Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

LM2 - Cert CII > Chapter 10 - Claims Handling > Flashcards

Chapter 10 - Claims Handling Flashcards

1
Q

What is ‘claims handling’ often referred to in the insurance industry?

A

The shop window of an insurer (or broker).

It’s at the time of a loss that the reaction & behavior of the insurer’s claims team will leave a lasting impression of the insurer with the client.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who is notified of a claim first?

A

The broker.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the point called when a broker is notified of a claim by the insured?

A

‘First advice’ or ‘First notification’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does the broker do after ‘First notification of the claim’? How is the claim presented?

A

Reviews the MRC to notify the relevant insurers of the loss.

The claim is presented either electronically or using a paper file.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the ‘Insurance: Conduct of Business Sourcebook (ICOBS)’?

A

This is a chapter in the FCA handbook dedicated to claims handling. It requires insurers to:

  • handle claims promptly & fairly.
  • guide policyholders making a claim.
  • settle claims promptly.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the claims agreement rules for the:
1. Lloyd’s Market

A

The “Lloyd’s Claims Scheme (Combined)” contains rules for claims handling in the Lloyd’s Market. This document contains rules concerning the agreement parties required for claims.

Standard claims (claims under £500,000) are handled by the leader only.

Complex claims (claims above £500,000) are handled by the first 2 syndicates only.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the claims agreement rules for the:
2. IUA Company Market (marine & aviation)

A

Marine business (not excess of loss):
- If there is Lloyd’s involvement, only 1 company is required to agree.
- If there is NO Lloyd’s involvement, the first 2 companies are required to agree.

Aviation (not excess of loss):
- If its direct business: the first 2 companies are required to agree.
- If its facultative reinsurance, the lead company only.

Excess of loss reinsurance:
- Always the first 2 companies must agree.

(Can see the rules vary according to if there’s any Lloyd’s involvement / it’s direct or excess of loss reinsurance).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the claims agreement rules for the:
3. IUA Company Market (non-marine)

A

In the non-marine market, NO insurer can make claims decisions on behalf of the rest of the market. The broker must obtain agreement from each insurer that is subscribed to that risk INDIVIDUALLY.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the ‘Single Claims Agreement Party’ (SCAP)?

What claims are valid for handling under (SCAP)?

A

SCAP was a project promoted by brokers who wanted to streamline the handling & agreement of smaller, less complex claims on business placed in the London Market.

A claim is potentially eligible for handling under SCAP if the financial value is less than £250,000 or equivalent to the slip and the claim is neither complex nor controversial.

The slip leader to decides whether a claim is complex or controversial & they have the final decision on whether any claim is handled under the rules, not the broker.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What role does XCS play for all claims in the Lloyd’s Market?

A

XCS maintains the Lloyd’s Market claims database which includes entering of data, sending out overnight messages to Lloyd’s insurers, and moving funds to the appropriate destinations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Are experts required in all claims? Who appoints experts?

A

The use of an expert is not required in all claims

Experts are appointed via the broker.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What types of experts may be used in the claims process?

A
  • Lawyers
  • Loss adjustors
  • Loss assessors
  • Surveyors
  • Accountants
  • Subrogation experts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a Lawyer used for?

A

Lawyers defend the insured / advise the insurer about policy coverage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a Loss Adjustor used for?

A

Inspects damage and makes recommendations for repairs. They determine the validity and value of a large claim.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a ‘Loss Assessor’ used for?

A

They assist the insured with the preparation of their claim. Their client is the insured.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a ‘Surveyor’ used for?

A

They evaluate the loss of damage. They are the type of expert used by underwriter’s to visit the risk and produce a report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When is an ‘Average Adjuster’ involved in the insurance business process?

A

They specialise in marine claims. They assess, calculate, and present claims.

(involved in claims handling).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the most likely reason that an expert is the first party to find out about a loss?

A

They have been written into the policy as the first notification party.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Summarise the claims handling process?

