Chapter 11 - Valid Claims Settlement and Fraudulent Claims

Question 1

What is meant by the ‘onus of proof’

Answer 1

Duty imposed on an individual to produce evidence to prove that what has been stated or affirmed is true

Question 2

What does an insured have to prove when making a claim?

Answer 2

That an inside peril arose; and

The financial amount of the loss

Question 3

What facts must an insurer check when establishing whether a claim is valid

Answer 3

• cover was in force at the time of the loss
• the insured is that named in the policy
• the peril is covered in the policy
• the insured has taken reasonable steps to minimise the loss
• all conditions and warranties have been compiler with
• no exceptions are appropriate: and
• the value of the loss is reasonable

Question 4

What are the main implied duties on an insured on the occurneces of and incident which might give rise to a claim?

Answer 4

An insured must:

• Act as though uninsured and try to minimise the loss
• advise the appropriate authorities, where necessary
• prevent the loss from spreading; and
• not hinder the insurer in the event of the claims investigation.

Question 5

What is the purpose of a claim form?

Answer 5

The purpose of the claims form is to:

• establish whether the insured is entitled to indemnity under the policy
• provide sufficient information to permit the insurer to process the claim, if appropriate
• enable the insurer to consider whether a third party claim is likely
• enable the insurer to consider whether any rights of subrogation or contribution are likely

Question 6

What is contribution?

Answer 6

Contribution is the right of an insurer to call upon other insurers, who are similarly, but not necessecarily, equally liable to the same insured, to share the cost of an indemnity payment.

Question 7

What is the formula by which average is calculated?

Answer 7

Sum insured
——————— X loss = claims payment
value at risk

Question 8

Under which two agreements does the MIB operate?

Answer 8

MIB operates under

• uninsured drivers agreement and
• untraced drivers agreement

Question 9

What are the 5 possible ways a claim may be settled?

Answer 9

Claims may be settled by:

1. Payment of money.
2. Paying for repairs.
3. Replacement
4. Reinstatement
5. Payment to a third party.

Question 10

Why is it important for an insurer to have an accurate reserve on its outstanding claims?

Answer 10

Claims raerarves are important because

• Financial statements must be submitted to the appropriate regulator and
• They impact on premium rates.

Question 11

What are the three main facilitaties available for fraud detection in the insurance industry?

Answer 11

The three main facilitaties for fraud detection are

Claims and underwriting authority

Art loss register

Motor Insurance anti-fraud and theft register