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Cert CII- IF4 > Chapter 3 - Claims consideration and adminstration > Flashcards

Chapter 3 - Claims consideration and adminstration Flashcards

1
Q

What deparment is vital in ensuring proper management of pooled funds?

A

The claims department

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2
Q

Summarise the 4 roles of a Claims handler

A
  1. Deal with all submitted claims quickly and fairly.
    2.Settle claims with the minimum of wastage and avoidable overpayment (leakage)
  2. Estimate accurately the final cost of outstanding claims
  3. Distinguish between genuine and fraudalent claims.
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3
Q

What will a claims deparment have a philosophy on to embrace more?

A

Service standard - How it itends to deal with claims presented by its customer.

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4
Q

What will the service standard philosophy normally cover?

A

1.Quality of service aimed for
2.How valid claims will be handled
3.Nature of claims service at each stage
4.speed of claims service
5.Economic effciency of the claims service.

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5
Q

what should the service standard balance?

A

Need to treat the customer fairly, efficiently and sympathetically with the need to only pay claims

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6
Q

what does good customer service typically incorporate?

A
  1. Efficient and prompt notification
  2. Investigation
  3. Settlement of claim
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7
Q

What is the benefit of good quality service to an insurer? (There is 6)

A
  1. Encourages Customer loyalty
  2. Attracts new customers
    3.Attracts and keep high-quality employees through job satisfactions
    4.Marks the company out from its competitiors
    5.Increases productivity
    6.Improves the working enviroment.
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8
Q

Does a third party have a contractual relationship with the insurer?

A

No

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9
Q

Whom must a third party pursure their claim against?

A

Legally against the insured not the insurance company

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10
Q

List all the below that are true :

  • Third Party’s expectations of the level of claims service may be grearer than those of the insured as they may be hostile
  • Third Party’s may be entilted to more settlement.

-Third Party’s are more than likely not to exaggerate their claim due to not identifying with insurer’s

-Third Party’s are likely to exaggerate their claim due to not identifying with insurer’s

  • Third Party’s cannot pressure insurers to respond more quickly as the insurer has no loyalty
  • A third party will not be fully compensated in the event of contributory negligence (They are to blame)
  • A third Party are liable for any excess or deductible when they are to blame
  • A third Party will never be liable for any excess or deductible
  • A third party will normally use a service of a reinsurance company
A
  • Third Party’s expectations of the level of claims service may be grearer than those of the insured as they may be hostile

-Third Party’s are likely to exaggerate their claim due to not identifying with insurer’s

  • Third Party’s cannot pressure insurers to respond more quickly as the insurer has no loyalty
  • A third party will not be fully compensated in the event of contributory negligence (They are to blame)
  • A third Party will never be liable for any excess or deductible
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11
Q

Why might an insurer manage the needs of a third party to the same standards of the paying? (Select all that apply)

  • Cheaper adminstration costs
  • Avoids delays and disputes
  • May lead to increased business in longer term
  • Better relationship with the third party’s insurer
A
  • Avoids delays and disputes
  • May lead to increased business in longer term
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12
Q

What is reserving?

A

The process a company carries out in order to assess the level of funds that are required to meet current and future claim liabilties.

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13
Q

What does reserving assess ? (select all that apply)

  • Overrall financial perfomance of the company
  • Adequacy (acceptable) of premium rates
  • Amount of expected claims
  • Financial security of insurer’s
  • Relative profitability of the various classes of business
A
  • Overrall financial perfomance of the company
  • Adequacy (acceptable) of premium rates
  • Relative profitability of the various classes of business
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14
Q

What is the reserve that covers the whole book of a business?

A

Global claims reserve

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15
Q

What is the objective of claims reserving?

A

Estimate the future cost of claims

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16
Q

what is the Incurred but not reported (IBNR) reserve?

A

This reserve suggests the claim has been incurred by the insured but has not yet been reported to the insurer

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17
Q

What is the outstanding claims reserve?

A

It is the gathering of all individual claim reserves covering the cost of claims that have been incurred and reported to the insurer.

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18
Q

what is the incurred but not enough reported (IBNER) reserve?

