CHAPTER 10 - C Flashcards
What must a broker do once notified of a loss?
Work out the right combination of insurers for instructions
How does a broker submit information to chosen agreement parties?
Either on paper file or via an Electronic Claims File (ECF)
What should an insurer consider regarding conflicts of interest?
Whether they can manage the conflict internally or need to hand over their role to another insurer
What system does Velonetic/XCS use in Lloyd’s claims handling?
Enters claims data onto the Velonetic/XCS claims system
How do agreement parties communicate their comments to the broker?
Through electronic messages or written notes on paper files
What happens if agreement parties agree to a payment for settlement?
Funds are debited from their accounts to that of the broker
Where does the first notification of loss typically go?
To the broker
What types of insurance might require the insured to notify named experts?
Professional indemnity and cargo
Why might immediate action be required after a loss occurs?
Losses can happen at any time, including when brokers or insurers are unavailable
What must a broker consider upon receiving information about a loss?
Whether any individual within their firm is precluded from handling the claim due to conflict of interest
What is an example of a practical conflict of interest for an insurer?
Handling claims for both vessels in a collision situation
What is the process for electronic claims handling?
Broker submits data and documents electronically via ECF
What components comprise the Electronic Claims File (ECF)?
- Data messaging system/database called CLASS
- Document repository
What is the Unique Claims Reference (UCR)?
A unique reference created by the broker for their claim
What is the Unique Market Reference (UMR)?
Essentially a policy number identifying it within the premium database
What happens when the leader considers the broker’s electronic presentation?
They can agree, query it, or provide comments
What is the role of Velonetic in Lloyd’s claims processing?
Inputs claims data into its claims database and sends messages to syndicates
What is an organizational conflict in claims handling?
When an insurer decides it cannot be an agreement party and passes the role to another insurer
What is an individual conflict management method used by insurers?
Chinese Walls or Ethical Walls
What information must be included in the broker’s paper file for first advice?
- Full copy of the MRC/slip
- Any endorsements
- Information received about the loss
What does the broker do if using a paper file with Lloyd’s agreement parties?
They contact the required insurers to obtain instructions
What is one disadvantage of using a paper file compared to electronic systems?
Paper can get lost from a file
What is a key advantage of electronic claims handling?
All data and documents are held centrally and can be accessed simultaneously
What happens to documents once loaded onto the electronic system?
They cannot be deleted
What is the primary function of the CLASS system?
To handle claims electronically, enabling access to data and documents by insurers.
What happens to documents once loaded onto the CLASS system?
Documents cannot be deleted.
How does the CLASS system facilitate communication between brokers and insurers?
It allows brokers to discuss claims with insurers who have already reviewed relevant documents.
What is the significance of interim payments in claims handling?
Interim payments can be made at any time during the claim lifecycle.
What should be considered when requesting a claims payment?
The request must be reasonable and supported by evidence.
What is the ‘loss payee’ clause?
It requires insurers to seek permission from specified parties before making indemnity payments.
In what currency can claims be settled by Lloyd’s?
Claims can only be settled in 14 specific currencies.
What is required when making indemnity payments?
A receipt or similar document confirming the acceptance of the payment.
What does the Enterprise Act 2016 imply regarding claims settlement?
Claims must be settled in a reasonable time, allowing insured parties to seek damages for late payments.
How does the Company Market handle the movement of money for claims?
It triggers movement from accounts based on settlement agreements via the electronic messaging system.
What are binding authorities in claims handling?
They allow insurers to delegate claims handling authority to coverholders or third-party administrators.
What is the term used for third-party administrators in the Lloyd’s market?
Delegated Claims Administrators (DCA).
What is a ‘bordereau’ in the context of claims handling?
A report sent by coverholders/TPAs to insurers detailing claims activity.
What is a ‘loss fund’ in claims handling?
An upfront amount provided to coverholders/TPAs to settle claims swiftly.
What is the difference between indemnity and betterment?
Indemnity aims to restore the insured to their pre-loss position, while betterment refers to an improvement in their situation post-loss.
What is subrogation?
The right of an insurer to pursue third parties after indemnifying the insured.
What does contribution refer to in insurance?
The shared responsibility of multiple insurers covering the same risk.
What is proximate cause?
The dominant cause of a loss that determines coverage under an insurance policy.
What are deductibles/excesses?
The amounts that the insured must pay before the insurer covers the remaining loss.
What do exclusions in an insurance policy signify?
Conditions under which the insurer will not pay a claim.
What is a ‘Reservation of Rights’ (ROR)?
A notice from an insurer indicating potential issues with a claim while further investigation occurs.
What is a ‘Reservation of Rights’ (ROR) in insurance?
It is a warning from the insurer to the insured that there might be a problem with the claim while further investigation is conducted.
ROR indicates that the insurer is reserving rights regarding aspects of the claim, such as application of a policy exclusion.
What legal issue can arise if an insurer leads the insured to believe there are no queries about a claim?
The legal issue is called ‘estoppel’.
Estoppel can prevent the insurer from declining a claim based on their previous behavior.
What should an insurer do after issuing a Reservation of Rights?
The insurer should attempt to resolve the query as soon as possible to either lift the reservation or deny the claim.
Timely resolution is important to avoid misunderstandings about the claim status.
Why is it important for insurers and claims personnel to understand the legal impact of using RORs?
Given the volume of business written out of the USA, understanding the legal impact is crucial for proper claims handling and compliance.
Appropriate legal advice should be sought regarding RORs.
What is one aim of digitizing insurance contracts in the London Market?
To enable the first notice of loss process to be partially automated.
This involves comparing key details about the claim with key policy details.
How can technology assist in the claims environment beyond automation?
By looking for patterns in fraud detection and identifying potential claims earlier in the process.
Technology provides analytical capabilities to improve claims management.
What is a major problem that prevails throughout the insurance market, including the London Market?
Insurance fraud.
Fraud can be more prominent in the London Market due to the prevalence of larger claims.
What are some key fraud triggers that claims personnel should watch for?
- Excessively documented claims file
- Pressure to settle
- Reluctance to answer questions
- Stories that do not add up
Identifying these triggers can help prevent fraudulent claims.
What happens if fraudulent claims are not spotted and prevented?
It results in claims leakage, which needs to be identified and prevented as much as possible.
Claims leakage refers to losses from claims that should not have been paid.
