Topic 8 - Risk Management & Insurance

Question 1

What does ‘risk’ mean in a general financial sense?

Answer 1

Question 2

What is risk management?

Answer 2

Question 3

The risk management process can be divided into five broad steps.

What are the first three?

Answer 3

Question 4

The risk management process can be divided into five broad steps.

What are the last two?

Answer 4

Question 5

What does the pooling of risk mean? What is a premium?

Answer 5

Question 6

Define underwriting.

Answer 6

•The pooling of risk:

–For example:

• This would mean that the risk profile of the fund would be higher than the mean risk profile of the population.
• In this case, inexperienced drivers are making an adverse selection against the fund.
• They are increasing the fund’s mean risk profile.

–For example:

• More experienced drivers in the fund would be subsidising the less experienced drivers.
• Eventually, premiums would have to increase to match the increased level of risk in the fund.
• It would eventually drive away the more experienced drivers who could obtain the same level of insurance at a lower cost elsewhere in the market.

Question 7

What happens when you reduce the size of the pool?

Answer 7

Question 8

The insurance marketplace is comprised of:

• insurers
• intermediaries
• clients
• regulators.

Differentiate between insurers and intermediaries.

Answer 8

–Insurers:

• Life insurers provide a range of risk and investment products.
• General insurers provide risk products.
• Health insurers provide hospital and medical benefits cover.

Question 9

What is the role of an insurance broker?

Answer 9

Question 10

What is the main self-regulatory code of practice in the insurance industry?

Answer 10

Question 11

How does APRA regulate the insurance industry?

Answer 11

Question 12

How does ASIC regulate the insurance industry?

Answer 12

FSRA - Financial Services Reform Act 2001

Question 13

Why is full disclosure critical on an insurance policy?

Answer 13

Question 14

What is misrepresentation?

Answer 14

Question 15

Differentiate between innocent and fraudulent misrepresentation.

Answer 15

Question 16

What is a severity limitation?

Answer 16

Question 17

Explain the concept of excess.

What type of personal insurance can you take out?

Answer 17

Question 18

There are several risks for a business:

Answer 18

Question 19

Evaluation of personal risks:

–Three areas need to be considered:

• lump sum costs
• provisions for dependants
• disablement.

Describe the lump sum costs of death/palliative care.

Answer 19

Question 20

Regarding provisions for dependents, describe the multiple approach.

Answer 20

Question 21

Regarding provisions for dependents, describe the needs approach.

Answer 21

Question 22

What are some control measures for personal risk that insurance companies take into consideration?

Answer 22

Question 23

Financing personal risks:

–A loss, in spite of control measures, requires a provision.

Retention:

•losses are met from an individual’s own resources.

Transfer:

•passing financial responsibility for the loss to another party.

Describing term life policies…

Answer 23

Question 24

•Control measures for house and contents risks:

–Measures can be taken to minimise the damage that can occur e.g. smoke detectors or burglar alarms.

•Financing measures for house and contents risks:

–Control measures will not stop all losses.

–Insurance will provide financing if a loss should occur.

–Two types of policies are available:

• replacement value
• indemnity value policy.

Why is the disclosure of the replacement value so important?

Answer 24

•Financing measures for house and contents risks:

–Co-insurance (average) clause:

• penalise policy‐holders if they fail to insure for the full value of the property
• the effect of this clause is to reduce the amount of the loss in proportion to the amount of underinsurance.

Question 25

Identification and evaluation of motor vehicle risks:

–There are 2 types of motor vehicle risks:

• damage to the vehicle itself
• loss or damage to third parties or their property.

List the different types of motor vehicle insurance policies.

Answer 25

Question 26

Discuss private medical insurance in Australia.

Answer 26

Question 27

What is the payback period?

Answer 27

Question 28

Go through this payback period calculation.

Answer 28

Question 29

What we need to know:

• What is insurable?
• severity limitations
• payback period
• moral hazard
• Who regulates it all?

Answer 29

•With risks identified:

–control and financing measures are developed and implemented

–enables the systematic management of the identified risks.

• A financial planner needs to systematically revise a client’s financial plan.
• A periodic review is required.

Question 30

In Australia, federal government regulations prohibit health insurance providers from charging higher insurance premiums for people who:

Select one:

a. are obese.
b. smoke.
c. drink alcohol.
d. all of the above.

