Claims Handling Systems and Organisational Structure

Question 1

When choosing or developing a claims system, what should also be considered?.

Answer 1

Customer expectations

Question 2

What are the two types of ‘customer’ in this respect:

Answer 2

• the insurance company itself, as a customer of the supplier of the system (whether the IT department is internal or not); and
• the general public and the businesses/organisations who are customers of the insurance company.

Question 3

Who is the ‘ultimate’ customer, who may be attracted to the company because of their state-of-the-art claims service;?

Answer 3

The insured

Question 4

the business needs and associated expectations of the insurer itself must be analysed??

Answer 4

True

Question 5

Why the business needs and associated expectations of the insurer itself must be analysed??

Answer 5

to ensure that the information recorded and collated is of a nature and quality to match the needs and expectations of all customers.

Question 6

When the insurance company itself, as a customer of the supplier of the system (whether the IT department is internal or not); is a type of?

Answer 6

Customer

Question 7

When the general public and the businesses/organisations who are customers of the insurance company, are a type of?

Answer 7

Customer

Question 8

What does an insurer expect from a claims management system??

Answer 8

the ability to process large amounts of data;
the ability to process data quickly and accurately;
and the delivery of information in a meaningful manner.

Question 9

The system should be flexible enough to deal with:

Answer 9

authority levels given to different staff grades, both in terms of reserving and the making of payments claims notification;
correct amount of claim detail appropriate for the class of business written (and the likely types of claim expected);
the involvement of loss adjusters and other experts as appropriate

Question 10

who has a large influence on the design of the system?

Answer 10

The expectations of the “customer”.

Question 11

Often customers’ expectations will be surveyed before the design process begins??

Answer 11

True

Question 12

What will surveying customers’ expectations BEFORE the process begin establish???

Answer 12

Basic quality threshold.

Question 13

General expectations (for example, a quick response and a quick settlement) can be assumed.

Answer 13

True..

Question 14

But It is in the MORE specific areas that careful consideration is required.

Answer 14

True

Question 15

Many companies are reluctant to introduce new, innovative procedures UNTIL accepted by the public at large.

Answer 15

True

Question 16

New ideas are difficult to evaluate in terms of expectations?

Answer 16

True

Question 17

However, customers (both personal and commercial) can have sophisticated knowledge of what they want and what is available. As Customers expect innovative, reliable and

Answer 17

cost effective solutions from their insurers.

Question 18

Cost effective solutions from their insurers, innovative and reliable are a type of?

Answer 18

Customer expectations.

Question 19

What do customers (both personal and commercial) expect from the system?

Answer 19

cost effective solutions from their insurers, innovative and reliable.

Question 20

Customers (both personal and commercial) can have sophisticated knowledge of what they want and what is available.?

Answer 20

True

Question 21

The system should be flexible enough to deal with:

Answer 21

Authority levels given to different staff grades, both in terms of reserving and the making of payments claims notification;

Question 22

The system should be flexible enough to deal with:

Answer 22

The involvement of loss adjusters and other experts as appropriate,

Question 23

the ability to process large amounts of data;
the ability to process data quickly and accurately;
and the delivery of information in a meaningful manner.
These are a type of?

Answer 23

Expectations an insurer expect from a claims management system.

Question 24

The system should be flexible enough to deal with:

Answer 24

Correct amount of claim detail appropriate for the class of business written (and the likely types of claim expected); and

Question 25

Insurance companies often have a complex structure. , why?

Answer 25

Due to their size and involvement in a varied number of activities.

Question 26

Activities include of the organisational (complex) structure, include?

Answer 26

underwriting, claims investigation and payment,

marketing, investment.

Question 27

Every company will require some form of organisational structure. What will this structure enable the company to do?

Answer 27

Meet its stated business objectives in an efficient manner.

Question 28

How many main ways to structure a company’s departments?

Answer 28

3 main ways:

Question 29

What are the main ways to structure a company’s departments?

Answer 29

Function e.g. claims, underwriting etc.
Division e.g. product, geographical area etc.
Or a blend of both

Question 30

What is Functional Structure?

Answer 30

The traditional form of insurance company organisation.

Question 31

What is best suited to smaller companies with a limited range of products?

Answer 31

A functional structure

Question 32

CEO
Board of Directors
Operational Head of Department
Human Resources Finance IT Marketing Underwriting Claims

What are the advantages of this type of structure?

Answer 32

Adv.
Employees can specialise in their type of work because
all those involved in the same or a related activity are in the same department.

Adv
Larger units may be more cost effective due to the uniformity of the procedures used.

Question 33

CEO
Board of Directors
Operational Head of Department
Human Resources Finance IT Marketing Underwriting Claims

What are the Disadvantages of this type of structure?

