IF4.5 Claims handling systems Flashcards
What does IT relate to?
the storage, production and communication of information
Characteristics of Insurance claims
-volume of claims
-complexity of claims
Types of claims transactions which need to be processed
- claims reserving and estimating
- claims payments
- recoveries
It is important for an insurers IT system to be able to deal with…
peaks in demand
What factors can effect to complexity of claims
- communication between insurer and insured and any other professionals involved
- more co-insurers => more complex
- brokers involved => they take care of some documentation
- reinsurance => details of claims need to be passed on
- fraudulent claims require investigation
A claims system needs to be capable of
- processing large amount of data
- processing it quickly
- processing it accurately
- delivering information in a meaningful manner
A powerful, flexible and adaptable claims system is not…
a substitute for experience people
What will effect the type of claims management system a company chooses?
- the structure of the company
- the type of business written
- management decisions about the extent to which their computer systems should be developed
Typical information recorded during a claim, aside from the class of business
- policyholder name
- policy number and claims reference
- details of the claim, inc dates
- contacts
-payments - reserves
Details recorded at the underwriting stage which will be used during the claims process
- description of the risk
- description of the cover provided
- supporting risk information
- whether there is more than one insurer and if so, the name of the insurer, its share of the risk and respective references
main aims of using IT in claims handling
- reduction in cost of claims admin
- improve the service to the insured
Benefits of using IT in claims handling
- single data entry (streamlines admin)
- Reduce use of paper files (quicker distribution)
- Quicker claims settlement
- electronic authorisation of claims payments (minimises bank fees, more efficient)
- Increase in communication channels (improved customer services and communications)
- Portals and extranet services (self service for customers)
Long term benefits of using IT in claims handling
- customer retention from improved service
- technical assistance for the claims handler (e.g. prompting)
- streamlined admin
- automatic checking for fraud
- automatic payment of loss adjustor fees
Drawbacks of using IT in claims handling systems
- non-standard claims cant be dealt with
- system may be difficult to operate
- adverse cashflow effect (speed up claims payments but not premiums)
- reduction of personal service, flexibility and initiative
- system needs to be maintained
- increase in claims cost (cost of licensing and software)
Who does UK GDPR apply to?
data controllers and processors
What are examples of sensitive personal data
- race
- ethnic origin
- politics
- religion
- trade union membership
= genetics - biometrics
-health - sex life & orientation
What are the 6 data protection principles
- data should be processed lawfully, fairly and transparently
-data should only be collected for specified, explicit and legitimate purposes - data should only be collected for specified purposes
- Data should be adequate, relevant & limited
- data should be accurate and up to date
- data should not be kept longer than necessary
- There should be adequate security & protection
What are the 6 lawful bases for processing data?
- Consent (must opt in)
- processing is necessary for a contract
- processing is necessary to comply with the law
- processing is necessary to protect an individual
- processing is necessary for public interest & for a firm to fulfil its function
- processing is necessary for the legitimate interest of the firm
rights for individuals under GDPR
- right to be informed
- right of access
- right to rectification
- right to erasure
- right to restrict processing
- right to data portability
- right to object
- rights in relation to automated decision making and profiling
Data protection act 2018
- ensuring sensitive data can be processed confidentially
- restricting rights to access and delete data where there are legitimate grounds for doing so
- setting the age from which parental consent is not needed to process data online
- proving the ICO with enhanced powers to regulate and enforce data protection law
What are the two customers of an IT system
- the insurance company itself
- the general public who are customers of the insurance company
Ultimate customer
the insured
Organisational Structure
a structure of the company which will allow the company to meet its stated business objectives in an efficient manner e.g. functional or divisional structures
Functional Structures
A traditional structure suited to smaller companies with limited products which splits the company into its different functions e.g. finance, IT, HR
Advantages of functional structures
- employees can specialise in their type of work because all those involved in the same or a related activity are in the same department.
- larger units may be more cost effective due to the uniformity of the procedures used.
Disadvantage of functional structures
- inflexible, no communication across functions
- difficult to co-ordinate the different functions
Divisional Structures
A structure used my most large multi-product companies where each division is partly autonomous to the extent of designing, producing and marketing its own products. e.g. divisions for different countries or sectors.
Centralised divisional organisations
retain authority at the top with little delegation
decentralised divisional organisations
more delegation with divisional managers making more decisions.
