Assignment 11: The Claim Function Flashcards
Primary Claims Goals
- Complying with the Contractual Promise
The insurer fulfills this promise by providing fair, prompt, and equitable service to the insured either directly or indirectly - Supporting the Insurer’s Financial Goals
Overpaid claims can lower insurer profits and result in higher policy premiums, while underpaid claims can result in dissatisfied insureds, litigation, or regulatory oversight
Claims Information Users
- Marketing: The marketing department needs information about customer satisfaction, timeliness of settlements, and other variables that assist in marketing the insurance product
- Underwriting: Proper, consistent, and efficient claims handling enables underwriters to evaluate, select, and appropriately price loss exposures based on consistent claims costs
- Actuarial: Actuaries need accurate information not only on losses that have been paid out but also on losses that have occurred and are reserved for payment, collectively called incurred losses
Claim Investigation Reports
When claim representatives inspect accident scenes in homes or at work sites as part of the claims investigation, they sometimes notice loss exposure characteristics, either negative or positive, that were not readily apparent in the insurance application
The underwriter may adjust the premium accordingly (up, or down via credit)
Claim Trends
A number of similar claims may also alert underwriting management to a problem for a particular type or class of insured
Claims Department Contacts
Claims Department personnel are most visible to the public, so they must interact effectively with:
- The Public
- Lawyers
- State Regulators (who do market conduct audits)
Market Conduct Audit
Includes more than just claim practices; it audits all departments that interact directly with insureds and claimants
Claim Department Optimization
Measured by:
1. Structure
2. Personnel
3. Performance Measures
Third-Party Administrators (TPAs)
An organization that provides administrative services associated with risk financing and insurance
Claims Representative
A person responsible for investigating, evaluating, and settling claims
Fulfills the promise to either pay the insured or on behalf of the insured by handling claims when losses occur
Examples include:
- Staff Claims Representatives
- Independent Adjusters
- TPAs (often used by self-insured organizations)
- Producers
- Public Adjusters
Staff Claims Representatives
Employees of an insurer and handle most claims, usually while working from branch or regional offices rather than at the insurer’s home office; includes inside and field (outside) claims representatives
Independent Adjusters
An independent claims representative who handles claims for insurers for a fee
Public Adjusters
An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee
Performance Measures
Include both:
- Profitability Measures (loss ratio, including LAE)
- Quality Measures (best practices, claim audits, and customer-satisfaction data)
Loss Adjustment Expenses (LAE)
The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy
In the short-term, these can be reduced by settlement payments.
In the long-term, inflated settlement demands should be resisted, researched, negotiated, and (if necessary) litigated
Best Practices
A system of identified internal practices that produce superior performance
Claim Audit
A review of claim files to examine the technical details of claim settlements; ensure that claims procedures are followed; and verify that appropriate, thorough documentation is included
Evaluates both qualitative and quantitative factors and is used to ensure compliance with best practices and to gather statistical information on claims
Compliance Measures
Compliance measures include:
- Claims Guidelines, Policies, and Procedures
- Controls
- Supervisor and Management Reviews
- Claims Audits
Claims Guidelines
A set of guidelines and instructions that specify how certain claims handling tasks should be performed by setting policies and procedures for claim handling
Diary, or Suspense
A system to remind claims personnel to perform a particular task on a claim
Activity Log
A record of all the activities and analyses that occur while handling a claim
Claims Reports
Reports might include information such as:
- Claims with reserves above a specified amount
- Claims assigned to independent adjusters
- Claims in litigation
- Claims closed by agents
- Claims with reserve changes larger than a specified amount
- Claims closed without payment by a claims representative
Access Security
A security setting that controls an individual computer user’s ability to review, enter, and change information in a claims information system.
Systems limit access to claims information by:
1. Requiring a person to enter a password maintained by the Information Systems Department
2. Restricting access to certain data in the claims information system to managers only
3. Preventing unauthorized individuals from changing crucial information in the claims information system, such as reserve amounts or claim codes
Authority Levels
A designated dollar amount assigned to claims personnel to limit the reserve amounts they can set and the payment amounts they can make
Claims Information Tracking System
Designed to automatically capture qualitative internal claim information (date, name of employee, etc.); the information cannot be altered, so it discourages fraud and identifies training needs