A

This covers shortfalls in provisions for outstanding claims reserve

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19
Q

What are the reasoning for the following reserves :

  • Equalisation
  • Catastrophe

-Unearned premium reserve and unexpired risk reserve

-Provision for claims handling expenses

-Re-opened claims reserve

A
  • Equalisation (Required by law and designed to smooth fluctuations in loss ratios)
  • Catastrophe (Set up to cover a large number of related individual losses arising from one event exp. hurricane)

-Unearned premium reserve and unexpired risk reserve (Unearned is element of premium reserve for which insurance cover has not yet been provided. Unexpired is only needed when a loss is foreseen in relation to the unearned premium)

-Provision for claims handling expenses (To cover the anticpated future costs of settling claims for example loss adjuster fees and office expenses)

-Re-opened claims reserve (This occurs when a claim is closed but then the underlying circumstances of the claimant deteriorate)

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20
Q

what are the 4 main ways fraud can be illustrated?

A
  • Inventing a loss event that never took place
  • Exaggersating the number of items stolen
  • Deliberately creating an insured event
  • Exaggerating the effects of an insured event
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21
Q

What are the two primary objectives of the insurance fraud bureau (IFB) established in 2006?

A
  1. Help insurers identify fraud and avoid the financial consequences
  2. Support police, regulators and other law enforcement agencies in finding fraudsters and bringing them to justice
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22
Q

Please describe the databases for the following:

  • Insurance fraud register
  • IFB insurance fraud intelligence Hub (IFiHUB)
  • Motor Insurance Anti-Fraud and Theft register (MIAFTR 2)
  • Motor insurance Database (MID)
  • Claims and Underwriting Exchange (CUE)
  • Art Loss register
A
  • Insurance fraud register (Holds details of proven fraudsters to help prevent future fraud being commited. It is adminstrated by the IFB on behalf of the ABI members)
  • IFB insurance fraud intelligence Hub (IFiHUB) (An IFB strategy in where intelligence about fraudsters can be shared in real time)
  • Motor Insurance Anti-Fraud and Theft register (MIAFTR 2) (Contains details of al the total loss and theft claims therefore insurers can check if a theft of a vehcile is being claimed for more than once)
  • Motor insurance Database (MID) (Contains details of all registered vehicles in the UK and related insurance details. Helps police in identifying uninsured drivers)
  • Claims and Underwriting Exchange (CUE) (Contains information on personal lines claims from the previous 3 years. its aim is to eliminate mutiple claims on parallel policies held by a single insured.)
  • Art Loss register ( Aims for this is to 1. Increase the recovery rate of stolen art and antiques and 2. Deter theft by making the resale of stolen articles more difficult.)
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23
Q

Who staffs in-house fraud detection teams?

A

Tend to be staffed by insurance fraud detection experts who are often people with experience in the surveillance or security sertives and the police

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24
Q

What is the FOS’s view in relation to fraudulent acts and liability?

A

The FOS stated that ‘ Where the fraudulent act or omission makes no difference to the insurer’s ultimate liability under the terms of the policy, it should not entitle the insurer to ‘forfeit’ the policy or reject the claim.’

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25
Q

In section 12 of the Insurance Act 2015 what is the insurers posistion if a fraudalent claim is made?

A

If a fraudulent claim is made, the act allows the insurer to treat an insurance contract as terminated from the time of the Fraudulent act.

26
Q

List the following that are true after termination (IA Act 2015):

  • The insurer will remain liable for any prior legitimate claims arising before the fraudulent act.
  • The fraudulent claim and all subsequent legitimate claims will be invalid
  • The insurer may recover any payments in respect of the fraudulent claim
  • The insurer will be entitled to retain any premium paid.
A
  • The insurer will remain liable for any prior legitimate claims arising before the fraudulent act.
  • The fraudulent claim and all subsequent legitimate claims will be invalid
  • The insurer may recover any payments in respect of the fraudulent claim
  • The insurer will be entitled to retain any premium paid.
27
Q

Is the Insurer entilted to terminate the cover from the date of the ‘fraudulent act’ or when the claim is submitted?

A

Fraudulent act

28
Q

What did the Criminal Justice and Courts Act 2015 bring in respect to PI (Personal Injury) Claims?

A

Where part of a Personal Injury claim is found to be ‘fundamentally dishonest’ the whole claim can be struck out. This means it should discourage claimants from exagggerating personal injury claims.

29
Q

Whom is responsible for claims handling?

A. Insurer

B. Policyholder

  1. Wholesale Broker
  2. Retail Broker
A

Insurer

30
Q

what is the main purpose of the ICOBS rules?