Answer 33

DisAdv
inflexibility, for example, claims personnel tend to see their role as purely claims handling and may not
recognise the need for them to give feedback and communicate with their underwriting and marketing colleagues.

DisAdv
It is difficult to co-ordinate the different functions, e.g. there may be a lack of common interest between the
different functions

Question 34

What is Divisional Structure? 
(Home Country,
Commercial Division,
Home Country,
Personal Division,
International Division)

Answer 34

A divisional structure is adopted by most large multi-product companies. Each division is partially autonomous to the extent of designing, producing and marketing its own products.

Question 35

The degree of autonomy that each division is given depends on whether its operations are:

Answer 35

centralised; or

decentralised.

Question 36

What are Centralised organisations?

Answer 36

Retain authority at the top, with little delegation.

Question 37

What are Decentralised organisations?

Answer 37

More delegation, with divisional managers making more decisions.

Question 38

An insurer may have a centralised or decentralised claims settlement policy based on :

Answer 38

The relationship between its head office and its branch offices.

Question 39

What will the choice of system in a divisional structure (centralised or decentralised) depend on?

Answer 39

the size of the company; and

the type of business being written.

Question 40

Even with a decentralised structure very large claims settlements will usually be: advised to head office.

Answer 40

True

Question 41

Why?

Answer 41

There are usually limits to the authority delegated to the branches.

Question 42

Centralised claims settlement methods have the following advantages and disadvantages:

Answer 42

True

Question 43

Centralised claims settlement methods advantages?

Answer 43

Adv
The required level of expertise is available (which would not always be the case at every office location)

Adv 
Accessing records (electronic and paper) and underwriting staff is easier.

Question 44

Centralised claims settlement methods disadvantages?

Answer 44

DisAdv
There may be a lack of contact between policyholders and local staff, which could have repercussions in respect of customer retention .

DisAdv

There will be an inevitable delay involved in advising head office and waiting for a response in respect of significant underwriting and claims issues.

Question 45

What are Support services?

Answer 45

The various external services available to an internal claims team, which can assist them in their functions.

Question 46

Support services are???????

Answer 46

authorised repairers;, 
loss adjusters, 
loss assessors
outsourcing companies;
risk managers
solicitors 
surveyors

Question 47

What are Authorised repairers?

Answer 47

Insurers will often utilise the services of an authorised repairer to rectify damage caused to the customer’s property, be it insured under any product where damage is covered and repair is an option for indemnity to be provided.

Question 48

Who are Authorised repairers contracted to?

Answer 48

the insurer, sometime exclusively, but more often as part of a network used by many insurers.

Question 49

Terms will be agreed with the repairer, which are advantageous, but provides the repairer with a guaranteed source of work.

Answer 49

True (Authorised Repairers)

Question 50

Insurers will encourage their customers to utilise authorised repair services and will often attach benefits,

Answer 50

True (Authorised Repairers)

Question 51

Free courtesy car for motor repairs as well as repair guarantees as they can ensure these are provided, through the contractual terms negotiated with the repairer?

Answer 51

True (Authorised Repairers).

Question 52

What are Loss adjusters?

Answer 52

Experts in processing claims from start to finish.

Question 53

Small claims are usually negotiated and settled by an insurer’s in-house claims staff.

Answer 53

True (Loss Adjusters)

Question 54

In the case of larger claims or complex policy wordings, the investigation, negotiation and recommendation for settlement is USUALLY:

Answer 54

delegated to a professional loss adjuster.

Question 55

The loss adjuster will investigate the cause of the loss and advise the basis for settlement.

Answer 55

True (Loss Adjusters)

Question 56

If it is a cash settlement, the loss adjuster will recommend the amount payable.

Answer 56

True (Loss Adjusters)

Question 57

If the insurer is satisfied, it will offer this sum to the insured, usually via the loss adjuster.

Answer 57

True (Loss Adjusters)

Question 58

Their function is to negotiate a settlement, within the terms of the policy, that is fair to both the insurer and the insured.

Answer 58

True (Loss Adjusters)

Question 59

Loss adjusters are independent, professionally qualified and their fees are met by the insurers who instruct them.

Answer 59

True (Loss Adjusters)

Question 60

Some adjusters are delegated to negotiate settlement of claims on behalf of the insurer, without needing to seek specific authority on a case by case basis.

Answer 60

True (Loss Adjusters)

Question 61

Loss adjusters are instructed by insurers and are independent and professionally qualified

Answer 61

True (Loss Adjusters)

Question 62

Loss adjuster fees are met by the insurance company or the insurer.

Answer 62

True (Loss Adjusters)

Question 63

What are Disaster recovery companies?

Answer 63

An organisation that specialises in ensuring business continuity for a company in the event of an interruption to the normal flow of business.

Question 64

Disaster Recovery Companies are concerned both with the implementation of plans in the event of an interruption, and the analysis before the event of a company’s requirements.

