Claims Awareness

Question 1

If an insured makes a claim under their policy, who does the onus of proof rest with?

Answer 1

The insured

Question 2

What is the difference between a loss and a claim?

Answer 2

A loss is an event which causes the insured financial loss which may or may not be covered. A claim is a request for indemnity under the policy

Question 3

In the event of a claim what two things must the insured prove?

Answer 3

That an insured peril arose

The amount of the loss

Question 4

What are some implied duties of the insured in the event of a claim?

Answer 4

Act as though they are uninsured
Act to minimise all losses
Do not hinder the investigation
Advise the appropriate authorities (ie the police)

Question 5

What are some express duties of the insured in the event of a claim?

Answer 5

Prompt notification to insurer
Take reasonable care
Provide proof within certain timescales
Notify the police of certain types of claims

Question 6

During investigation of a fire claim under a household insurance policy the insurer discovers that the insured has not complied with the security condition. What action does the insurer take?

Answer 6

None - the condition is not relevant to the fire claim so they cannot use it to repudiate the claim and must meet it in full

Question 7

How can claims be notified?

Answer 7

Telephone, internet, fax, email or in writing (claim form)

Question 8

What does the information in a claim form allow an insurer to establish?

Answer 8

Whether the claim is covered
The likely size of the claim (reserve, not final cost)
Whether there is any potential for recovery/subrogation

Question 9

What sort of supporting evidence may be provided in the event of a claim?

Answer 9

Original purchase receipt
Photograph of damage
Crime reference number
Replacement/repair estimates
Doctors report

Question 10

What must a third party prove when making a claim?

Answer 10

That the insured was negligent

Question 11

What did the Limitation Act 1980 do?

Answer 11

Set out timescales in which a claim must be notified to an insurer

Question 12

How long do claimants have to notify a claim for:

a) Personal injury
b) Property

Answer 12

a) 3 years

b) 6 years

Question 13

What was the aim of the Woolf Reforms?

Answer 13

To implement a “Pre-Action Protocol” for personal injury claims. These have more contact between parties and exchange of information and better investigation in order to avoid litigation. They also introduced a timescale of 21 days for insurers to acknowledge a letter from a third party solicitor and 3 months to decide on liability

Question 14

When were the MOJ reforms implemented?

Answer 14

30th April 2010

Question 15

What was the purpose of the MOJ reforms?

Answer 15

To ensure prompt settlement of motor claims and avoid litigation

Question 16

How many stages make up the MOJ reforms process?

Answer 16

Three

Question 17

What claims fall within the MOJ reforms process?

Answer 17

Motor injury claims valued between £1,000-£25,000

Question 18

What is stage 1 of the MOJ process?

Answer 18

Notification and Liability Assessment

The insurer has 15 days to acknowledge a claim, investigate, and communicate a liability decision. This is done via an industry wide IT portal.

If they accept liability costs must be paid at a fixed rate within 10 days

Question 19

What is stage 2 of the MOJ process?

Answer 19

Medical and Negotiation

The claimant sends a medical report and a settlement offer to the insurer. The insurer has 15 working days to consider the settlement pack and accept or reject. If rejected they can make a counter offer. 20 working days are allowed for negotiation. If no agreement is reached the claimant will send a final settlement offer which the insurer has 5 working days to respond to

Question 20

What is stage 3 of the MOJ process?

Answer 20

Court Hearing

The claimant can apply to the court 10 days following their final settlement pack being sent. The court then determines quantum, costs and timescales for payment

Question 21

What recommendations were brought in under the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012?

Answer 21

Losing defendants are no longer liable for the success fee in a claimants lawyers “no win, no fee” or for their after the event legal expenses insurance premium. General damages are to be increased by 10% to compensate claimants for this.

Successful defendants are no longer able to recover their legal cots.

Question 22

Why do insurers favour replacement as a form of settlement?

Answer 22

It discourages fraud and due to supplier discounts can limit costs

Question 23

What are the 2 distinct elements of third party injury claims?

Answer 23

General damages and special damages

Question 24

What are general damages?

Answer 24

Awards for pain, suffering, loss of amenity and injuries

Question 25

What are special damages?

Answer 25

Costs that can be specifically proven and documented eg travel costs, loss of earnings etc

Question 26

What is meant by agreed value?

Answer 26

When the subject matter would be difficult to value (eg a work of art, classic car or unique jewellery) the amount payable in the event of a loss is agreed when the policy is taken out

Question 27

What is an ex-gratia payment?

Answer 27

When the claim is not covered but the insurer pays it anyway as a gesture of goodwill

Question 28

What is claims leakage?

Answer 28

An over-payment, error, or payment for a claim that is not actually covered, which has led to unnecessary costs. For example forgetting to deduct an excess or paying VAT when it isn’t applicable

Question 29

What is salvage?

Answer 29

For example when damaged goods have been replaced or stolen goods are paid for and later recovered, the original goods become property of the insurer

Question 30

What are some examples of fraud?

Answer 30

Inventing a loss that never happened
Exaggerating the extent of a genuine claim
Deliberately causing an insured event

Question 31

What are some databases insurers may use to detect and prevent fraud?

Answer 31

MIAFTR - Motor Insurance Anti Fraud and Theft Register

MID - Motor Insurance Database

CUE - Claims Underwriting Exchange

Question 32

What are claims handlers trained to spot in order to detect fraud?

Answer 32

Claims soon after inception
Pressure or threats to settle a claim quickly
Lack of co-operation
Inconsistency
Lack of supporting documentation

Question 33

Why do insurers like to take claim details over the phone?

Answer 33

To combat fraud - people find it harder to lie when talking in person as opposed to a computer

Question 34

What are some methods insurers use to discourage fraud?

Answer 34

Settling with replacement items rather than cash

Taking claims details over the phone

Question 35

What are the consequences of fraudulent claims to the insurer?

Answer 35

Loss of profit

Inflation of premiums due to larger claims payouts which may impact their competiveness

Question 36

What are the consequences of fraudulent claims to innocent policyholders?

Answer 36

Their premiums may increase to make up for the insurer’s larger outlay

Question 37

What is the maximum award the Financial Ombudsman Service can award?

Answer 37

£150,000

Question 38

Is the decision of the Ombudsman binding?

Answer 38

To the insurer yes

The insured can accept or reject the decision. If they reject they have the option to resort to litigation through the courts for damages

Question 39

What is the role of the Financial Ombudsman Service?

Answer 39

To settle disputes over liability and quantum between and insured and their insurer where the insurer’s internal complaint channels have not resolved the complaint

Subject to guidelines over what can be referred

Question 40

Why might an insurer use approved or preferred repairers or suppliers?

Answer 40

They can guarantee the quality of repairs and replacement goods or services

It is convenient for both the insurer and insured

They can lower their costs

Question 41

What are uninsured losses?

Answer 41

Costs that are not insured. For example policy excesses, damage to a vehicle only insured on a third party basis, etc