Module 12: Claims Handling in the London Market

Question 1

What four parameters can affect the procedure for handling claims?

Answer 1

1. The class of business.
2. The type of cover.
3. The amount of the claim.
4. Whether it is a personal or commercial risk insured.

Question 2

In the London subscription market, who will make the first notification of a claim?

Answer 2

The insured.

The insured will then inform the broker who was asked to arrange the insurance.

Question 3

When must a claims notification be made?

Answer 3

This depends. If there is a claims notification clause, this may specify a method and/or timescale for the notification of the claim.

Question 4

How can a claims notification be made?

Answer 4

Telephone call or E-mail.

The broker’s and insurer’s claims departments must be aware of the basic details required from the insured.

Example:

1. Date of loss
2. Location of loss
3. Nature of loss insured
4. Insured address or contact information.

Question 5

What is the role of the broker in the claims handling process?

Answer 5

1. Telling the insured what information will be needed to support their claim.
2. Explaining the process to them and identifying the key parties and decision makers.
3. Negotiating the claim with insurers.
4. Letting the insured know their options if they are not happy with the result of the claim.

Question 6

Why would the leading underwriter want speedy notification of claim?

Answer 6

So that they can instruct suitable personnel to investigate.

Their representative could be:

1. A loss adjuster
2. Surveyor or;
3. Lawyer.

Question 7

How does the procedure of claims notification work with motor claims?

Answer 7

Both premiums and claims are handled outside the Lloyd’s centralised settlement process.

Xchanging Claims Services (XCS) will not handle claims other than specialist risks such as classic vehicles, or racing cars.

Question 8

How does the procedure of claims notification work with life insurance claims?

Answer 8

1. The insurer must receive proper proof of death.
2. The proper legal recipient of any proceeds from claim must be identified.
3. Will’s or assignments of the proceeds within personal life policies must be taken into account.

These procedures often involve the use of the courts.

Question 9

How does the procedure of claims notification work with physical damage claims?

Answer 9

When the accident has occurred it is essential for notice to be given promptly to underwriters through the broker.

The objective of giving notice is to enable the leading underwriter and XCS to appoint an expert to survey and assess the damage.

Question 10

How does the procedure of claims handling work with energy losses?

Answer 10

Energy losses are adjusted by specialist loss adjusters who are considered agents of the underwriter.

(Their fees are considered an extra contractual obligation of underwriters, remain responsible for their fees in all cases, including total losses)

Question 11

How does the procedure of claims handling work with hull claims?

Answer 11

1. A surveyor is usually appointed.

In addition, an average adjuster will often be employed by the insured to present the claim to underwriters.

2. Adjusters’ fees are initially payable in fully by the insured.

Question 12

How does the procedure of claims handling work with hull claims that have total losses?

Answer 12

In the event of a total loss or the combined claims reach or exceed:

• the sum insured on a valued policy;

the underwriter’s liability is limited to the insured value and no additional sum will be payable for the average adjuster’s fees.

These fees can be recovered from the insured who is the principal of the average adjuster.

Question 13

How does the procedure of claims handling work with cargo claims?

Answer 13

For goods lost or found damaged on arrival at destination, underwriters usually appoint a surveyor.

However, if a cargo policy has a certificates clause allowing the insured to issue certificate with his shipments, notice of a claim is sent to the nearest Lloyd’s or IUA agent who will arrange surveys.

This is called settlement of claims abroad (SCA).

Question 14

How does the procedure of claims notification work with reinsurance claims?

Answer 14

It follows the same principles of direct insurance.

Timely notification of a claim under a reinsurance programme must be made to their broker and/or reinsurers as appropriate.

Question 15

Who does the duty of providing full particulars of a claim and proof of loss ultimately rest with?

Answer 15

The insured.

If the policy is unvalued or subject only to a limit he will be required to demonstrate the extent of the loss.

Question 16

Name five examples of different types of experts used in the claims process.

Answer 16

1. Fire experts
2. Forensic Accountants
3. Art experts
4. Engineers
5. Lawyers

Question 17

What is Xchanging claims services (XCS)?

Answer 17

The centralised claims office for the Lloyd’s market.

XCS sometime agree claims on behalf of the following market and also process data and financial transactions relating to claims through the central claims database.

