Claims consideration and administration

Question 1

What are the roles of claims staff?

Answer 1

• estimating accurately the final cost of outstanding claims
• distinguishing between genuine and fraudulent claims
• dealing quickly and fairly with all claims submitted
• settling claims with the minimum of wastage or avoidable overpayment.

Question 2

What service standards will insurers have in respect of key claims issues?

Answer 2

• the quality of service aimed for
• how valid claims will be handled
• the nature of the claims service at each stage of the claims process
• the speed of the claims service
• the economic efficiency of the claims process.

Question 3

What is claims reserving?

Answer 3

The accurate estimation of the cost of settling claims.

Question 4

Why is claims reserving important?

Answer 4

• to be sure that adequate funds are available to meet all claims
• to enable the ongoing assessment of the profitability of the insurer
• it is a regulatory requirement for insurers to submit financial statements every year to the PRA.

Question 5

How is a ‘global’ claims reserve established?

Answer 5

• a value is applied to each claim
• an allowance is added for direct claims expenses
• the total is adjusted to take into account the estimated date of payment

Question 6

What are some of the common indicators of fraud?

Answer 6

• claims occurring soon after inception
• no supporting documentation (or too much)
• the insured changes their story
• reluctance to report a loss to the police
• claims which are inconsistent with the insured’s lifestyle
• a poor previous claims record.

Question 7

What is “The Motor Insurance Anti-Fraud and Theft Register” (MIAFTR)?

Answer 7

A database which contains details of all total loss and theft claims.

Question 8

What is the “Motor Insurance Database” (MID)?

Answer 8

A database which contains details of all registered vehicles in the UK and their related insurance details.

Question 9

What is the “Claims and Underwriting Exchange” (CUE)?

Answer 9

A database shared by insurers containing information on personal lines claims from the previous three years.

Question 10

How does the “Claims and Underwriting Exchange” (CUE) work?

Answer 10

Subscribing members submit their claims data on individual claimants and check the true claims history of those individuals.

Its aim is to eliminate multiple claims and parallel policies held by a single insured.

CUE now covers household, motor and personal injury claims.

Question 11

What is the aim of the Art Loss Register (ALR) initiative?

Answer 11

The ALR aims to:

• increase the recovery rate of stolen art and antiques
• deter theft by making the resale of stolen articles more difficult.

Question 12

Who can access the Art Loss Register (ALR)?

Answer 12

The ALR is available to the insurance industry, the art trade, law enforcement and custom agencies, collector and museums.

Question 13

What are the consequences of undetected fraud?

Answer 13

for the insurer - claims cost rise, profits reduce

for the policyholders - premiums are higher than they otherwise would be

for the fraudulent claimant - if successful, temptation to make more fraudulent claims.

Question 14

Name 3 types of dispute resolution.

Answer 14

• Arbitration
• Mediation
• Concilliation

Question 15

What are the main mechanisms in place for dealing with disputes?

Answer 15

• Arbitration
• Alternative dispute resolution (mediation and conciliation)
• The Financial Ombudsman Service
• The Woolf reforms

Question 16

What types of dispute does arbitration deal with?

Answer 16

Disputes that arise over the amount to be paid in settlement of a claim under a policy.

If the dispute concerns whether or not the claim is covered, it will not be dealt with under an arbitration clause.

Question 17

How does mediation work?

Answer 17

A neutral mediator is appointed and discusses the dispute with both parties but makes no decisions.

The idea is to identify the real issues at the heart of the disagreement and for the parties themselves to work out a mutually acceptable settlement.

If agreement cannot be reached the parties are free to pursue other options.

Question 18

How does conciliation work?

Answer 18

Similar to mediation except that the parties decide in advance whether they will be bound by the conciliator’s recommendation.

If they agree to this they will not usually have any recourse to the more formal court system afterwards.

Question 19

What types of dispute does the Financial Ombudsman Service (FOS) deal with?

Answer 19

FOS deals with disputes between insured and insurer where the insured is:

• A consumer
• A micro enterprise; i.e. a business employing fewer than 10 people and with an annual turnover of less than €2,000,000
• A trust with a net asset value of less than £1,000,000
• A charity with an annual turnover of less than £1,000,000.
• Membership of the FOS is compulsory for all insurers and intermediaries.

The maximum award the Ombudsman can make is £150,000.

The insurer only is bound by the decision: the insured can either accept or reject the decision, and may still take legal action.

Question 20

What are the Woolf reforms?

Answer 20

The Woolf legal reforms were introduced in 1999 to reduce costs, delay and complexity in the way personal injury claims are handled. They:

• encourage the early settlement of disputes through pre-action protocols
• allow active case management by the courts, together with cost penalties for parties who refuse.

Question 21

Who do the ICOBS rules on claims handling apply to?

Answer 21

• consumers

- commercial customers

Question 22

What are the ICOBS rules on claims handling?

Answer 22

Amongst other things, the ICOBS rules confirm:

• The insurer will remain responsible for claims handling, even if they have outsourced this function
• No claim should be rejected unreasonably (there are specific rules as to what is unreasonable with regard to claims from consumers)
• The insurer must provide reasonable guidance on how to make a claim and give appropriate information on its progress.
• Once settlement terms are agreed, the claim should be settled promptly.
• Conflicts of interest must be managed fairly.

Question 23

What is the first Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 23

The first outcome states:

“Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to corporate culture.”

Question 24

What is the second Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 24

The second outcome states:

“Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.”

Question 25

What is the third Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 25

The third outcome states:

“Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.”

Question 26

What is the fourth Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 26

The fourth outcome states:

“Where consumers receive advice, the advice is suitable and takes account of their circumstances.”

Question 27

What is the fifth Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 27

The fifth outcome

The fifth outcome states:

“Consumers are provided with products that perform as firms have led them to expect and the associated service is both of an acceptable standard and as they have been led to expect.”

Question 28

What is the sixth Treating Customers Fairly (TCF) ‘consumer outcome’?

Answer 28

The sixth outcome

The sixth outcome states:

“Consumers do not face unreasonable post-sale barriers imposed by firms to change products, switch provider, submit a claim or make a complaint.”