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CII > IF4.6 claims settlements > Flashcards

IF4.6 claims settlements Flashcards

1
Q

What are the four ways to settle a claim?

A

reinstatement
paying for repairs
replacement
paying money

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2
Q

When will an insurer pay cash settlements

A
  • liability
  • benefit policies
  • business interruption
  • small property claims
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3
Q

Why do insurers use cash to settle claims

A

easiest

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4
Q

Why don’t insurers do cash settlements

A

to deter fraud

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5
Q

when will insurers repair as settlements

A
  • motor
  • building damage
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6
Q

When will insurers use replacement as settlements

A
  • damaged or lost goods e.g. TVs & Glass
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7
Q

How does repair work?

A

An estimate is provided to the insurer which then authorises repairs, the invoice sent directly to the insurer.
Insurers can used authorised repairers.

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8
Q

When is reinstatement used for settlements

A

Building (fire etc)

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9
Q

Why is reinstatement not used?

A

onerous obligations which can become expensive and exceed the sum insured.

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10
Q

Why two settlements only apply if written into the policy?

A

replacement & reinstatement

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11
Q

Which claims settlement method is chosen should be…

A

explained to the insured to comply with the FCA fair treatment to customers.

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12
Q

When will the insurer pay someone other than an insured as a claims settlement

A
  • Hire purchase companies
  • Mortgage Companies
  • Private Medical Services
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13
Q

define a surge event

A

an insured event that causes higher volume of claims than normal, placing greater demand on the insurers claims resource

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14
Q

Examples of surge events

A
  • volcanic eruptions
  • Heatwaves/Cold spells
  • Riots

(Usually property claims)

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15
Q

What to insurers have to do to prepare for surge events

A
  • claims notification processes need to accommodate a large number of calls
  • prediction: looking at the weather to prepare for the event
  • proactively contact customer you think may be effected
  • smaller claims made be approved more simply to reduce workload
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16
Q

In surge events its important for insurers to …

A

prioritise customer needs and manage expectations for smaller claims

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17
Q

Global Reserving

A

the responsibility of the actuaries to set aside funds for the company as a whole.

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18
Q

Global Reserving Process: Checking the Integrity of the Data

A

Ensure that individual case estimates are up to date and that no processing backlogs exist.

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19
Q

Global Reserving: Collating Historical Data

A

collate data into similar groups with each group having sufficient data to maintain statistical credibility.

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20
Q

Global Reserving: Projection of claims

A

claims need to be projected to establish the likely ultimate gross pay-out

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20
Q

Loss Development Factor Method Method

A
  1. Setting the data in the form of a table showing the development of premium, claims and incurred claims at each point in time.
  2. Analysing the trend
  3. Calculating the claims reserve.
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21
Q

Triangulation

A

analysing data and comparing it by accident, underwriting, calendar or policy year.

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22
Q

How is the claims reserve for each accident year calculated?

A

multiplying the cumulative claims to date for that year by the development factors for the number of years that remain undeveloped.

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23
Q

Individual Case Reserves

A

Set by the claims handler to determine funds required for:
- damage to property
- damages for personal injury
- third party special damages
- legal costs
when claims are made (taken out of the global reserve)

24
Q

Who estimates individual case reserves

A

claims handlers (can be helped by loss adjustors, surveyors & engineers)

25
Q

Factor/Flag reserving

A

a factor is added to each claim as it comes rather than the whole case reserve

26
Q

When is factor/flag reserving used?

A

Motor & small personal injury

27
Q

Why would a claim be invalid

A
  • cover never in force
  • breach of material warranty/ policy condition
  • fraud
  • misrep/ non-disclosure
28
Q

Why may a claim only be partially met, it may only be partially met

A
  • Sum insured/ limit of liability, any the loss is greater than this amount it will not be recoverable
  • Average clause
  • compulsory excess or deductible
  • ex gratia payment (gesture of good will even when there is no obligation to pay).
29
Q

Subrogation rights

A

the insurers pursue right of action available to the insured to recover any payments they have made

30
Q

ex gratia payments

A

gestures of goodwill where insurers pay part of a claim even when not valid to maintain relationships.