Question 18

What are the claims agreement parties?

Answer 18

The combination of insurers involved in claims related decision making.

Question 19

What is the normal combination of agreement parties for Lloyd’s?

Answer 19

1. Normal combination use to be the Leading Lloyd’s Syndicate and Xchanging Claims Services (XCS).
2. This is now replaced with either the Leading Lloyd’s Syndicate only or Leading Lloyd’s together with Second Lloyd’s, removing the agreement role of XCS.

Question 20

What is the normal combination of agreement parties for companies writing marine and aviation business?

Answer 20

The two leading companies can bind the balance of the market.

Question 21

What is the normal combination of agreement parties for companies writing non-marine risks?

Answer 21

Each insurer has to agree for their own share.

Question 22

What is Xchanging Claims Services’ basic role when dealing with claims arising under policies issued by Lloyd’s underwriters?

Answer 22

Processing claims through the central claims database for the Lloyd’s market.

Its basic role for all policies is to enter the claims on the central database, process data and move funds.

Question 23

How does company market claims handling work?

Answer 23

The leader has authority in respect of

• denials of claim,
• claims litigation/arbitration,
• time bar extensions and
• formal complaints concerning claims handling.

Question 24

In what circumstances is agreement required from the leader and following market(s) during claims handling?

Answer 24

1. Ex-gratia payments
2. Commutations
3. Policy rescissions
4. Powers of attorney
5. Issuance of proceedings
6. Provision of security/counter security of any description
7. Time bar waiver and coverage in place agreement.
8. Other contractual matters including any arrangement in respect of insolvent security.

Question 25

Who are the service providers offering claims related services to the London Market?

Answer 25

1. Broking services for intermediaries - who choose to keep the face to face claims work in house but outsource their other activities such as the loading of claims onto ECF or accounting tasks
2. Claims agreement - under outsourcing contracts from syndicate or companies who choose not to perform their own claims agreement role.
3. Recovery agents - they pursue subrogation for insurers
4. Audit companies - who will assist insurers in checking their own internal compliance with standards but also check any outsourced companies are in compliance with their contracts.

Question 26

What is the Claims Advising and Settlement System (CLASS)?

Answer 26

The central market database by which broker can present claims to London Market insurers and receive their comments and agreement.

Question 27

What is the Insurers Market Repository (IMR)?

Answer 27

The central electronic location where supporting documentation for both premium and claims presentation can be uploaded by the broker.

Insurers can also load documents into the IMR.

Question 28

What are Syndicate Claims Messages (SCM)?

Answer 28

• Electronic messages which go to Lloyd’s insurers.

- It advises them about claims and provides updates including reserves.

Question 29

What are Underwriters’ Signing Messages (USM)?

Answer 29

• Electronic messages which go to Lloyd’s insurers.

- It advises them about payments on claims.

Question 30

What are Broker’s Signing Messages (BSM)?

Answer 30

• Electronic messages which go to brokers.
• It advises them about settlements being transferred into their accounts so they can locate the funds and allocate them to the correct claim.

Question 31

What are London Insurance Market Claims Messages (LIMCLM)?

Answer 31

• Electronic messages which go to company market insurers.

- It advises them about claims and updating, including reserves.

Question 32

Which two claims settlement messages are used in the company market?

Answer 32

1. For Non Marine or (WSETT)

2. Marine/Aviation (LUCSM)

Question 33

Who’s responsibility is it to load electronic messages within CLASS and add supporting documents to the IMR?

Answer 33

Brokers.

Question 34

What new functionalities does ECF2 bring?

Answer 34

1. Claims Workflow Triggers
2. Claims Workflow system
3. Claim agreement screens
4. Document File viewer
5. Single Sign on

Question 35

What does the Claims Workflow Triggers do?

Answer 35

• A system which will notify a workflow system when an action takes place in the system
• This could be a broker adding a transaction, or a carrier responding.

Question 36

What does the Claims Workflow system do?

Answer 36

For carriers who do not have their own workflow system, this allows them to manage their incoming transactions.

Question 37

What does the Claims agreement screens do?

Answer 37

This is where the activity of reviewing and responding to the claims presented takes place.

Question 38

What does the Document File viewer do?

Answer 38

This system “stitches” all the documents on the file together into a book for easy review.