A

Ensure customers are treated fairly

31
Q

In respect to Consumers ICOBS considers it to be unreasonable for claims to be refused when :

A
  • A misrepresentstion, which is not a qualifying misrepresentation under CIDRA
  • A breach of warranty or condition unless the circumstances of the claim are connected with the breach.
32
Q

Under ICOBS, how long should firms retain records?

A

As long as is relevant for the purposes for which they were made and their own business needs.

33
Q

what Act categorised Policyholders to ‘Consumer’ and ‘Commercial Customer’?

A

Consumer Insurance (Disclosure and Representations) Act 2012

34
Q

Under CIDRA, what is a qualifying misrepresentation defined as?

A
  • Deliberate or reckless (The insurer can avoid the contract if this was made)
  • Careless
35
Q

If a misrepresentation was Careless, what could an insurer do? (select all that apply)

  • If insurer would of not entered into the contract it can avoid the policy but must return any premium
  • If insurer would of entered into the contract on different terms it can treat the contract as if those terms had applied
  • If insurer would of entered into the contract but charged a higher premium, the claim amount can be reduced proportionately.
A
  • If insurer would of not entered into the contract it can avoid the policy but must return any premium
  • If insurer would of entered into the contract on different terms it can treat the contract as if those terms had applied
  • If insurer would of entered into the contract but charged a higher premium, the claim amount can be reduced proportionately.
36
Q

What ways does the IA act 2015 amend the insurance law? (select all that apply)

  • Pre-contractual duty of disclosure and the effect of misrepresentations at that stage
  • The effect of warranties contained in the policy
  • Insurer’s remedies for fraudulent claims
A
  • Pre-contractual duty of disclosure and the effect of misrepresentations at that stage
  • The effect of warranties contained in the policy
  • Insurer’s remedies for fraudulent claims
37
Q

What does the new duty of ‘fair presentation’ mean to proposers.

A
  • Disclose to insurers ‘every material circumstance’ which the insured knows or ought to know
  • Provide the insurer with ‘sufficient information’ to put a prudent insurer on notice that they need to make further enquiries into those ‘material circumstances’
38
Q

In what manner should disclosure be made?

A. Would be reasonably clear and accessible to a prudent underwriter

B. In a quickly and timely manner and be careful not to make a misrepresentation

C.In a slow and detailed way to ensure no mistakes are made

A

A. Would be reasonably clear and accessible to a prudent underwriter

39
Q

Define who is included in the term ‘Knowledge’ for individuals and organisations when disclosing information.

A

Indiviudal - Deemed to include anything known by a person who is ‘responsible for the insured’s insurance’.

Organisation - Anyone who is part of the insured’s ‘senior management’ or who is responsible for the insured’s insurance.

40
Q

What does the IA 2015 provides that an insurer is ‘ought to know’

A

Anything which:

  • An employee or agent of the insurer knows and ought reasonably to have passed on to the underwriter

-Where the relevant information is held by the insurer and is readily available to the individual.

41
Q

When can an insurer repudiate a claim and avoid a policy entirely? (expect fraud)

A. When the insured made a breach of duty in an innocent way.

B.When the insured doesnt communicate with the insurer.

C.When the Insured provides a late FNOL.

D. When the insrured makes a deliberate or reckless breach of duty.

A

D. When the insrured makes a deliberate or reckless breach of duty.

42
Q

What was the consequence of breach of warranty under CASE LAW and the INSURANCE ACT 2015. Please match the following consequences:

A. The insured receives a penalty fine but hwoever the policy stays in place.

B.Insurer’s liabilty is suspened until the warranty has been remedied. Liabilty cannot be suspended if warranty does not relate to loss

C. Breach of warranty automatically terminates cover from date of breach and effectively cancels the insurance.

A

Case Law - C.Breach of warranty automatically terminates cover from date of breach and effectively cancels the insurance.

IA 2015 - B.Insurer’s liabilty is suspened until the warranty has been remedied. Liabilty cannot be suspended if warranty does not relate to loss

43
Q

What Clause does the Insurance Act 2015 prohibits ?

A

Basis of Contract Clause

44
Q

Under the Insurance Act 2015, what circumstances allow Consumers and Non-consumers to Contract out of the Act.

A

Consumers - Only if it does not put the consumer in a worse posistion than if it was to stay under the Act.

Non-Consumer - Act allows commercial parties to contract out of the new provisions by agreeing alternative terms.

45
Q

When did the Insurance Act 2015 come into effect?

A

12 August 2016

46
Q

What does the Enterprise Act 2016 amend?

