Chapter 10 - Claims Handling Flashcards
XCS is a key service for Lloyd’s insurers - what does it do?
Maintains Lloyd’s market claims database by:
- entering data
- sending out overnight messages to insurers
- moving funds from syndicates to brokers
(Technical Processing service)
Leaders can delegate their authority to XCS for claims
How are experts appointed for claims handling
Via a broker
Reports sent to insurer via broker
Also sent to agent so client has access
Insurer may want to only appoint expert for advice if concerned about coverage. Insurer then appoints expert itself.
Types of experts used for claims handing
- lawyers
- loss adjusters
- surveyors
- accountants
- investigators
- specialist (fire, ship collision,chemist)
- translators, interpreters
- subrogation/recovery specialist
How are experts managed?
Party employing expert ensures they are properly briefed
Insurer holds expert accountable if they dont deliver
Terms of Engagement document used to detail scope and frequency of reports, what they can charge for, how often to submit invoices
What is the claims handling process
- Notified of loss - broker works out right combination of insurers to get instructions
- Broker submits information
- Agreement parties consider info and respond
- XCS enters data (Lloyds only)
- Broker receives messages. Agreement parties receive daily messages.
- If any payment to be made for presentation funds debited from accounts of the broker
- Broker updates its file and repeats process if required
First notification of loss
Goes to broker
Insurer inserts named experts to be used in event of loss onto the policy
PI - nominates a lawyer
Cargo - nominates a local surveyor
Losses can occur any time so better to name expert
Examples of conflicts of interest in claims handling
PI - two experts being sued for same problem
Marine - collision where both vessels are firms insured
Aviation- product liability claims for manufacturer and distributor
What does an Electronic Claims File consist of
- data messaging system (CLASS)
- document repository
CLASS has built in routing and messages leaders first.
Once leaders have considered presentation they can agree or query. Broker sees response.
EC system can cope with changes in agreement parties
A paper file has no place for overseas UWs
Difference between paper and electronic claims process
Paper: insurers outside london have to use email or other methods
ECF: neither claims nor broker need to be in london
Paper: paper can get lost
ECF: once loaded on system docs cant be deleted
Paper: paper is a familiar medium
ECF: scanned docs take practice to read and system takes time to learn to use
Settlement of claims - key matters to consider
- is amount requested reasonable
- is claim covered
- any deductible/excess
- anyone in control of where payments made (eg. Bank lent money as mortgage and appears as loss payee)
- currency
- indemnity payments should only be made in exchange for a receipt
- where money is to be paid
Under Enterprise Act 2016 how long after the claim was paid does the insured have right to take action for damages for late payment of claim?
Up to 12 months
In what two ways is movement of money carried out?
Company market - agreement parties automatically trigger money moving from their accounts
Lloyds market - XCS triggers movement of money from Lloyd’s insurers
Claims handling under binding authorities
Insurers can delegate authority under binding authority to CH or organisations eg TPAs, but information flow is different
Party receives info from broker or insured.
Party handles claims within their authority.
Party refers anything outside their authority.
Referrals go via London broker
CH sends bordereau via broker to insurer monthly
Key difference is insurer often provides CH/TPA with loss fund upfront.
Loss fund is returned at end of binding authority when claim concludes
Key issues to be considered
Indemnity - putting insured back in position- what if you cant due to sublimits or impossible to repair
Subrogation - right of insurer having indemnified to step into insureds shoes
Contribution - two insurers covering same subject matter against same risk
Proximate cause - fortuity, named perils, exlcusions
Deductible/excess - more than one (different properties or different causes of loss)
Exclusions - clarity in communication
Insurance fraud in LM
Fraud can be on a bigger scale in LM Regulated by FCA Insurer must: Handle claims fairly Provide guidance Not unreasonably reject a claim Settle claims promptly
Key fraud triggers
Excessive claims file
Pressure to settle
Reluctant to answer questions
Stories that dont add up
Complaints handling - what should a LM insurer communicate to insured within its complaints procedure?
Who to contact
Timescales
Existence of FOS
The fact referring to FOS doesnt remove insureds legal rights
FOS only deals with these eligible complainants
Consumer Micro enterprise Small charity Trustee of trust Consumer buy-to-let Small business Guarantor
How long does a complainant have to refer to FOS
6 months after date of letter of final decision
6 years after event complained about
3 years after the complainant knew they had cause for complaint
How is redress awarded
In money or in directions
What is purpose of FSCS
Protect insureds if insurer cannot pay out claim due to going out of business
100% protection for:
Compulsory insurance
PI insurance
Long term insurance
Claims for injury, sickness, infirmity of policyholder
90% protection for:
General insurance advice and arranging
Lloyds uses Central fund to pay out claims when syndicate cant pay
What is the brokers role in claims process
First point of contact for insured Gather as much info as poss Work out which insurers need to be advised Present claims electronically or paper Provide updated info to insurer Negotiate on behalf of client Receive any claims funds
Insurers role in claims process
Two main claims handling agreements:
International UW Association of London Company markets (IUA) - IUA claims handling agreement (marine and aviation only, for non marine each insurer agrees for its own share)
Lloyds market - lloyds claims schemes
IUA Non Marine rules
Not prepared to have one leader making claims decisions
Broker needs agreement from each insurer
Individual companies can set up claims agreement system to bypass them if share below certain amount
IUA marine and aviation rules
Advices agreed by lead company market UW only
Settlements have a number of requirements:
Marine (not XS of loss) - Lloyd’s involvement, one company binds rest of company market. No Lloyds involvement, first 2 companies have to agree
Aviation (not XS of loss) - Direct business, first 2 companies have to agree. Facultative, lead company only
XS of loss - first 2 companies have to agree
Lloyds claims scheme
Rules have exceptions for any business written by only one syndicate (singletons)
Standard claims: up to 250,000
Handled by leader only
Eligible for SCAP
Complex claims: over 250,000
Handled by first 2 syndicates only
(This changes to 500,000 for energy or property treaty classes)