A
  1. The broker is usually the ‘first notification’ of a loss.
  2. Broker must decide who the relevant insurers are subscribed to that risk.
  3. Broker must inform insurers either on paper, or via an ‘Electronic Claims File’ (ECF).
  4. (For Lloyd’s only) XCS enters the claims data onto the XCS claims system to be sent to syndicates.
  5. Broker receives messages which advise of agreement parties’ comments. Agreement parties receive daily updates on any claims information.
  6. Insurers claims funds are debited from their accounts to the brokers.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Name 2 ways an insurer can be notified of a claim?

A
  1. paper file.
  2. Electronically - The Electronic Claims File (ECF).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is an Electronic Claims File (ECF)?

A

This is the electronic way in which the broker can submit the relevant claims information to insurers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How many components does ECF have? What are they?

A

ECF comprises 2 components:

  1. CLASS (data messaging system).
  2. Document repository.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

If a broker is using ECF to submit claims to insurers, what two actions must the broker take to start the process?

A

Set up and send electronic messages; load documents to the repository.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the UCR?

A

Unique Claims Reference. This is the unique reference code for a claim.

25
Q

What information should be included in the ‘Paper file’ that notifies the insurer of the loss?

A
  1. A full copy of the MRC and any endorsements to it.
  2. All information received to date about the loss.
26
Q

What does every MRC have to have?

A

Every MRC must have a Unique Market reference (UMR) - this identifies it within the databases.

27
Q

Describe a ‘conflict of interest’?

A

Any situation where the insurer or broker is involved in more than one interest from the same loss.

28
Q

What are the 2 different types of ‘Conflict of interest’?

A
  1. Organisation conflict.
  2. Individual conflict.
29
Q

What is an ‘organisational conflict’?

A

When an insurer decides that it cannot be an agreement party on a claim, and so the role is passed on to the next insurer.

Insurer withdraws from their decision-making role but not from their role of playing claims.

30
Q

What is an ‘individual conflict’?

A

Aka ‘Chinese walls’ or ethical walls’.

Claims adjusters ensure files are marked to tell brokers to see within the organisation.

31
Q

How is claims data transmitted in the Lloyd’s Market?

A

XCS transmits data to the syndicates who are not agreement parties.

32
Q

Compare the pros/cons of the paper/email Vs. electronic claims processes?

A

Location:
- Paper/email: Broker has a physical paper file which is sent to various insurers - insurers must wait their turn to see the physical file but email can be simultaneous.
- Electronic: All data can be accessed simultaneously by all insurers if they have access. Neither the insurers’ claims personnel nor the broker need to be in London.

Accessibility:
- Paper/email: The file is physically ‘broked’ - insurers have limited opening time for insurers to visit. Email can be looked at any time.
- Electronic: Available all of the time and can be accessed by insurers whenever.

Document disposal:
- Paper/email: Paper can get lost. Should not be an issue with email.
- Electronic: Once loaded onto the system documents cannot be deleted.

Leader agreement:
- Paper/email: Once a leader has dealt dealt with the claim the broker has to take it physically to the next agreement party.
- Electronic: System automatically notifies the next agreement party after the leader has dealt with the claim.

Familiarity:
- Paper/email: Paper is a familiar document for reading.
- Electronic: The system takes some time to get used to and scanned documents take practice to read.

33
Q

When can money be paid during the claim lifecycle?

A

Monies can be paid at any time during the claim lifecycle.

34
Q

What does the ‘Enterprise Act 2016’ do?

A

This imposes a duty on insurers to make prompt payment of claims.

The insured has the right to commence action for the late payment of claims anytime up to 12 months after the claim was actually paid.

35
Q

How is the movement of money carried out in the Lloyd’s Market?

A

The method of moving money is different depending on the sector of the market.

For the Company Market:
- The agreement parties agreeing to the settlement transaction that the broker puts on the electronic messaging system, triggers the movement of money from their accounts.

For the Lloyd’s Market:
- XCS enters the settlement info onto its database once all the agreement parties have agreed.
- XCS triggers the movement of money from the Lloyd’s insurers.

36
Q

What is a ‘Loss fund’?

A

This is the money insurers give to coverholder’s under binding authorities so they can pay claims upfront and promptly.

Any balance left in the fund would be returned to the insurers.

37
Q

What is ‘indemnity’?

A

Putting the insured back into the position they were in prior to the loss.

