Management of expenses Flashcards
The department with largest expenditure
Claims department
The shop window of a company
Claims Department
For this reason, it is imperative that the cost of settling claims is accurate, carefully monitored and properly reserved for.
True
If the claims department regularly sets aside insufficient funds to cover the cost of claims, this could have
A negative effect on the profitability, and even the solvency, of the company.
A similar effect will be produced if claims are regularly over paid
(This is called leakage).
The claims department costs the insurer money when it settles a claim
(Called indemnity spent)
There is also the cost of running the claims department to consider.
True
The role of the claims manager is crucial in all these areas,
True
The claims department creates and manages the largest amount of money spent by an insurance company.
True
Therefore, the position of the claims manager is vital to developing
Operational excellence.
Another form of the key tasks of claims manager is
To ensure the company’s strategic direction is followed;
having sufficient resources budgeted to the department to meet their objectives, and have an effective departmental structure to ensure the work is done; is a claims manager key task.
have suitable computer systems that produce effective, accurate reports and preferably incorporate a workflow system; is key task of claims manager.
maintain best practice within the claims department;
maintain a sufficiently senior status so that they are able to exert the influence the role demands; and
set business plans and objectives to ensure smooth
operation of the plans;
There are two main aspects to the claims manager’s responsibilities when it comes to considering cost are :
Overseeing the internal cost of running the claims department (claims expenses).
Monitoring the cost of the claims themselves (claims indemnity), which encompasses the average lifecycle
staff salaries and benefits; the cost of any outsourcing; and IT provision are examples of :
claims manager responsibilities in terms of cost when overseeing the internal cost of running claims department.
payment of claims;
recovery from reinsurers, where appropriate, subrogated recovery are examples of claims manager responsibilities in terms of cost when monitoring the cost of the claims themselves (claims indemnity), which encompasses the
average lifecycle.
Question 7.1
Which of the following is NOT a consideration for a claims manager when determining costs and expenses of running his operation?
a. Payments made to customers. □
b. Payments made to suppliers. □
c. Cost of recruiting staff. □
d. Office rent and rates. □
e. Cost of IT for claims staff. □
D
What does the claims manager also needs to do :
ensure they have the means to recruit, train, motivate and retain intelligent and
competent staff.
There are two main aspects to the claims manager’s responsibilities when it comes to considering cost are :
Overseeing the internal cost of running the claims department (claims expenses).
Monitoring the cost of the claims themselves (claims indemnity), which encompasses the average lifecycle
staff salaries and benefits; the cost of any outsourcing; and IT provision are examples of :
Caims manager responsibilities in terms of cost when overseeing the internal cost of running claims department.
payment of claims;
recovery from reinsurers, where appropriate, subrogated recovery are examples of claims manager responsibilities in terms of cost when monitoring the cost of the claims themselves (claims indemnity), which encompasses the
Average lifecycle.
How is leakage defined as?
the amount by which the actual settlement exceeds the amount that would have been required to make an acceptable settlement under the policy.
What does the claims manager also needs to do :
Ensure they have the means to:
recruit, train, motivate and retain intelligent and
competent staff.
It can be seen from this that leakage could be the critical factor between a:
profitable or unprofitable account.
When is an ex gratia payment made?
to preserve good business relationships,
where an exclusion is a borderline one;
where hardship would be created
However, within this process, there is scope for paying more than is justified by the details and circumstances of the claim.
True
This potential overpayment is referred to in an insurance context as
Leakage,
It may be problematic should a recovery be required from
reinsurers
How to identify overpayment, by:
A detailed review of the handling of a claim through its various stages is required.
It can be seen from this that leakage could be the critical factor between a:
Profitable or unprofitable account.
Quantifying overpayment is not an exact science, but entails a degree of ?
Subjectivity
Leakage the overpayment of claims categorised as
either soft or hard leakage.
Ex gratia payments would be authorised by :
The claims manager.
EX GRATIA PAYMENTS cannot really be regarded as avoidable overspend, and it may be problematic should a recovery be required from
Reinsurers
Once any overpayment has been identified?
steps should be taken to prevent or limit its reoccurrence.
How could an overpayment of claims be avoided?
The claims handler should have been properly trained and systems should have been in place to ensure that before the file was closed.
What to consider before closing claim?
Excess taken into account,
Indemnity offer was made,
Salvage was sold to the benefit of the insurer, subrogation rights exercised against third party.
Leakage the overpayment of claims categorised as
Either soft or hard leakage.
Who could put emphasis on reducing claims payments in particular rather than expenses in general?
Senior Management
Also what function should apply in respect of all claims, not just the large ones?
Management Control
Who would have to be trained to the appropriate levels, and be encouraged to take professional qualifications?
Employee skills
Once any overpayment has been identified?
Steps should be taken to prevent or limit its reoccurrence.
Supervision of staff :
Supervisors require all the same skills as the rest of the employees plus:
- management training; and
* presentation training
Who would require additional training?
Supervisors, in the management and presentation of the training.
Adequate checks should be in place to avoid hard leakage and as many aspects of soft leakage as possible.
What function is this?
Quality Management
Checks that are USUALLY undertaken by way of regular audit are:
Quality Management.