A

Amends the Insurance Act 2015 by adding in Provisions relating to Compensation for late payment of claims. This came into effect from MAY 2017

47
Q

Under the Enterprise Act 2016 what is the consequence of breaching the ‘late payment’ term?

A

Breach of the term will result in the insurer paying damages to the insured as well as the original payment and interest.

48
Q

Where can you find full rules and guidance relating to the handling of complains?

A. ICOBS (Insurance Conduct of Business Sourcebook)

B.The Senior Managers and Certification Regime (SM&CR)

C.Dispute Resolution: Complaints Sourcebook (DISP)

A

C.Dispute Resolution: Complaints Sourcebook (DISP)

49
Q

Who are the eligible complainants for FOS disputes: Select all that apply

A. Consumer

B. Micro-enterprise (With a turnover less then €2M)

C. Charities (With Annual income less than £6.5m)

D.Trustees of trusts with a net assest value of less then £5m

E.Small businesses with annual turnover less that £6.5m and less than 50 employers

F.Guarantors

A

A. Consumer

B. Micro-enterprise (With a turnover less then €2M)

C. Charities (With Annual income less than £6.5m)

D.Trustees of trusts with a net assest value of less then £5m

E.Small businesses with annual turnover less that £6.5m and less than 50 employers

F.Guarantors

50
Q

A complainant can refer their complaint to the FOS within the earliest of: (List the Time Bar’s for each one)

A. _____ of the date on the firm’s letter advising the claimant of its final decison

b.____after the event complained about

c.____after the complainant knew, or should have known, that they had cause for complaint

A

A. 6 MONTHS of the date on the firm’s letter advising the claimant of its final decison

b. 6 YEARS after the event complained about

c. 3 YEARS after the complainant knew, or should have known, that they had cause for complaint

51
Q

When should the FOS aim to investigate and responsd to a complainant?

A

Within 3 months

52
Q

In respect to a Money award what is the maximum the FOS can require a firm to make on acts on or after APRIL 2022 about acts or omissions:

A. After 1 April 2019

B. Before 1 April 2019

A

A. After 1 April 2019 - £375,000

B. Before 1 April 2019 - £175,000

53
Q

Who are the FOS funded by? (There is 2)

A
  1. A general Levy paid by all firms
  2. Case fee payable by the firm to which the compaint relates
54
Q

Once a customer has resorted to arbitration what do they normally write to their insurer: (select all that apply)

A. A delegated authority number

B. Who they think the arbitrator should be or how they should be chosen.

C.Name and addresses of the parties

D. FOS number

E. A brief discription of the dispute and how they would like to see it resolved.

A

B. Who they think the arbitrator should be or how they should be chosen.

C.Name and addresses of the parties

E. A brief discription of the dispute and how they would like to see it resolved.

55
Q

Is it true or false that the arbitrator has the same powers as the courts to order the parties to do something?

A

True

56
Q

What is Adjudication?

A

Covers disputes between policyholder and sub-contractors. A decision is made by an independent party within 28 days.

57
Q

Please list the 3 Adjudicative options for Third party disputes:

A. Negotiation

B. Expert determination

C.Mediation

D.Adjudication

E.Arbitration

A

B. Expert determination

D.Adjudication

E.Arbitration

58
Q

Select all the Non-adjudicative options for Third Party disputes: (This means the parties control the process and outcome)

A. Negotiation

B. Joint settlement/round table meetings

C. Mediation

D. Early Neutral evaluation/expert evaluation

E.Conciliation

A

A. Negotiation

B. Joint settlement/round table meetings

C. Mediation

D. Early Neutral evaluation/expert evaluation

E.Conciliation

59
Q

What is the Financial Vulnerability Taskforce?

A

it is an independent representative body covering the personal financial sector.

Main purpose is to promote greater understanding, encourage appropriate behaviours and establish good practice in respect to customer vulnerability.

60
Q

In respect to ICOBS 8 claims handling, an insurer should set out procedures to ensure what? (select all that apply)

A. Handles claims promptly and fairly

B. Settlements are made within a week for consumers

C.Provides guidance on how to make a claim and information on its progress

D.does not unreasonably reject a claim

E.Settle claims promptly once settlement terms are agreed.

A

A. Handles claims promptly and fairly

C.Provides guidance on how to make a claim and information on its progress

D.does not unreasonably reject a claim

E.Settle claims promptly once settlement terms are agreed.

Cert CII- IF4 (7 decks)

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