38
Q

What is subrogation?

A

The right of the insurer, having indemnified the insured, to pursue the at fault third party for the recovery of claims payments.

39
Q

What is Contribution?

A

If two insurers cover the same subject matter, they should share any claims made, rather than one policy having to pay the whole claim.

Claim payments are calculated using ‘independent liability’ - each insurer’s claim payment is proportionate to their sum insured.

40
Q

What is the Deductible/Excess?

A

The first amount of any loss that must be paid by the insured.

41
Q

What are Exclusions?

A

Exclusions are present in almost every insurance policy and claims adjusters must check whether the insured’s claim is excluded or not.

The wording of exclusions must be clear.

42
Q

What is the legal issue of ‘Estoppel’?

A

When an insurer is prevented from declining a claim because it had led the insured to believe that it had no queries with the claim.

43
Q

How do insurers find out about sanctions?

How do ‘Lloyd’s’ insurers find out about sanctions?

A

Substantial information on the websites for HM Treasury & the US Department of the Treasury, Office of Foreign Assets Control (OFAC).

Lloyd’s insurers & brokers also access information on the Crystal system.

44
Q

How can a ‘Sanction’ be defined?

A

A sanction can be defined as a ban.

Governments around the world can ban all parties from doing business with certain individuals, businesses, governments, or even whole countries/regimes.

45
Q

Why are ‘Sanctions’ imposed?

A

Sanctions are imposed as a way of controlling the access to funds for regimes, companies, or persons who are felt to be less than desirable - maybe because they have links to terrorism or other unlawful behavior.

46
Q

Who do EU sanction apply to?

A

EU sanctions are part of EU law and apply to:

  • all member states
  • nationals of member states
  • all persons & entities doing business in the EU, including nationals of non-EU countries
47
Q

What country does the USA have sanctions in place against? Who must comply with US sanctions?

A

Cuba.

UK/EU/UN must comply with US sanctions.

48
Q

Who controls the organisations:

  1. The Financial Ombudsman Service (FOS).
  2. Financial Services Compensation Scheme (FSCS).
A

The FCA.

49
Q

What is the role of the ‘Financial Ombudsman Service’ (FOS)?

A

The FOS is a free, independent, and impartial service that deals with unresolved disputes between insurers and insured’s.

Membership is compulsory for all authorised firms, including intermediaries.

50
Q

What chapter in the FCA handbook are the full rules relating to the handling of complaints contained?

A

The Dispute Resolution: Complaints (DISP) Sourcebook.

51
Q

How long should the FOS take to investigate and answer the complaint?

A

The FOS must investigate and aim to answer the complaint within 3 months.

52
Q

What are the two ways the FOS can deal with complaints?

A

Redress can be awarded in 2 ways - by providing a:

  1. A ‘money award’.
  2. A ‘directions award’.
53
Q

What is a ‘Money Award’ from the FOS?

A

Money award:
- Telling the firm the specific sum of money it should pay the complainant.
- The maximum money amount the FOS can ask a firm to make to a complainant is £355,000.
- The FOS may recommend a higher figure but this will not be binding on the firm.

54
Q

What is the maximum monetary award the FOS can require a firm to make to a complainant?

A

£355,000.

The FOS may recommend a higher figure but this will not be binding on the firm.

55
Q

What is a ‘Directions Award’?

A

Directions award:

  • Tells the firm what actions it needs to take to put things right for the complainant.

i.e.
- pay an insurance claim that had earlier been rejected.
- apologise personally to the customer.

56
Q

How is the FOS funded?

A
  • a general levy paid by all firms.
  • a case fee payable
57
Q

What is the role of the ‘Financial Services Compensation Scheme’ (FSCS)? What are the levels of protection?

A

The FSCS pays compensation to customers on the behalf of insurers who are not be in a position to pay valid claims - perhaps they have gone bust.

Protection is 100% for:
- Compulsory insurances
- Long-term insurances

Protection is 90% for:
- All other types of policy (with no upper limit).

58
Q

How is the FSCS funded?

A

Insurers have to pay a levy for the funding of FSCS. This levy is also paid partially out of the central fund.

LM2 - Cert CII (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions