Week 4 - Claims Management Flashcards
Define claims management
Claims Mgmt definition: propmt resolution of an organization’s losses s_ubject to insurance or an active retention program_ including claims by other entities to which it may be legally or ethically bound
What is primary goal of claims management:
To resolve claim matters promptly and effectively
Describe parties to a claim:
Second party – employee(s) in course & scope of employment
Third party – any entity other than the organization itself or second party
What is claim resolution?
Claim Resoution:
- Full or negotiate settlement
- Denial
- Litigation
- Alternative dispute resolution (ADR)
- Subrogation
What is the typical role (responsibilities) of claims management:
_Gathering data: _ incident/accident reports; contractual obligations; verification of claim amounts, etc.
_Enforcing contractual obligations: _ insurance policy, hold harmless, additional insured; mortgagee or lessee clauses, etc.
Mitigating damages after a loss event – losses and costs undertaken to minimize severity of a loss
Promoting equitable compromise of claims – settling for lowest, reasonable dollar amount
Identifying & combating fraud – internal, external & systemic fraud (SIU departments)
Loss forecasting – setting accurate reserves, performing trend analysis (inflation & loss development)
Advising & consulting w/insured & internal (insurance company) departments
List three types of claims management plans
- Insured Plan
- Third party administered plan
- Self-administered plan
Describe features of insured/insurance plan
Insured Plan = _bundled insurance program _
Loss sensitivity – normally includes low ded or SIR
• Insured provides all policy services from 1st dollar & bills insured post-payment
SIR – no obligation by insurer to pay until SIR amount has been reached by insured
Loss runs – online access & ad hoc reporting as allowed by insurer
Loss reserves – insured has little or no input regarding reserving philosophy or case rserves
Staffing – capabilities of adjusters vary widely; insured may not be able to select
Settlement – insured has no control with SIR’s claim reviews; not frequently performed, if at all
**Litigation Mangement - **Carrier leads litigation strategic plan; utilizes in-house or staff counsel for routine litigation; insured has almost no ability to prevent insurer from settling litigation
What are features of unbundled carrier services?
Pure insurance transfer; no loss control services and/or claims administration
Willingness of insured to assume larger portion of risk
Annual premium must be large enough to justify expense of assumption of risk and be attractive to target insurance markets
Insured must have greater risk tolerance because of retained losses & LAE (cash flow is critical
Insured’s financial ability must support anticipated cost of risk
What are the main features of a TPA plan
Loss sensitivity – normally includes larger deductible/SIR than insured plans
Loss runs – informaiton may be available in real time or inquiry basis only
Loss reserves – reflect TPA reserving practices and vary widely from office to office
Staffing – greater insured control during TPA selection (geographic considerations – location to orgnizations operations)
Settlement – payments within SIR administered by TPA; approval typically required prior to payment on larger cases
Claim Audits – internal audits are infrequent; internal audits rarely shared with insured
Litigation Management – more responsive to insured’s settlement/litigation philosophy; retains outside counsel based on experience & knowledge
**Other advantages of TPA plan: 1. **Access to TPA RMIS solution; 2. Good alternative if company cannot qualify for self-insured plan; Provides control of claims management function w/out administrative burden of complying with state self-insurance requirements
What are features of Self-administered Plan?
Self-administered plan = unbundled insurance transaction
Loss sensitivity – very large SIR
Loss runs – organization assumes responsibility for data management
Loss Reserving – huge incentive for company to be accurate on reserves; tendency is to keep reserves low requiring careful monitoring as part of auditing process
Staffing – ultimate control over entire claims staff
Settlement – ultimate control over settlements
Claim reviews – internal reviews conducted with broker & on-staff adjuster
Claim Audits – supervisory internal audits are critical; independent audit is desirable; excess insurers will require regular audits
Litigation Management – more willing to litigate to promote “tough reputation”, use outside counsel based one experience & knowledge
What are some common issues with claim audits?
Composition of audit team – do they have expertise, etc.
Frequency of audit – vary b product line, but should be annually at minimum
Variations in audit process due to types of claims management plan
What should be included in the scope of an audit (things to look for when auditing)?
Duplicate payments
Overpayments & frivolous payments
Poor reserving (stair stepping-creeping)
Failure to document file
Failure to pursue subrogation
Failure to watch aggregates
Improper application of statutes
What are the (three) steps in the Claims Management Process?
1. Investigation
2. Evaluation
3. Resolution
Define Reservation of Rights (ROR) action
Reservation of rights - unilateral
- Notifies insured of coverage issues
- Avoids waiver and estoppel arguments
- Identifies all policy provisions that are at issue
Define Non-waiver agreement
Non-waiver agreement – bilateral & better alternative to ROR letter
- Permits continued process of claim while preserving rights to disclaim/deny coverage
- Insured must be notified immediately once coverage issues are resolved
- Methods for resolving disagreements:
a. Declaratory judgment action
b. Arbitration/mediation
c. Assignment
