Study 5: Renewals Flashcards
Besides issuing a renewal, what else should be done during renewals of policies? (2)
- Its the best time for a broker to reassess the risk.
- Upon Review, the broker can look at certain areas to determine if the policy was tainted or is susceptible to fraud.
When should the broker begin the renewal process? (2)
- Generally, on an average size account, two or three months before renewal is suitable.
- Timing is important, as enough time should be available to conduct a proper review to uncover any potential fraud.
What are some areas that may trigger an account review during renewal? (6)
- Economic issues.
- Major personal changes such as divorce or job loss.
- Policy has been cancelled several times for non payment of premium.
- Number of claims on account is higher than average.
- An increase in insurance limits is requested.
- Insurance is taken out on items that previously did not warrant insurance.
Why may economic issues trigger an account review? (4)
- Overall economic conditions in the country are significant and should be considered by underwriter.
- When Economic downturns occur, it may take some time before increases in fraudulent activity are reported. (Correlation between the two)
- Changes in local economic conditions, particularly in specific neighborhoods or areas must also be assessed.
- Changes in the financial position of a policyholder must also be reviewed.
Why may major personal changes (2) and policy cancellations for non payment trigger an account review? (2)
Major Personal Changes:
- Changes in a person’s life can increase the chance of fraud. Moral hazards may materialize when major changes happen in a customer’s life.
- Social settings sometimes provide insurance professionals with opportunity to learn what consumers are thinking and feeling.
Cancellation for non payment:
- Habitual disregard for financial obligations are considered a flag in fraud management.
- What creates a concern within financial circles is the repeated disrespect towards debt, and the necessary steps that must be taken to avoid being pursued for payment.
Why may claims history (1) and a requested increase in insurance limits trigger an account review? (2)
Claims History:
-When the claims rate on a policy is higher than average, or when a pattern of claiming on multiple policies exists, it should be closely reviewed, especially if client is not to worried about high insurance costs.
Requested Increase in Insurance limits:
- A fraudster would typically increase the coverage so the effort to deceive is worthwhile. (Looking to get as much of a payout as possible)
- Always important for insurance professionals to verify that those specific items exist and what their values are.
Insurance taken out on items that previously did not warrant insurance: Why may this trigger a review? (3)
- Fraudsters may be looking for a bigger pay out, so they make up items to try and insure.
- As people purchase more and more expensive things,(Jewelry, collectibles, etc.) the demand for special coverage’s increases.
- Special items would be covered under a personal articles floater or endorsement.
- Review all examples
What are some things that might effect how a broker deals with the renewal/new customer process? (3)
- Each province has unique insurance related legislation. Some of it affects the ability to collect info,and other conditions of it limit the nature of what can be asked of prospective clients.
- The onus is on broker and agents to inform clients with appropriate coverage options.
- A very competitive environment may adversely effect those providing insurance, as that may encourage greater emphasis on writing the business for premium rather than assessing its insurability. (Can increase chance of fraud)
Communication: How do brokers and insurers communicate with their clients? (1) and what do they communicate to them? (5)
-During the course of the year, many brokers and insurers send out newsletters and other mailings to inform policyholders about important insurance issues.
Clients can be reminded about the following:
- Insurance fraud and how it can increase insurance rates.
- Principle of indemnity.
- Policy exclusions and how they operate.
- Additional coverages that can be purchased.
- Info such as crime stoppers as a source to direct tips on fraud.
*Sponsorship of certain community events can help raise awareness about activities and issues that may help control fraud.
Communication: How do you protect brokers and agents against clients suing them? (3)
- Many clients have sued brokers and agents because a claim was not covered. The only way to protect them is to document all conversations.
- Whether a telephone call, or a visit, proper notes should be taken to ensure everything is accurate and ensure that all parties understand what was said.
- Suitable documentation can save a broker against errors and omission, where as lack of documentation can be used against them.
- See example 5.3 pg 112`
Elements of fraud within the renewal process: Why must any “changes and new exposures” be made aware to the insurer? (3)
- Any important changes might affect how the insurer views the risk, or might affect the amount of premium to be charged.
- When clients knowingly keeps important info from insurer it may amount to fraud.
- Potential for fraud arises when insured does not take adequate steps to abide by policy conditions and a claim occurs.
*See example 5.6 pg 114
Elements of fraud within the renewal process: How are the “types of products insured” a potential element of fraud? (2)
- Some items can alert brokers to investigate further.
- Insurance products are for physical coverage on property with financial interest or to protect insured from costs possibly associated with ownership and responsibility to the public at large.
Elements of fraud within the renewal process: How are “Coverage Requirements” a potential element of fraud? (2
- Maintaining adequate coverage is responsibility of policyholder, but brokers and underwriters may suggest increases in coverage when its warranted.
- When an insured requests an increase in coverage without any apparent reason, it needs to be reviewed and determined it it makes good sense. (Can be a cause for concern.)
- Review example 5.7 pg 115
Elements of fraud within the renewal process: How are “automated renewal notices” A potential element of fraud within the renewal process? (2)
- Automated renewal notices sent to client may negate the voiding of a policy if the renewal is not “stopped”
- Beware of automatic processes within your company that might counteract action taken on a policy.
- See example 5.8 pg 116