Answer 30

d. all of the above.

Question 31

The feature of guaranteed renewal for a term life policy protects the:

Select one:

a. insured.
b. insurer.
c. both a and b.
d. the Insurance Council.

Answer 31

a. insured.

Question 32

Risk management includes the following steps, in order, to be addressed:

Select one:

a. identifying risks, developing control and financing measures, implementing agreed-upon plans and on-going review.
b. implementing agreed-upon plans, identifying risks, developing control and financing measures and on-going review.
c. developing control and financing measures, implementing agreed-upon plans, identifying risks and on-going review.
d. developing control and financing measures, identifying risks, implementing agreed-upon plans and on-going review.

Answer 32

a. identifying risks, developing control and financing measures, implementing agreed-upon plans and on-going review.

Question 33

Consumer credit insurance policies will exclude claims by the insured in which of the following circumstances?

Select one:

a. The insured has a drug or alcohol addiction.
b. The death of the insured.
c. Sickness of the insured extending beyond a period of 12 months.
d. Both a and c.

Answer 33

a. The insured has a drug or alcohol addiction.

Question 34

In Australia:

Select one:

a. there is a national compensation arrangement for consumers of financial services.
b. holders of an Australian Financial Services Licence (AFSL) can elect whether or not to hold professional indemnity insurance or alternatively pay an additional licence fee to the government.
c. professional indemnity insurance provides the public with a consumer compensation scheme.
d. none of the above.

Answer 34

d. none of the above.

Question 35

Term life insurance policies taken out through a superannuation fund where salary sacrifice contributions are arranged to fund the amount of the premium payment via the employer will:

Select one:

a. be subject to a contributions tax of 15% by the recipient superannuation fund.
b. be tax-deductible to the employer as concessional superannuation contributions.
c. be paid out on death tax-free to a dependant.
d. both b and c.

Answer 35

d. both b and c.

Question 36

When assessing how personal risk losses can be financed, which of the following alternatives are not possible in Australia?

Select one:

a. Meeting losses from personal financial resources.
b. Transferring risks to a third party.
c. Applying for assistance from the personal risk loss relief fund.
d. None of the above.

Answer 36

c. Applying for assistance from the personal risk loss relief fund.

Question 37

Compulsory third party (CTP) motor vehicle insurance covers:

Select one:

a. the legal liability of the driver arising out of the use of the vehicle.
b. the damage to the vehicle, whether for repairs or if the vehicle is a total loss.
c. the insured or the driver (driving with the insured’s consent) for their legal liability in relation to property damage as a result of an accident arising out of the use of the vehicle.
d. both a and c.

Answer 37

a. the legal liability of the driver arising out of the use of the vehicle.

Question 38

The convertibility option for term life insurance policies provides for:

Select one:

a. such clause to be included in the relevant policy document subject to a medical examination.
b. the insured to convert the current policy into ordinary shares at a discount to the current share price.
c. the insured to convert the current policy into any other type of insurance policy so long as the sum insured does not alter.
d. both a and c.

Answer 38

c. the insured to convert the current policy into any other type of insurance policy so long as the sum insured does not alter.

Question 39

Benefit payments from an income protection policy will generally be:

Select one:

a. reduced by any sick leave or compensation payments received by the insured during the claim period.
b. unaffected by any sick-leave or compensation payments received by the insured during the claim period.
c. increased by any investment income earned during the claim period.
d. none of the above.

Answer 39

a. reduced by any sick leave or compensation payments received by the insured during the claim period.

Question 40

What is the difference between pure and speculative risk? What are the main categories of pure risk?

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Answer 40

Pure risk is where is there is the possibility of loss or no loss. For example, a house might burn down or it might not. Pure risk is generally an insurable risk.

Speculative risk is where there is a chance of a loss or gain. For example, investing in shares might produce a loss or gain. Speculative risk is a risk voluntarily undertaken by an individual as opposed to pure risk. Speculative risk is generally not an insurable risk.

Pure risk can be categorised into personal, property and liability risk.

Question 41

What are the five main steps in any systematic risk management process?

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Answer 41

1. The identification of risk
2. The evaluation of risk
3. The control of risk
4. The financing of risk
5. The periodic review of the risk management program

Question 42

What is risk pooling? How can insurers reduce the size of the pool in order to reduce the average level of risk within the pool? Is there any limit to how small the pool can be?

