Claims Settlement Flashcards
Sometimes an insurer can:
recover the money it has paid out in settlement of a claim from a third party.
insurers make agreements between themselves to :
smooth the process of claims settlement and to reduce its cost.
When a claim has been notified, and assuming that all the parties have carried out their respective duties, all that remains is for the claim to be :
Settled.
There are four ways in which the claim can be settled. These are:
payment of money;
paying for repairs;
replacement; and
reinstatement.
The payment of money directly to the insured is:
the easiest and most common form of settlement.
The payment of money directly to the insured is the easiest and most common form of settlement, as it is simply a cash payment to the insured covering the amount of their claim.
TRUE
The insurer can also pay for repairs, this is very common with motor vehicle repairs (often
by using authorised repairers).
TRUE
An estimate would usually be provided to the insurer which would then authorise repairs.
TRUE
If the repairs are extensive, an engineer may inspect the vehicle first. The invoice would be sent directly:
to the insurer for settlement (minus any policy excess).
Insurers can also arrange to replace damaged or lost goods. This is often the case with:
glass insurance for instance,
as glaziers frequently offer discounts to insurers.
Replacement can be used as a form of indemnity in the case of suspected fraud.
TRUE
Why offering a replacement for a stolen or damaged item would discourage fraud?
If someone was fraudulently claiming for a stolen item in order to raise cashyit would be frustrating for them to receive a replacement, which they would have to sell in order to get the money.
The final option available to an insurer is:
to reinstate that which has been damaged by the
insured peril.
in relation to reinstatement, extensive damage to or destruction of a building, insurers can take control of the repair and/or rebuilding themselves. This course of action is:
Seldom used as it carries onerous obligations for the insurer .
If the sum insured is exceeded,
the insurer is responsible for paying the full amount in relation to reinstating a building caused by an insured peril.
TRUE.
Replacement and reinstatement only apply if stated in the policy. Therefore, if they are not offered by the policy as settlement options they do not apply and the insured? :
the insured only has a right to financial compensation.
An explanation must be provided to
the insured of the usual way in which such claims are settled.
True
Other than the authorised repairers, circumstances in which an insurer will pay someone other than the insured?
paying a hire purchase company the amount still outstanding for a lost item with the balance of the value paid to the insured;
paying a mortgage company following severe damage to a property;
paying a doctor under a private medical insurance policy.
Other than those examples….
(of circumstances in which an insurer will pay someone other than the insured),
what else?
Liability claims.
Claims paid by insurer to third party personal injury.
Any form of claims must be explained to the insured, before payment is made in order for the Insurer?? :
Insurer to comply with the FCA principle of the fair treatment of customers!
What is the indemnity for the insured when -at-fault liability claim to a third party?
Insured indemnified by not having to pay out of their own pocket.
Insurers are facing increasing numbers of what are known as ‘surge events’. This is when?
an insured event causes a higher volume of claims than normal, placing greater demand on the insurer’s claims resources.
When insured makes claim, Insurer claims resources are in high demand, an example would be :
Surge events
Surge events is the type of insurance policy that …
is restricted to property claims, either residential or commercial,
but could also affect other classes of insurance…
Can you think of a type of insurance peril which could be affected by a surge in claims?
This could be as a result of :
a significant storm,
a period of prolonged rain leading to flooding
or
an exceptionally cold spell leading to increased claims for burst pipes
Can you think of another type of insurance which could be affected by a surge in claims?
Travel Insurance
Insurers need to be ready for a surge event as it is not easy to predict when it might occur.
TRUE
What do insurers need to do to be able to handle claims, that they would not usually deal with?
Staff need to be trained and claim notification processes need to be adapted to cope with the number of calls, without impacting the validation of claims.
Surge events are often localised and insurers will interrogate their databases in times of surge and proactively contact customers in the affected area to establish if claims need to be made..
True
Insurers also send staff to local temporary offices near the affected area, to make the process easier for the customer.
True
In times of surge, requesting documentation/quotes for repair is sometimes difficult.
TRUE
In these situations, customer descriptions or photographs may be sufficient to validate the loss
TRUE
something that would be less acceptable in normal circumstances?
TRUE!
In a surge event, it is important for an insurer to priorities customer needs and manage the expectations of those:
With lower priority claims.
There are a number of circumstances in which an insurer will refuse to pay a claim. This is known as :
repudiation.
What circumstances can you think of where an insurer will refuse to pay a claim?
Breach of material warranty,
policy condition,
cover never in force,
fraud.
Fraud needs to be???
Proven .
In relation to proving fraud, all policy benefits will be forfeited from the date of the fraudulent act and:
The insurer may keep the premium.
If Cover was never in force?
A claim occurred outside the policy period.
A person claimed for damage to the insured’s own car under a third party only motor policy, is binding on the insurer to state that?:
To state that cover was never in force under this type of policy.
If a theft occurs while a burglar alarm has not been set, and there is a warranty states that it will be set
(the emphasis here being on ‘materiality’),
then the insured:
Is under the Breach of a material warranty.
A claim was reported so late that the insurers were prejudiced in respect of any recovery rights, this is an example of:
Breach of a policy condition
If the policy condition is precedent?
Insurers can avoid policy liability, regardless as to whether insurers were prejudiced by late notification or not.
Can you think of examples where insurers will make a payment of less than a full indemnity?
Sum insured or limit of liability,
Application of average,
excess or deductible and
an Ex-gratia payment.