With a decentralised claims structure….
very large claims are still likely to be advised to the head office.
What is used to decide if claims systems should be centralised or decentralised?
- the size of the company
- the type of business being written
disadvantages of centralised claims settlements in a divisional structure
- there may be a lack of contract between policyholders and local staff (bad for customer retention)
- There will be an inevitable delay in advising head office about a claim and waiting for a response.
advantages of centralised claims settlements in a divisional structure
- the required expertise is available
- accessing records and underwriting staff is easier
What are some external support services available to internal claims teams
- outsourcing companies
- loss adjustors
- loss assessors
- surveyors
- solicitors
- authorised repairers
- risk managers
Outsourcing
using a skilled resource from outside the company to handle work traditionally performed by in house staff.
reasons for outsourcing
- received cost benefits
- managing a specific issue (e.g. a surge event)
- again access to a wider skills base.
Claims process
Notification -> review -> response to claimant -> claim investigation -> claim negotiation -> claim settlement -> recoveries -> review
Who provides outsourcing?
- third party administrators
- insurance company claims departments
- brokers
- solicitors
- loss adjustors
Advantages of outsourcing
- STRATEGY: concentration in core acitivities & better capacity to cope with an increase in workload
- COSTS: savings
- SERVICE: through access to a wider skillset and/pr improved tech
- STAFF: reduces requirement for staff, avoids peaks and troughs of workflow and the loss of expertise.
Disadvantages if outsourcing
- STRATEGY: Loss of control & dependence on provider
- COSTS: unforeseen problems & extra co-ordination and audit costs
- SERVICE: may be a problem, especially in respect of customer retention
- STAFF: loss of the opportunity to retain and develop in house expertise.
Loss Adjusters are…
Independent professionally qualified experts in processing a claim from start to finish (hired by the insurer)
What is the function of a loss adjustor?
Investigate the cause of a loss and advise the basis for settlement which is fair to both the insurer and the insured.
disaster recovery companies
an organisation that specialises in ensuring business continuity for a company in the even of an interruption to the normal flow of business.
Concerned with implementation of plans in the even of an interruption and the analysis before the event of a companies requirements (similar to risk management).
disaster recovery companies are often involved in:
- management analysis of the effect and impact of loosing resources
- identifying and evaluating operational risks that may impact operations.
- compiling recovery strategies
- addressing specific emergency situations e.g. terrorist attacks
- returning a business to normal
- trials to assess the effectiveness of plans
Surveyors
Eyes and ears of the underwriter, prepares a report which includes:
- full description of the risk
- assessment of the level of risk
- a measure of max probable loss (MPL)
- recommendations of loss prevention
- adequacy of the insurance being requested.
What additional tasks may surveyors be asked to complete
a post loss survey & views on compliance with conditions
Solicitors
used as:
- pre litigation advice facility
- negotiation of complex injury claims
-issue court proceedings where negotiations have reached an impasse
- legal advice services including policy wording interpretation and reinsurance disputes.
Loss assessors
experts in dealing with insurance claims, representing the insured in order to maximise their recovery from the insurer.
Authorised repairers
Businesses contracted to the insurer where terms are agreed and often advantageous e.g. reduced rates, provision of courtesy car etc.
Salvage Companies
Serviceable parts from scrapped vehicles can be refurbished and returned to use as a ‘green part’ ensuring the supply of cheaper repair method and introducing recycling (good for ESG and in turn customer satisfaction)
risk managers (for policyholders)
scrutinise insurance claims and factors that can contribute to claims and try to find ways to reduce the likelihood of an insurance claim taking place by improving safety protocols or installing new equipment.
medical reporting experts
For third party claims insurers will appoint medical reporting experts to assist with the valuation of the injured party’s claim.
If they do not agree with the third party claimant then a judge will decide.
Care experts
former nurses commenting on hours and nature of care requirements
medical experts
specific to the type of injury e.g. neurosurgeons
Accountants
review lost wage claims
Accommodation experts
To comment on suitability of housing needs for claimants requiring alternative or adapted accommodation after an accident.
Surveillance
To verify claimants injuries and claims concerning wage loss are genuine.
What can the ICO do in the event of a data breach?
fines of up to 17.5 mil (or 4% of annual global turnover)
bring Criminal proceedings against a data controller or processor
which is impartial and lost adjustor or a loss assessor?
loss adjustor