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Answer 42

Risk pooling is based on the principle that individuals that face similar risks, for example, the risk of the house being burnt down, all contribute to a common pool via insurance premiums. That pool can then be used to fund a payout to any contributor who has suffered a loss. When the number of contributors is large actuaries can estimate with reasonable certainty the likely payout to contributors and can set premiums accordingly.

The insurance marketplace is competitive and consumers will seek out cheaper premiums where possible. Some insurers will meet this need by reducing the number of contributors to the pool in such a way as to reduce the average level of risk within the pool. For example, house insurance might only be offered to people over 50 if the insurer believes that people over 50 represent a lower level of risk. A lower average level of risk within the pool means a lower likely payout from the pool and provides the insurance company with the opportunity to offer lower premiums. The reverse of this argument is that people under the age of 50 might be forced to pay higher premiums.

Pooling is all about averaging risk. The larger the pool the more confident that actuaries can be in estimating the likely payout from the pool. As we noted above in order to offer competitive premiums an insurance company might decide to make the size of the pool smaller. However, if the pool gets too small statistically there is likely to be more variation around the average and as a result actuaries will be less confident in setting premiums and ultimately they would need to respond to this uncertainty by increasing premiums.

Question 43

What is the difference between indemnity and non-indemnity insurance products?

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Answer 43

To indemnify means to secure against loss. An indemnity insurance product will payout on a claim of an amount similar to the loss.

Household insurance is an example of an indemnity insurance product – if a house is damaged by fire and $100,000 damage is caused the insurance company indemnifies this loss and will pay out $100,000 provided there is sufficient insurance cover in place.

A non-indemnity insurance product will pay out an agreed amount which is not necessarily related to the actual loss incurred. Life insurance is an example of a non-indemnity insurance product.

Question 44

Sally has a small amount of life insurance provided through her superannuation fund. She is thinking of applying for additional coverage but is worried about filling in an application form and/or having to attend a medical examination. Six months ago, Sally was diagnosed with hypertension and in response to this she gave up smoking. She is quite confident that her health has improved as a result although she has not been back to a doctor to confirm this. Given her improved health, Sally’s partner has suggested that she not mention the hyper-tension in any application but Sally is unsure of the consequences of failing to declare her medical history correctly. Advise Sally.

See page 316 for principle of utmost good faith

Answer 44

Sally needs to check with her superannuation fund as to what level of insurance cover is available. Often insurance cover is offered in units with a base level of units offered automatically as part of fund membership – there can also be the option of ‘buying’ some additional units in the fund without the need to complete additional forms or undertake a medical check.

If, however, Sally does wish to get additional insurance that goes beyond this level of cover she will need to complete a medical form and/or submit to a medical examination. All parties to an insurance contract are bound to comply with the principle of utmost good faith – in simple terms do I have information which if I disclosed to the other party might influence their decision to proceed with the insurance contract? In this case, a history of hypertension and smoking are likely to be significant factors that should be disclosed and can’t be dismissed by Sally’s self-diagnosis of feeling better. To not disclose a material fact in your application means that the insurance company may be able to avoid any payout on the contract in the future.

Question 45

How can insurers use severity limitations to reduce their risk exposure?

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Answer 45

The use of severity limitations mean that some risk is retained by the individual and some is transferred to the insurer. The use of ‘excesses’ and waiting periods are two forms of severity limitation.

Most household contents insurance will have an ‘excess’. If a policy has an excess of $500 this will mean that small incidents which are worth less than $500 would never result in a claim with the cost retained by the individual. For incidents worth more than $500 the first $500 will be retained by the individual and the balance will be transferred to the insurer.

All income protection policies will have a waiting period before any benefits are payable. The longer the waiting period the lower the premium, which reflects the fact that the insurer has reduced their risk exposure.

Question 46

Which policy is likely to attract the higher premium: a TPD ‘own’ occupation insurance or a TPD ‘any’ occupation insurance?

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Answer 46

TPD - total and permanent disablement

An ‘any’ occupation TPD cover means that it is more likely that the person will be able to return to work than an ‘own’ occupation TPD cover and therefore the ‘own’ occupation policy will attract a higher premium.

