines. States will often grant temporary licenses to out-of-state claims reps for catastrophe claims handling
How do privacy concerns come into play with claims?
Claim reps are privvy to lots of personal information, including dates of birth, SSNs, etc. In addition, something as “innocent” as disclosing a vehicle value to an uninvolved party can cause mistrust with the involved party as they may not want that information handed out.
Explain why it is important that insurers and claims repts have well-defined codes of ethics
A well defined code of ethics forms guidelines for good faith claims handling. A focus on handling claims ethically, rather than a defense focus of avoiding bad faith, is the best protection for claim reps and their employers to allegations of bad faith.
Explain the fundamental basis for good-faith claims handling
Instead of providing an immediate, tangible good or service, insurers provide a promise. The fundamental basis for good-faith claims handling is to meet that promise the insurer has made to the insd.
Explain the best way for the claims reps to balance duty to the insured and the insurer
To perform a fair, unbiased, and thorough claims investigation.
Explain how insurer best practices promote good-faith claims handling
Most insurers have best practices out duties and time frames. Consistent and ethical application of best practices will provide quality and good-faith claims handling.
Explain why most states have enacted laws, such as a version fo the Model Unfair Claims SEttlement Practices Act, to regular claims activities
Insurance is essential to the functions of modern society and provides critical restoration to consumers after often devastating loss.
Describe continuing education requirements in states that require licensing of claims reps
Those states that require licensing also typically require continuing education credits, including ethics components.
Define “Blockchain”
A distributed digital ledger that facilitates secure transactions without the need for a third party
