IF4.7 management of expenses Flashcards

1
Q

what are the 3 main roles of a claims manager

A
  • strategy
  • costing
    -staffing
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2
Q

approach to claims management

A
  • corporate claims philosophy
  • clear claims procedures (inc. reserving practises)
  • quality management system
  • efficient use of IT
  • outsourcing where appropriate
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3
Q

Who is responsible for strategy?

A

worked out at senior management level but the claims manager is responsible for its day-to-day implementation

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4
Q

Key tasks of a claims manager in respect to strategy

A
  • ensure strategic direction is followed (set business plans to ensure everything goes smoothly)
  • maintain sufficiently senior status so they can complete the role
  • maintain suitable links with other departments including underwriters actuaries and claims support function
  • have suitable computer systems that produce effective, accurate reports
  • maintain best practise
  • be aware of current underwriting practise and reserving methodology
  • implement ESG where possible
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5
Q

Two aspects of the responsibilities of a claims manager when it comes to cost

A
  1. Cost of running the claims department
    e.g. salaries, outsourcing costs & IT costs
  2. Cost of Claims
    e.g. pay outs, subrogated recovery & recovery from reinsurance
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6
Q

Two aspects of the responsibilities of claims managers when it comes to Staffing

A
  • ensure can recruit, train, motivate and retain intelligent and competent staff.
  • effectively manage and motivate staff (plan tasks/responsibilities, provide leadership, monitor progress & co-ordinate training)
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7
Q

Define Leakage

A

the amount by which the actual settlement exceeds the amount that would have been required to make an acceptable settlement under the policy

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8
Q

What are the two main decisions when handling a claim?

A
  • is the claim valid?
  • Size of the payment
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9
Q

Ex Gratia Payment

A

A payment of goodwill by the insurer where a claim is invalid but they still make a payment

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10
Q

What situations are ex gratia payments made?

A
  • where an exclusion is borderline
  • where hardship would be created
  • to preserve good business relationships
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11
Q

How is overpayment identified?

A

detailed review of the handling of the claim through its various stages:
- what the cause included in the policy?
- was the date of loss within in the policy?
- was the claim notified in the time limit?
- is there sufficient proof of the extent of the loss?
- Has excess been applied?
- Does underinsurance apply?
- have all recoveries been made?
- has subrogation taken place?
- has contribution been taken into account?
- all fees paid? are they reasonable?
- has depreciation been taken into account?
- is it a repeat claim?
- has the damage sit been inspected?
- was the settlement appropriate?

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12
Q

Define Soft Leakage

A

subjective and difficult to quantify
e.g. failure to negotiate properly

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13
Q

Define Hard leakage

A

easy to identify
e.g. failure to deduct the excess

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14
Q

Overpayment (Leakage) =

A

What was actually paid - what should have been paid

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15
Q

Prevention of Leakage

A
  • senior management focus
  • employee skills
  • Supervisions of staff
  • Quality management
  • IT checks
  • Culture
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16
Q

How can senior management focus help prevent leakage

A

Senior management can emphasise reducing claims payments and following best practise.

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17
Q

How can employee skills prevent leakage?

A

Training in the following areas:
- legal training
- awareness of market practises
- knowledge and best practise
Helps reduce mistakes and reduce leakage.

18
Q

What skills do supervisors need?

A

the same skills as the rest of the employees plus:
- management training
- presentation training

19
Q

How can quality management prevent leakage?

A

Adequate checks should be in place to prevent hard leakage (and as many aspects of soft leakage as possible. E.g. via regular audit

20
Q

How can IT prevent leakage?

A

A computer systems can stop against simple hard leakage e.g. warning the user that excess has not been deducted.

21
Q

How does culture prevent leakage?

A

If the culture of accuracy and open challenge flourishes staff will be more attuned in ensuring accuracy & validity, reducing errors in their actions.

22
Q

Causes of leakage

A
  • inexperienced staff
  • fraud
  • mistakes
23
Q

Solvency II

A

An insurance company must be trading solvently (must have enough funds to pay claims)

24
Q

Solvency margin

A

the funds set aside for a company to remain solvent

25
Q

Fixed portfolio

A

highest regulation. All 3 pillars.

26
Q

Flexible portfolio

A

reduced regulation. pillars 2 and 3 only.

27
Q

Why is it necessary to monitor a company’s financial performance

A
  • satisfy the regulators
  • maintain management control
  • purposes of their annual reports and accounts
28
Q

Financial conduct Authority (FCA) is responsible for:

A

responsible for:
- ensuring markets operate with integrity
- promotes effective competition
- requiring firms to put well-being of customers first

29
Q

FCAs three pillars

A
  1. Firm systematic frame work
  2. Event-driven work
  3. Issues and Products
30
Q

What decides the portfolio of a company

A

the size of the company, the risk it carries & customer results etc

31
Q

Companies Act 1985

A

companies require profit and loss accounts & balance sheets

32
Q

profit and loss accounts

A

shows the transactions carried out by a company during the financial year

33
Q

balance sheet

A

the financial position at the end of the year: shows assets and liability

34
Q

Premium reserves examples

A

outstanding claims, incurred but not reported

35
Q

Management control

A
  • plan
  • monitor
  • control
36
Q

Firm Systematic Framework - FCA conduct of business Pillar 1

A

preventative work through structured assessment of firms

37
Q

Event-driven work - FCA conduct of business Pillar 2

A

dealing with problems that have emerged or happened and securing them with customer redress or alternative remedial work

38
Q

issues and Products - FCA conduct of business Pillar 3

A

Campaigns in relation to market sectors or products which put or pay put customers at risk

39
Q

Financial Services Act 2012

A

Enables the financial policy committee (FPC) to give directions to the regulators for the purpose of protecting and enhancing financial stability.

40
Q

Focus of the FCA

A

clients assets are protected and that relevant markets function well.

41
Q

What determines the level of supervision from the FCA?

A

size, market presence & customer footprint

42
Q

How are firms supervised by the FCA?

A

market-based thematic work, programmes of communication, engagement & education aligned with the key risks identified for the sector.