Question 47

Fiona and Greg are both aged 35 years, both earn the same level of income ($80 000) and both work in the same occupation. Fiona is upset to learn that her quote for income protection insurance is more expensive than Greg’s. The quotes the couple received were as follows. For a benefit of $60 000 p.a. (for each of Fiona and Greg), Fiona’s quote was $634.80 for a 30-day delay before the insurance would be paid and $429.60 for a 60-day delay. Greg’s was $368.40 for a 30-day delay and $203.40 for a 60-day delay. Provide reasons why Fiona’s quote for income protection insurance is more expensive than Greg’s.

Answer 47

At age 35, males who have survived the early 20’s spike in mortality among those age groups are statistically less of a health risk than females of the same age.

Statistically, females in their mid-30s are more likely to become ill for a period of time and be unable to work.

Fiona might also have included information (in the personal health questionnaire) which reveals a greater health risk e.g. smoking.

Question 48

Co-insurance *

The market value of the Smiths’ home and contents is $400 000. However, Mr Smith insured the home and contents for only $300 000. If fire caused $200 000 damage, what amount is the insurance company liable to pay if the policy included a coinsurance clause and the company required a market value of 80%?

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Answer 48

The insurance company is liable to pay based on the following:

Home value $400,000

Insured value $300,000

Co-insurance clause 80%

Thus:

($300,000/(80% x $400,000)) x $200,000 = $187,500

Question 49

Income protection insurance — agreed value versus indemnity policy *

Danni is earning $8 000 per month and takes out a fixed benefit (agreed value) income protection policy for 60% of her monthly income. Six months after commencing the policy her income falls to $6 000 per month. After several months of earning $6 000 per month, she falls ill and is unable to work.

(a) What will be the monthly benefit under the policy?
(b) If Danni had an indemnity policy rather than a fixed benefit policy what would be the monthly benefit under the policy?

Answer 49

a) What will be the monthly benefit under the policy?

$8,000 * 60% = $4,800.

(b) If Danni had an indemnity policy rather than a fixed benefit policy, what would be the monthly benefit under the policy?

$6,000 * 60% = $3,600.

Question 50

Term life insurance premiums **

KGB Insurance offers term life insurance under the following terms:

• guaranteed renewal
• cover to age 75
• sum insured remains constant.

(a) Why do the premiums increase as the age of the insured increases?
(b) In percentage terms, approximately how much more expensive is term life insurance for a smoker than a non-smoker?
(c) If the renewal of the policy was at the discretion of the insurer, would you expect the premiums to be higher or lower? Why?
(d) If the sum insured was indexed to CPI, would you expect the premiums to be higher or lower? Why?
(e) If the term of the insurance was to age 65 rather than age 75, would you expect the premiums to be higher or lower? Why?
(f) Ashleigh and her husband are both 45, non-smokers and considering term life insurance. Ashleigh believes she is being discriminated against by being asked to pay the same premium as her husband. Why does she hold this view? Do you agree?

Answer 50

(a) Why do the premiums increase as the age of the insured increases?

There is an increased risk of death as the insured gets older and the higher premiums reflect this risk to the insurer.

(b) In percentage terms, approximately how much more expensive is term life insurance for a smoker than a non-smoker?

It varies between age category from 59% to 117%. On average it equals 96%. Basically, smoking doubles your premiums.

(c) If the renewal of the policy was at the discretion of the insurer, would you expect the premiums to be higher or lower? Why?

Individuals are unlikely to get healthier during the term of insurance and more likely to get less healthy. If the insurer could identify the ‘bad risks’ and not renew their insurance, then premiums would be lower as a reflection of the lower pool of risk for the insurer.

(d) If the sum insured was indexed to the consumer price index (CPI), would you expect the premiums to be higher or lower? Why?

The higher the potential payout for the insurer, the higher the premiums required to underwrite that risk.

(e) If the term of the insurance was to age 65 rather than age 75, would you expect the premiums to be higher or lower? Why?

Fewer people are likely to die before age 65 than age 75 therefore premiums would be expected to be lower.

(f) Ashleigh and her husband are both 45, non-smokers and considering term life insurance. Ashleigh believes she is being discriminated against by being asked to pay the same premium as her husband. Why does she hold this view? Do you agree?

