Chapter 6 - Claims settlement Flashcards
What are the fours ways a claim can be settled?
- Payment of Money
2.Payment of Repairs
3.Replacement
4.Reinstatement
what is the most easiest and common form of settlement?
Payment of money to the insured
In which class of insurance is replacement used for settlement?
Glass insurance due to glaziers frequently offer discounts to insurers
Out of the 4 ways in which a claim can be settled: Payment of money, paying for repairs, replacement and reinstatement, what two ways need to be stated in a policy to be applied?
Reinstatement and replacement
An insurer can pay someone else for the claim rather then insured such as repaires but before payment is made under what rule means the insurer must explain to the insured the reasoning for the third-party payment?
FCA Principle of the fair treatment of customers
What is a ‘surge event’
This is where an insured event causes a higher volume of claims than normal, placing greater demand on the insurer’s claims resources.
exp is a storm or hurricane
In a surge event, what is it important for an insurer to priortise? (select one)
- Customer needs and higher priorty claims
2.Customer needs and expensive claims
3.Customer needs and cheaper claims
4.Customer needs and lower priorty claims
4.Customer needs and lower priorty claims
Global reserving which is mainly the responsibilty of the actuarial department can also be referred to as what?
Actuarial reserving
The 1st step of the claims reserving process is “checking data integrity” what does this mean to the insurance company?
The company must ensure that individual case estimates are up to date and no processing backlogs exist
The 2nd step of the claims reserving process is “collating historical data” what does this mean to the insurance company?
Data must be collated into smaller groups such as private and commerical in motor.
Historical data should contain premiums earned, No of claims, amount paid along with outstanding claims data.
You should be able to search all this info by underwriting, calender, policy and accident year.
The 3rd and final step of the claims reserving process is “Projection of claims” what does this mean to the insurance company?
Claims need to be projected to establish the likely ultimate gross payout. A method to use is the LOSS DEVELOPMENT FACTOR METHOD.
Explain what should happen to a reserve when:
- A claim payment is made
- Extra information comes to light or the claim becomes more complez
- Once a claim payment is made the reserve should be reduced
- If more info comes in or a claim becomes more complex a reserve should be increased.
What is factor or flag reserving?
This is where a factor is being added to each claim rather then a whole case reserve. It is usually common in motor damage or small personal injury claims.
What are the following reasons in to why a claim is invalid or only partially met?
- Cover was never in force
2.Breach of a material warranty
3.Breach of a policy condition
4.Fraud
- Cover was never in force
2.Breach of a material warranty
3.Breach of a policy condition
4.Fraud
The following 4 reasons are why a claim may be partially met please explain what they are:
1.Limit to maximum amount recoverable
2.Application of an average clause
- Application of excess or deductible
4.An ex Gratia Payment
- This could be either the loss is greater than sum insured or their is a limit of liability
- Average clause is the case when underinsurance occurs
- A set amount payable by the insured for every claim
- This is payment made by an insurer as a gesture of goodwill.
