Claims Awareness Flashcards
If an insured makes a claim under their policy, who does the onus of proof rest with?
The insured
What is the difference between a loss and a claim?
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
In the event of a claim what two things must the insured prove?
That an insured peril arose
The amount of the loss
What are some implied duties of the insured in the event of a claim?
Act as though they are uninsured
Act to minimise all losses
Do not hinder the investigation
Advise the appropriate authorities (ie the police)
What are some express duties of the insured in the event of a claim?
Prompt notification to insurer
Take reasonable care
Provide proof within certain timescales
Notify the police of certain types of claims
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?
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
How can claims be notified?
Telephone, internet, fax, email or in writing (claim form)
What does the information in a claim form allow an insurer to establish?
Whether the claim is covered
The likely size of the claim (reserve, not final cost)
Whether there is any potential for recovery/subrogation
What sort of supporting evidence may be provided in the event of a claim?
Original purchase receipt Photograph of damage Crime reference number Replacement/repair estimates Doctors report
What must a third party prove when making a claim?
That the insured was negligent
What did the Limitation Act 1980 do?
Set out timescales in which a claim must be notified to an insurer
How long do claimants have to notify a claim for:
a) Personal injury
b) Property
a) 3 years
b) 6 years
What was the aim of the Woolf Reforms?
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
When were the MOJ reforms implemented?
30th April 2010
What was the purpose of the MOJ reforms?
To ensure prompt settlement of motor claims and avoid litigation
How many stages make up the MOJ reforms process?
Three
What claims fall within the MOJ reforms process?
Motor injury claims valued between £1,000-£25,000
What is stage 1 of the MOJ process?
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
What is stage 2 of the MOJ process?
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
What is stage 3 of the MOJ process?
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
What recommendations were brought in under the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012?
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.
Why do insurers favour replacement as a form of settlement?
It discourages fraud and due to supplier discounts can limit costs
What are the 2 distinct elements of third party injury claims?
General damages and special damages
What are general damages?
Awards for pain, suffering, loss of amenity and injuries
What are special damages?
Costs that can be specifically proven and documented eg travel costs, loss of earnings etc
What is meant by agreed value?
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
What is an ex-gratia payment?
When the claim is not covered but the insurer pays it anyway as a gesture of goodwill
What is claims leakage?
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
What is salvage?
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
What are some examples of fraud?
Inventing a loss that never happened
Exaggerating the extent of a genuine claim
Deliberately causing an insured event
What are some databases insurers may use to detect and prevent fraud?
MIAFTR - Motor Insurance Anti Fraud and Theft Register
MID - Motor Insurance Database
CUE - Claims Underwriting Exchange
What are claims handlers trained to spot in order to detect fraud?
Claims soon after inception Pressure or threats to settle a claim quickly Lack of co-operation Inconsistency Lack of supporting documentation
Why do insurers like to take claim details over the phone?
To combat fraud - people find it harder to lie when talking in person as opposed to a computer
What are some methods insurers use to discourage fraud?
Settling with replacement items rather than cash
Taking claims details over the phone
What are the consequences of fraudulent claims to the insurer?
Loss of profit
Inflation of premiums due to larger claims payouts which may impact their competiveness
What are the consequences of fraudulent claims to innocent policyholders?
Their premiums may increase to make up for the insurer’s larger outlay
What is the maximum award the Financial Ombudsman Service can award?
£150,000
Is the decision of the Ombudsman binding?
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
What is the role of the Financial Ombudsman Service?
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
Why might an insurer use approved or preferred repairers or suppliers?
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
What are uninsured losses?
Costs that are not insured. For example policy excesses, damage to a vehicle only insured on a third party basis, etc