The life expectancy of a female at all ages is longer than that of a male. It could be argued that there is less risk of Ashleigh dying before the age of 75 than her husband and therefore her insurance premiums should reflect this lower risk. Insurance by definition involves some averaging of risk between a group of people – whether it is valid to average risk between male and female, or a range of other characteristics, is a matter of personal opinion.

Question 51

Paying term life insurance through superannuation **

(a) If a term life insurance premium is $1 000 and the client decides to pay their premium out of after-tax dollars how much pre-tax income will an individual need if their marginal tax rate is:
(i) 0%
(ii) 19.0%
(iii) 32.5%
(iv) 37.0%
(v) 45.0%
* Page 336*

Answer 51

(i) $1 000 = $1 000/(1-0.000)
(ii) $1 235 = $1 000/(1-0.190)
(iii) $1 481 = $1 000/(1-0.325)
(iv) $1 587 = $1 000/(1-0.370)
(v) $1 818 = $1 000/(1-0.450)

Question 52

Paying term life insurance through superannuation **

(b) If a term life insurance premium is $1 000, how much pre-tax income will an individual need if they decide to salary sacrifice their premium into superannuation?
* Page 336*

Answer 52

$1 000

Question 53

Paying term life insurance through superannuation **

(c) Besides the cost differential between (a) and (b), what are the advantages/disadvantages of paying term life insurance premiums through a superannuation fund versus paying for them out of after-tax dollars?
* Page 336-338*

Answer 53

The superannuation fund will often have a bulk purchasing power which means that insurance is often cheaper and/or the related terms are more favourable than insurance bought as an individual outside the superannuation fund. The group insurance aspect also means that a person who is suffering from ill health or is more likely to suffer from ill-health in the future may find it easier to obtain life insurance through their superannuation fund.

On the downside, any insurance payout will be direct to the fund, not to the individual—the individual can only claim the money when they have satisfied a condition of release—in most cases however the event which warranted the insurance payout will also act as a condition of release.

Question 54

Health insurance ***

Longwei is 33 years old and single. He is looking to take out some health insurance coverage. Longwei earns $112,000 per year and he has not had health insurance coverage in the past. He has entered his personal details and preferences into the iselect.com.au website and has been given a quote of $178 per month before any loadings or rebates are applied.

(a) Given that Longwei is over 30 years of age how premium loading will be applied?
(b) How much health rebate will Longwei be entitled to?
(c) What will be the net annual cost of the insurance after allowing for (a) and (b) above?
(d) If Longwei decides not to take out health insurance how much Medicare Levy Surcharge will he have to pay?
* Page 335*

Answer 54

(a) Given that Longwei is over 30 years of age how premium loading will be applied?

Given that he is 3 years past the loading commencement age his loading will be 6% ( 3 * 2%).

(b) How much health rebate will Longwei be entitled to?

Given his age and income level, he will be entitled to a rebate of ~ 8.9%%.

Table 9.4

(c) What will be the net annual cost of the insurance after allowing for (a) and (b) above?

$178 * 12 = $2,136

$2,136 * 1.06 = $2,264

$2,264 * 8.9% = $202

$2,264 - $202 = $2,062

(d) If Longwei decides not to take out health insurance how much Medicare Levy Surcharge will he have to pay?

Given his income level, he will be subject to a surcharge of 1.25% which equals $1,400.

Question 55

The multiple-approach to determining the sum insured ***

Huan is married and has two teenage children. He has a detailed retirement plan in place. He is 40 years old and he hopes to retire in 20 years from now when he is 60 by which time his superannuation should be sufficient to afford a comfortable life in retirement for himself and his partner. He is however concerned that he has insufficient life insurance and he would like to ensure that he has sufficient to cover any loss of earnings caused by his death during that 20 year period. He currently earns $100,000 per annum.

(a) Using a simple multiple-approach, how much life insurance coverage will Huan need to cover his loss of earnings for the 20 year period?
(b) If Huan were to pass away in the first year and the amount calculated in (a) above was invested at 3%, what would be the value of this insurance payout?
(c) If Huan were to pass away in the first year and the amount calculated in (a) above was invested at 3% and the inflation rate was 3%, what would be the present value of this insurance payout?
(d) If the rate at which funds are invested is greater (less) than the inflation rate, what implications does this have for the sum insured?
(e) Assuming that Andrew does not pass away in the first year of insurance, what implications does this have for the sum insured?