Question 39

What does the Single Sign on do?

Answer 39

Simpler access for the user by providing on logon with a bespoke menu of options available rather than separate logon credentials for each piece of functionality.

Question 40

When did the Lloyd’s Claims Management Principles and Minimum Standards come into force and when were they updated?

Answer 40

They originally came into force in 2005 and were updated to come into effect from 1st January 2012.

Question 41

What are the four claims schemes?

Answer 41

1. Lloyds 1999 Claims Scheme
2. Lloyds 1999 (amended) Claims Scheme
3. Lloyds 2006 Claims Scheme
4. Lloyds Combined Claims Scheme

Question 42

What topics does the Lloyd’s Claims Minimum Standards cover?

Answer 42

1. Claims Philosophy
2. Resources, Skill and Management Control
3. Claims Adjustment and Management
4. Documentation
5. Claims Reserving
6. Management of External Service Providers
7. Performance Management
8. Claims Agreement for Subscription business

Question 43

What does CTP stand for?

Answer 43

Claims Transformation Programme

Question 44

What are the benefits of the Claims Transformation Programme (CTP)?

Answer 44

1. Enhances the current segmentation of claims.
2. Introduces choice - the option to either manage claims in-house or to outsource.
3. Enables increased flexibility in notification and settlement.
4. Strengthen the Corporation’s governance role.
5. Explores & develops business system options.

Question 45

What claims (ECF claims only) are part of the CTP phase 1?

Answer 45

1. Policies incepting on or after 1/1/10.
2. That are not singletons (written by only one syndicate).
3. That are not binding authorities.
4. That are using certain risk codes which fall into the categories of marine hull and liability, property and non marine casualty treaty RI.

Question 46

What claims (ECF claims only) are part of the CTP phase 2?

Answer 46

1. Policies incepting on or after 1/7/2011
2. That are not singletons
3. That are using certain risk codes falling with the categories of marine cargo and specie, energy on and offshore, other property related codes, and some further reinsurance related codes.

Question 47

What claims (ECF claims only) are part of the CTP phase 3?

Answer 47

1. Policies incepting on or after 1/1/2012.
2. That are not singleton.
3. That are using certain risk codes falling within the category of non marine liability.
4. That can include binder as long as the binder incepts on or after 1/1/2012.

Question 48

What are the duties of the leaders and second leaders under the CTP?

Answer 48

1. Consider the claim and decide the category to allocate it to.
2. Check that the broker has loaded up all the relevant documents to ECF.
3. Make sure that XCS have all the required information to allow them to process the claim on their systems.
4. Make sure that XCS issues an SCM to send information to the following market.
5. Answer any queries from followers.
6. Pro-actively manage the claim.
7. Ensure that followers have access to the claims management strategy being adopted for the claim.
8. Appoint experts as required and manage their activities.
9. Ensure reserves are held for indemnity and also any experts fees.

Question 49

What are Ex-gratia payments?

Answer 49

Payments “out of grace” (not by right), usually made where the claim is excluded but insurers wish to preserve goodwill with the client and the broker.

Question 50

What is the Financial Ombudsman Service?

Answer 50

A complaint service.

It is an independent and impartial body which will adjudicate in disputes between policyholders and insurer as well as clients and their intermediaries.

If an insurer has rejected a policyholder’s claim, the policyholer may be able to refer the complaint to the Financial Ombudsman Service.

Question 51

Which policyholders can use the Financial Ombudsman Service (FOS)?

Answer 51

1. Consumers
2. Small businesses with a turnover of less that €2M and employing fewer than 10 people.
3. Charities or Trusts which have income or assets less than £1M.

Question 52

When a claim is agreed, how does the central accounting system work?

Answer 52

1. Both Lloyd’s and company markets have central settlement systems which allow brokers to be paid directly from a central source without each insurer having to pay individually.
2. In the Lloyd’s market, submission by the broker of the appropriate paperwork, signed by the agreement parties, will allow XCS to process the settlement through their systems
3. In the company market, it is the completion of the CLASS agreement process which will trigger the insurer’s payment to the nominated payee.

It is then the responsibility of the broker to pay the insured immediately on receipt of these monies.

Question 53

When does a broker’s duty in the settlement of a claim end?

Answer 53

When he is satisfied that the claimant has received his money.