Answer 64

True (Disaster Recovery Companies)

Question 65

The implementation of plans in the event of interruption and the analysis before the event of a company requirements are the CONCERNS of Disaster Recovery Companies.

Answer 65

True (Disaster Recovery Companies)

Question 66

Disaster Recovery Companies function, would at times overlap with a company’s normal risk management programme.

Answer 66

True (Disaster Recovery Companies)

Question 67

Disaster recovery companies are often involved in:

Answer 67

actual work done to return business operations to normal, or as close as possible to normal.

addressing specific emergency situations, for example, terrorist attacks, fire, significant escape of water, etc;
compiling recovery strategies.

identifying and evaluating operational risks that may impact operations.

management analysis of the effect and impact of losing resources;

trials to assess the effectiveness of plans.

Question 68

It should be noted that disaster recovery companies will usually address the complete scenario of disasters,

Answer 68

True (Disaster Recovery Companies)

Question 69

Such as: from the backing up and retrieval of information technology (IT) systems,
to the cleaning and restoration of individual pieces of paper from files that may have been affected by soot from a fire???

Answer 69

True (Disaster Recovery Companies)

Question 70

What are Surveyors?

Answer 70

Act as the eyes and ears of the underwriter.

Question 71

Who can equally be used by the claims department post loss?

Answer 71

True (Surveyor)

Question 72

The surveyor will prepare a report of a risk that will include:

Answer 72

adequacy of the insurance being requested.

an assessment of the level of risk; and a full description of the risk;

a measure of the maximum probable loss (MPL), i.e. what they consider to be the most that could be lost should the insured event take place;

recommendations on loss prevention.

Question 73

After a claim, a surveyor may be instructed to undertake a post loss survey, and these aspects will be reviewed and reported on the cause of the loss..

Answer 73

True (Surveyor)

Question 74

Who will give their view as to the compliance, or otherwise, with any relevant policy conditions or warranties??

Answer 74

Surveyors.

Question 75

What is ‘Outsourcing’?

Answer 75

Using a skilled resource from outside the company to handle work traditionally performed by in-house staff.

Question 76

Essentially, a function (or part of a function) is delegated to a third party.

Answer 76

True (Outsourcing)

Question 77

This can be done by either:

Answer 77

Sending the work out or by bringing the resource into the company.

Question 78

What are the reasons behind outsourcing are:

Answer 78

to gain access to a wider skills base
to manage a specific issue (for example, a surge event);
the perceived cost benefits (i.e. the belief that the work will be done more cheaply than if carried out in-house);

Question 79

At the turn of the twenty-first century, many insurance companies started basing their call centres outside of the UK. This is usually called

Answer 79

‘off-shoring’ or ‘near-shoring’.

Question 80

This action was even more marked than merely outsourcing to another, cheaper part of the UK:

Answer 80

As for the perceived cost benefits.

Question 81

Labour may be cheap, but allegations of exploitation and questions of language and service levels tended to arise.

Answer 81

True (Offshoring)

it is the method of Outsourcing more specifically (Offshoring).

Question 82

As a result, customer satisfaction fell markedly, as consumers found the service provided by this method was not good enough.

Answer 82

True (Offshoring)

it is the method of Outsourcing more specifically (Offshoring).

Question 83

Consequently, most of these services, particularly where there is interaction with customers, have now been returned to UK call centres and this in itself is often used as a marketing benefit to the customer.

Answer 83

True (Onshoring)

it is the method of Outsourcing more specifically (Onshoring).

Question 84

Let us take the opportunity to remind ourselves of the CLAIMS PROCESS by looking again at the figure we introduced in chapter 4.

Answer 84

This is shown again in this figure:
Figure 5.3:
Notification 
Review Response to claimant
Claim investigation
Claim negotiation
Claim settlement 
Review Recoveries

Question 85

Any, or all, of the claims functions can be outsourced.

Answer 85

True (Outsourcing)

Question 86

If a company chose to outsource the whole process, along with the financial reporting and management of the operation, then there would be no need for an internal claims department.

Answer 86

True (Outsourcing)

Question 87

However, internal responsibility for claims would be retained by the insurer for COMPLIANCE PURPOSES. This is generally satisfied by regular audit activity.

Answer 87

True (Outsourcing)

Question 88

The outsourcing could be provided by:

Answer 88

brokers;
insurance company claims departments (i.e. to non-insureds);
loss adjusters.
solicitors and
third party administrators;

Question 89

What are the advantages outsourcing in

(Cost, Service, Strategy, Staff) ???

Answer 89

Advantages

Costs::
Often results in cost savings

Service::
Through access to a wider skill base and/or improved technology

Staff::
Reduces the requirement for staff and
Avoids the peaks and troughs of workflow and the loss of expertise ,

Strategy::
Better capacity to cope with an increase in workload,
Concentration on core activities,

Question 90

What are the disadvantages of Outsourcing in (Cost, Service, Strategy, Staff) ?

