Study 2 - The Claims Environment

Question 1

What is OSFI?

Answer 1

Office of the Superintendent of Financial Institutions

Primary regulator of federally chartered Canadian and foreign property insurance companies.

Question 2

What is PACICC?

Answer 2

Property and Casualty Insurance Compensation Corporation

Protects policyholders from the financial collapse of an insurer

Question 3

What is PIPEDA?

Answer 3

Personal Information Protection and Electronic Documents Act

Federal statute governs collection and use of personal information

Question 4

What are the four main elements to the structure of any company?

Answer 4

Administration, marketing, finance and IT

Question 5

What two elements are unique to insurance operations?

Answer 5

Underwriting and claims

Question 6

What are some examples of claims expenses?

Answer 6

• Cause of loss
• Defence counsel
• Accountants
• Private investigators

Question 7

What are the two main methods to set up reserves for claims?

Answer 7

Average cost reserving (volume reserving)
- Large numbers of claims have produced reliable statistics to accurately state reserves

Individual reserving
- Adjuster can effectively estimate a reserve, estimates based on current coverage under policy

Question 8

What are the six IBC claim agreements?

Answer 8

1) Agreement respecting standardization of claim forms and practices, and guidelines for the settlement of claims
- 60 day reporting period from independent adjusters
- Waives agreements for proof of loss on 1st party auto claims as long as repairs have been completed
- For prop, waives proof of loss for claims not exceeding $5k except for theft, mysterious disappearance or subrogation
- Various rules to interpret subro rights for auto accidents
- Intercompany Settlement Chart; percentage of responsibility in certain situations, chart does not apply for Ontario, New Brunswick or Quebec

2) Agreement of Guiding Principles (prop)
- Where prop policies overlap in coverage

3) Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims
- Agreement is used to resolve claims when liability policies overlap in coverage

4) Agreement Respecting Disputed Losses Between Property Insurance and Boiler and Machinery Insurance Policies
5) Owned and Non-owned Contents Agreement (Quebec)
6) Insurance Industry Alternative Dispute Resolution (ADR) Commitment

Question 9

What is CICMA?

Answer 9

Canadian Insurance Claims Managers Association

Question 10

What is the Canadian Inter-Company Arbitration Agreement used for?

Answer 10

Insurers can arbitrate their disputes over qualified physical damage subrogation claims among themselves, does not impact the insured

Question 11

What are some examples of how fraud can occur?

Answer 11

• Property that does not exist or owned by someone else
• Misrepresents how property is being used
• Staged accidents for injury claims
• Staged burglary
• Vehicle theft that did not actually happen
• Inflates claim or commits arson

Question 12

How does IBC urge the public to provide information about insurance crimes?

Answer 12

• Submitting a confidential tip using IBC’s online form at www.ibc.ca
• Calling the TIPS line, 1-877-IBC-TIPS
• Canadian Anti Fraud Centre, 1-888-495-8501

Question 13

What types of law must an adjuster be familiar with?

Answer 13

Contract law, tort law, regulatory environment, consumer protection legislation, privacy legislation, other relevant government statutes and other case law

Question 14

What is the CIAA?

Answer 14

Canadian Independent Adjusters Association

Question 15

What does the CIAA lead through?

Answer 15

Advocacy
Education
Recognized professional standards

Question 16

What is stated in the CIAA code of ethics?

Answer 16

• Insureds and claimants are entitled to receive courteous, fair, and objective treatment promptly from knowledgeable adjusters
• A copy of written statement should be made available without charge to the statement maker
• Adjusters do not provide legal advice or deal with a claimant or insured that is represented by legal counsel unless permission by legal counsel has been given
• Relevant insurance coverage must be explained to the insured
• Written consent is required to obtain medical information or records
• Adjusters must identify themselves to claimants and insureds; if asked they will also identify their principals fully

Question 17

Adjusters owe insurers and self insurers what standard of conduct?

Answer 17

• Report all facts that are relevant to a claim to the insurer or self insurer
• Represent only one interest and immediately report any conflict of interest
• Adjusters must not have any financial interest in the adjustment or take title in any salvage without written authority from their principals
• Adjusters receive consideration only from their principals and do not engage in price setting among other adjusters. No inducements are accepted from any party who has an interest in a claim.
• Information is to be treated confidentially, to be disclosed only as authorized by the insurer or by law

Question 18

Where do adjusters need to be licensed?

Answer 18

Independent adjusters must be licensed everywhere

Employees of a company are required to be licensed in Quebec, New Brunswick, Newfoundland & PEI

Question 19

How do the federal and provincial and territorial governments monitor and regulate the insurance
industry?

Answer 19

• The Office of the Superintendent of Financial Institutions (OSFI) is the primary regulator of federally chartered Canadian and foreign property and casualty (P&C) insurance companies. It evaluates their financial soundness and sets their financial reporting requirements.
• The property and casualty (P&C) insurance industry funds a special program, approved by government regulators, to protect policyholders from the financial collapse of an insurer.
• The Property and Casualty Insurance Compensation Corporation (PACICC) is a non-profit organization that responds to claims of policyholders under most policies issued by P&C insurance companies when an insurer becomes insolvent.
• Each province and territory has its own insurance statute to prescribe approved policy forms; the reports insurers must file; the licensing of agents, brokers, and claims adjusters; and financial security requirements for insurers.
• Insurance Bureau of Canada (IBC) has developed a guideline to help member companies meet regulatory requirements arising from this law.

Question 20

What is the Canadian Inter-Company Arbitration Agreement?

Answer 20

• The Canadian Insurance Claims Managers Association (CICMA) developed an arbitration mechanism for settling disputes between insurers efficiently and cost effectively.
• Many insurers are signatories to the Canadian Inter-Company Arbitration Agreement (CICAA), which provides the mechanism for insurers to arbitrate their disputes over qualified physical damage subrogation claims among themselves.
• Only the interests of insurance companies are arbitrated and not the interests of the insured, even when he or she is insured by a signatory company.
• The CICMA makes rules and regulations concerning how claims are presented and determined under CICAA.
o It also chooses the arbitration facilities, outlines the policy upon which arbitration panels are selected and appointed, and prescribes territorial jurisdictions.
o It decides the basis upon which program operating expenses will be apportioned; members appointed to various arbitration panels serve without compensation.