31
Q

When can insurers pursue subrogation rights

A

Once the claim is made (before payment to the insured) but they cannot actually recover the funds until the payment has been made.

32
Q

Average formula

A

sum insured / actual sum insured x 100

where actual sum insured is what it should’ve been

33
Q

Define Salvage

A

the damaged article that has been subject of a claim

34
Q

Who keeps the value of the salvage

A

the insurer (they can sell it one) unless the insured wants to keep it (according to the FOS they can) then a suitable reduction is made from the settlement.

(the insurer can only pursue the amount the paid out via subrogation)

35
Q

Bi-lateral Agreement

A

an agreement with others who operate in the same market. They can share resources to help each other out.

36
Q

What are the benefits of market agreements

A
  • reduce claims costs
  • speed up repair and claims settlement
  • promote good insurer relations
37
Q

ABI personal effects contribution agreement purpose

A
  • avoid adverse publicity and criticism of the insurance industry generated by referring policyholders to other insurers for payment of part or all of their claim.
  • avoid costly and time consuming handling
  • set out rules for contribution
38
Q

Motor Insurance Bureau

A

-Compensates the victims of uninsured or untraced motorists
- acts as a guarantor of the existence of insurance for UK vehicles overseas and takes responsibility for handling claims.

39
Q

How is the MIB funded

A

insurers pay a levy proportionate to the size of their motoring department.

40
Q

When can you submit an untraced drivers claim to the MIB

A

3 years from the date of the accident for injury
6 years for property damage

41
Q

Excess for property damage in the untraced drivers agreement by the MIB

A

£400

42
Q

Policies subject to average

A

In the case of underinsurance policies are subject to an average clause where the insured must act as their own insurer for the difference between the actual value and the insured value.

sum insured / actual value of goods x loss

43
Q

Define excess

A

the first amount of each and every claim which is not covered by the policy

44
Q

Compulsory excess

A

an excess applied by the insurer as a term of the policy, representing the fact a higher risk might apply

45
Q

Voluntary excess

A

policy holder requests excess in return for discounted premium.

46
Q

deductible

A

large excess

47
Q

define Franchise

A

a threshold used to decide if a claim is to be paid. Once a claim exceeds the level for a franchise the claim is paid in full.

48
Q

What are the 3 obligations a insurer has when a motor policy is taken out

A
  1. follow the contractual terms of the policy
  2. Statutory obligations (basic level of insurance)
  3. Motor Insurance Bureau
49
Q

Article 75

A

An agreement between the MIB and insurers/syndicates making insurers unable to escape liability for third party accidents

50
Q

Uninsured Drivers Agreement

A

The MIB will compensate victims in motor accidents where the at fault motorist has no motor insurance policy in force. Limit of 1.2mil for third party property damage.

51
Q

Limitations on the uninsured drivers agreement

A
  • subrogation rights do not apply (i.e. when the insured has comprehensive insurance)
  • costs of repairing the vehicle where the vehicle itself was uninsured are not covered
  • passenger claims are not considered if they new the vehicle was driven without insurance.
52
Q

Who is responsible for global reserving?

A

actuaries

53
Q

Who is responsible for claims reserving?

A

claims handlers

54
Q

What type of businesses is the ABI Personal Effects Contribution Agreement for?

A

household, all risks, motor, travel & other personal insurances

55
Q

What does the ABI personal Effects Contribution Agreement set out?

A

Rules for loss of personal effects covered by two or more policies:
- Motor -no contribution
- Specified items - Usually no contribution
- All other circumstances require contribution unless it is less than £200.

56
Q

When does contribution not occur (ABI personal effects contribution agreement)

A

Motor policies, specifically insured policies & claims less than £200.

57
Q

Untraced Driver Agreement

A

Claims can be submitted to the MIB Who investigate the hit and run and decide whether or not to make payment.
(person make make an appeal to an independent arbitrator)

58
Q

Under the untraced driver agreement when will the MIB be liable to pay compensation?

A
  • claims for death or injury
  • claims for property damage where the MIB has paid a significant personal injury claim aswell.

CII (28 decks)

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