Answer 55

(a) Using a simple multiple-approach, how much life insurance coverage will Huan need to cover his loss of earnings for the 20 year period?

$100,000 * 20 = $2,000,000

(b) If Huan were to pass away in the first year and the amount calculated in (a) above was invested at 3%, what would be the value of this insurance payout?

$2,000,000 * (1+.003)²⁰ = $3,612,222

(c) If Huan were to pass away in the first year and the amount calculated in (a) above was invested at 3% and the inflation rate was 3%, what would be the present value of this insurance payout?

$2,000,000

(d) If the rate at which funds are invested is greater (less) than the inflation rate, what implications does this have for the sum insured?

If the funds are invested at a greater rate of return than the inflation rate, the real rate return is positive. Less can be invested initially to achieve the same present value. If, for example, the investment rate of return was 5% and the inflation rate was 3%, the real rate would approximate 2%. $1,345,943 could be invested for 20 years at a real rate of return of 2% to produce a present value of $2m, therefore, the current sum insured could be less.

(e) Assuming that Andrew does not pass away in the first year of insurance, what implications does this have for the sum insured?

Whilst Andrew needs to replace an income stream for 20 years, initially, he will only need to replace an income stream for 19 years after the first year and so on. As a result, the sum he needs to ensure decreases over time.

Question 56

A terminal illness benefit is:

Select one:

a. typically included in a basic term life policy.
b. paid as a regular income for a specified period.
c. generally limited to a total payment of $1 million.
d. both a and c.
* Page 326*

Answer 56

d. both a and c.

Question 57

Indexing a sum insured for life cover typically:

Select one:

a. is automatic and does not require a medical examination.
b. will cease if the insured declines the indexation increase 5 times in succession.
c. will cease if the insured declines the indexation increase 6 times in succession.
d. both a and c.
* Page 326*

Answer 57

a. is automatic and does not require a medical examination.

Question 58

The multiple approach to calculating the needs of dependants regarding life insurance:

Select one:

a. is quite straightforward and can be used to calculate the total amount of cover necessary.
b. has an underlying assumption that the needs of all people are very similar.
c. generally ignores the individual’s resources and commitments.
d. all of the above.
* Page 322*

Answer 58

d. all of the above.

Question 59

In the event of a claim, an indemnity value house and contents policy will:

Select one:

a. provide a payout equal to the market value of the loss incurred at the time of the loss.
b. include the effects of depreciation in establishing a value for the items subject to the claim.
c. both a and b.
d. replace all items at their current replacement value.
* Page 339*

Answer 59

a. provide a payout equal to the market value of the loss incurred at the time of the loss.

Question 60

Life insurance products can:

Select one:

a. provide for insured amounts not necessarily related to the actual loss.
b. be regarded as indemnity-type products.
c. both an and b.
d. none of the above.
* Page 315*

Answer 60

a. provide for insured amounts not necessarily related to the actual loss.

Question 61

Methods of minimising insurance premiums from the insurer’s perspective include:

Select one:

a. reducing the average risk profile of new entrant.
b. increasing the average risk profile of new entrant.
c. reducing the total number of entrants.
d. both a and c.
* Page 314*

Answer 61

d. both a and c.

Question 62

Severity limitations in insurance contracts:

Select one:

a. seek to transfer the financial risk to the insurer.
b. limit the liability of the insured.
c. none of the above.
d. may include the removal of policy excesses.
* Page 320*

Answer 62

c. none of the above.

Question 63

Gambling from the gambler’s perspective is a good example of what type of risk?

Select one:

a. Pure risk.
b. Speculative risk.
c. Arbitrage risk.
d. Property risk.
* Page 313*

Answer 63

b. Speculative risk.

Question 64

The areas from which legal liability can arise include:

Select one:

a. common law.
b. statute law.
c. contract.
d. all of the above.
* Page 344*

Answer 64

d. all of the above.

Question 65

The effect of the ‘co-insurance’ or ‘average’ clause included in a house and contents policy is to:

Select one:

a. increase payouts to policyholders if they are over-insured at the time of making a claim.
b. decrease payouts to policyholders if they are under-insured at the time of making a claim.
c. both a and b.
d. ensure that a claim rejection arising from late payment can be overturned by the courts.
* Page 340*

Answer 65

b. decrease payouts to policyholders if they are under-insured at the time of making a claim.