Answer 90

Disadvantages :

Costs::
Extra co-ordination and audit costs
Unforeseen problems

Services::
May be a problem, especially in respect of customer retention

Staff::
Loss of the opportunity to retain and develop in house expertise.

Strategy::
Dependence on provider
Loss of control

Question 91

There are then potential gains and potential pitfalls in using an external skilled resource, what is needed then??

Answer 91

Both need to be analysed before any decision is made.

Question 92

Internal responsibility for claims would be retained by the insurer for COMPLIANCE PURPOSES. This is generally satisfied by which activity??

Answer 92

Regular audit activity.

Question 93

What are the two main ways

a firm of solicitors can be used for?

Answer 93

As a pre-litigation advice facility.
(It may also supply specialised services, such as the negotiation of complex injury claims).

A firm of solicitors is OFTEN used to either issue court proceedings where negotiations have reached an impasse, or to defend the claims where proceedings have been issued against an insurer’s customer.

Question 94

What can solicitors also be used for?

Answer 94

They may also be used for legal advice services, including policy wording interpretation and reinsurance disputes.

Question 95

Why do some insurers employ in-house solicitors and barristers or have a financial interest in a firm of solicitors?

Answer 95

For cost reasons.

Question 96

Insurers utilise external solicitors where there would be a conflict of interest or for matters that their in-house team is unable to deal with.

Answer 96

True (Solicitors)

Question 97

Who are Risk managers?

Answer 97

Insurance risk managers are utilised by policyholders (usually commercial customers) to scrutinise insurance claims and factors that can contribute to claims.

Question 98

What is the objective of the risk manager?

Answer 98

To find ways to reduce the likelihood of an insurance claim by taking such actions as improving safety protocols or installing new equipment that has better safety features.

Question 99

How can risk managers reduce the costs of their insurance policies?

Answer 99

By determining how a company can reduce their potential risks, .

Question 100

How can risk managers do their work effectively?

Answer 100

They must be able to:
gather data,

identify ways to reduce risk and develop a strategy for implementing changes in the workplace,

review procedures,

Question 101

What are the Other duties insurance risk managers?

Answer 101

Training staff about risk awareness.

Question 102

What are Experts used in the valuation of third party claims?

Answer 102

Medical reporting experts

Question 103

What happens in Medical reporting experts?

Answer 103

In fast track claims medical evidence is obtained at court direction, jointly for the insurer and claimant’s solicitor.

Question 104

Who are the experts appointed by?

Answer 104

In large and complicated multi-track claims, insurers and third- party solicitors will often appoint their own experts to assist with the valuation of the injured party’s claim.

Question 105

These opinions will be exchanged and compared, and the experts will be asked to consider any area of disagreement,

Answer 105

True in (Medical Reporting Experts)

Question 106

What type of meeting are usually arranged by Experts used in the valuation of third party claims?

Answer 106

Joint Expert Meeting..

Question 107

When/IF the experts cannot agree, and the claim cannot be settled out of court, who will decide which two opinions is the most persuasive??

Answer 107

The judge

Question 108

There are other experts such as????

Answer 108

Accommodation experts
Accountants
Care experts
Life expectancy experts
Medical experts
Surveillance

Question 109

Accommodation experts?

Answer 109

To comment on suitability of housing needs for claimants requiring alternative or adapted accommodation after an accident.

Question 110

Accountants?

Answer 110

They review future lost wage claims

Question 111

Care experts?

Answer 111

Typically former nurses commenting on hours and nature of care requirements.

Question 112

Life expectancy experts??

Answer 112

Experts who will be responsible to see how much life is left…

Question 113

Medical experts?

Answer 113

Specific to the type of injury and include neurosurgeons, psychiatrists and other specialists.

Question 114

Surveillance??

Answer 114

To verify claimant’s injuries and claims concerning wage, loss are genuine.

Question 115

What are Loss assessors?

Answer 115

As with loss adjusters, loss assessors are experts in dealing with insurance claims.

Question 116

Who are loss assessors appointed by?

Answer 116

Appointed by the insured to prepare and negotiate a claim on the insured’s behalf.

Question 117

Who pays The loss assessor’s fees?

Answer 117

By the insured themselves.

Question 118

the loss assessor’s fees do not form part of the insured’s claim and that loss assessors are not impartial:

Answer 118

True ( Loss Assessors)

Question 119

they represent the insured in order to maximise their recovery from the insurer.

Answer 119

True ( Loss Assessors)

Question 120

‘A loss adjuster is paid by the insurance company and works for it to manage the cost of the claim down.’

Answer 120

False (Question 5.2)