Chapter 10 - Claims Handling Flashcards

1
Q

XCS is a key service for Lloyd’s insurers - what does it do?

A

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

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2
Q

How are experts appointed for claims handling

A

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.

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3
Q

Types of experts used for claims handing

A
  • lawyers
  • loss adjusters
  • surveyors
  • accountants
  • investigators
  • specialist (fire, ship collision,chemist)
  • translators, interpreters
  • subrogation/recovery specialist
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4
Q

How are experts managed?

A

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

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5
Q

What is the claims handling process

A
  1. Notified of loss - broker works out right combination of insurers to get instructions
  2. Broker submits information
  3. Agreement parties consider info and respond
  4. XCS enters data (Lloyds only)
  5. Broker receives messages. Agreement parties receive daily messages.
  6. If any payment to be made for presentation funds debited from accounts of the broker
  7. Broker updates its file and repeats process if required
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6
Q

First notification of loss

A

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

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7
Q

Examples of conflicts of interest in claims handling

A

PI - two experts being sued for same problem
Marine - collision where both vessels are firms insured
Aviation- product liability claims for manufacturer and distributor

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8
Q

What does an Electronic Claims File consist of

A
  • 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

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9
Q

Difference between paper and electronic claims process

A

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

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10
Q

Settlement of claims - key matters to consider

A
  • 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
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11
Q

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?

A

Up to 12 months

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12
Q

In what two ways is movement of money carried out?

A

Company market - agreement parties automatically trigger money moving from their accounts

Lloyds market - XCS triggers movement of money from Lloyd’s insurers

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13
Q

Claims handling under binding authorities

A

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

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14
Q

Key issues to be considered

A

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

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15
Q

Insurance fraud in LM

A
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
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16
Q

Key fraud triggers

A

Excessive claims file
Pressure to settle
Reluctant to answer questions
Stories that dont add up

17
Q

Complaints handling - what should a LM insurer communicate to insured within its complaints procedure?

A

Who to contact
Timescales
Existence of FOS
The fact referring to FOS doesnt remove insureds legal rights

18
Q

FOS only deals with these eligible complainants

A
Consumer
Micro enterprise
Small charity
Trustee of trust
Consumer buy-to-let
Small business 
Guarantor
19
Q

How long does a complainant have to refer to FOS

A

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

20
Q

How is redress awarded

A

In money or in directions

21
Q

What is purpose of FSCS

A

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

22
Q

What is the brokers role in claims process

A
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
23
Q

Insurers role in claims process

A

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

24
Q

IUA Non Marine rules

A

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

25
Q

IUA marine and aviation rules

A

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

26
Q

Lloyds claims scheme

A

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)