Week 5

Question 1

For a customer, what is insurance?

Answer 1

It is an intangible (not physical) promise finically

Question 2

What are the three ratios and what do they all stand for?

Answer 2

Claims ratio (premiums in to claims out, £1000 in premiums but £600 payout is a 60% claim ratio), expenses ratio (the cost of operating expenses like salaries, rent etc…) and combined ratio (The overall profitability which is based on combining claims and expense ratio)

Question 3

What does >100% and <100% mean?

Answer 3

if there’s a >100% that means there has been a loss, more money paid out in claims than premiums

<100% this means there has been a profit on the underwriting

Question 4

Whats a claims ratio, expense ratio and combined ratio?

Answer 4

A claims ratio is also known as a loss ratio, expense ratio is the premiums you spend as operating cost and combined ratio is your overall profitability.

Question 5

What does indemnity mean in insurance?

Answer 5

In basic putting you back to your pre financial loss

Question 6

What might conflict with insurers?

Answer 6

Satisfying policy holders, having indemnity at the lowest cost you can and avoiding fraud

Question 7

What are the main steps to a claim?

Answer 7

Think NAMS

Notification (claims handling), acceptance, management and quantification, settlement and closure (claims reserving) .

Question 8

In the claims process, claims handling is also known as?

Answer 8

Notification

Question 9

In the claims process, claims reserving is also known as?

Answer 9

Settlement and closure

Question 10

What is claims management?

Answer 10

The process in which companies assess and fulfil policy holders claims such as direct lines claims philosophy to focus on simple product that lead to simple claims. it is also the complete operational criteria of claims, how competent they are as well.

Question 11

What might be a difficulty when considering claim size?

Answer 11

Typically the smaller the claim the more simple, the more expensive the claim the more amount of expert will have to be involved.

Question 12

What is a claims reserve?

Answer 12

Money set aside by insurer to cover future expected losses

Question 13

Why might some insurance costs be more expensive than other?

Answer 13

Due to frequency and severity

Question 14

What are the two types of timing insurance?

Answer 14

Immediate (car crash) and deferred (medical)

Question 15

What can claims management strongly influence?

Answer 15

Claims management influences performance.

Question 16

What does >78% mean?

Answer 16

Its a loss ratio/ claim ratio, it means there was a high loss

Question 17

What does <25% mean?

Answer 17

A low loss ratio

Question 18

What is conflict resolution?

Answer 18

conflict resolution is how issues between insurance and policy holder is dealt. For example they may chose negations, an internal investigation, litigation/ legal route

Question 19

What is claims leakage and what are the steps to avoiding it?

Answer 19

When the amount of money goes above the cost of the claim due to inefficiency on behalf of the insurance operation. Its sorted by the NAMS, Notification, acceptance, management and quantification, settlement and closure.

Question 20

Dylan creates an insurance company, he talks about his insurance philosophy and sets out criteria on claims and how to operate them efficiently to his team, what term is used to describe what and who he may be talking to?

Answer 20

His claims management team.

Question 21

Who will investigate complex claims on behalf of the insurance?

Answer 21

Loss adjustors

Question 22

Whats the relationship between how much insurance company pays for risk management and level of risk?

Answer 22

The higher the cost of risk management, the lower the cost of the level of risk

Question 23

Suggest 3 ways indemnity could be provided?

Answer 23

Replacement, a payment to value or repair

Question 24

What are the 3 different stage of insurance reporting?

Answer 24

Claims reported and settled,
Reported but not settled,
incurred/ Happened but not yet reported

Question 25

Insurance what does RBNS and IBNR stand for?

Answer 25

RBNS (Reported but not settled)

IBNR (Incurred but not reported)

Question 26

Between RBNS and IBNR at which point does claims open?

Answer 26

RBNS, reported but not settled

Question 27

When talking about claims made vs claims occurring, what might an example of claims occurring be?

Answer 27

Claims occurring could be like asbestos or chemical poisoning from work over decades or working in shipyards asbestos related.

Question 28

Claims leakage is a problem for insurance, where does it cost them?

Answer 28

Claims leakage costs insurance operational cost.

Question 29

What would you talk about in what might conflict between insurance companies? (3)

Answer 29

Seeing policyholder and regulators expectations

minimising fraud

trying to price premiums at a fair price and reducing their risk

Question 30

What might you talk about in claims management? (5)

Answer 30

Claims management is the insurance ability to see a policyholders claim first made to the settlement and payout of the claim and how effective or how ineffective they may be.

Small claims can be straight forward as they may have an efficient proximate cause and often require less of an expertise.

Large claims can cause a problem for many reasons such as increased chances of claims leakage where the cost becomes more expensive to solve the claim due to inefficicens on the insurances side, there could also be a concurrent causation in which there are multiple primary causes for the possible event and there often requires a lot more expertise involved.

To battle both of these, loss adjustors made be involved, they will take into account everything such as policies, witnesses and view documentation they will then advise insurance on what to do.

Insurance companies can provide indemnity here, they could do this in three way, they could repair what is broken, completely replace what is broken or pay to the value of what is broken.

Question 31

What might you talk about in claims reserving?

Answer 31

Claims reserving is insurance companies putting money aside for possible future losses, this could be where the event is anticipated or is totally unexpected.

The problem is the event can be a lot more severe than planned for, could come quicker than planned for or does not happen at all.

There is low frequency high severity (less predictable for insurance, they possibly cant use LLN or relative frequency of occurrence here) and high frequency low severity.

The stage of the claims are

IBNR (Incurred but not reported)

RBNS (Reported but not settled)

CRAS (Claims reported and settled)

Claims made is when occurrence happens during the time of the risk

claims occurrence is when the risk can be at any point during a period of coverage such as asbestos exposure where risk still lays

Insurance may also use claim reserve for catastrophic events, emerging risks and risks which are more difficult to evaluate.

Question 32

What might you talk about in insurance fraud?

Answer 32

Hard fraud where it was pre-planned and soft fraud where the truth is often exaggerated.

Fraud triangle which is pressure/ incentive (motivational to push fraud usually financially driven) overcome by in person interview

opportunity (the attempt to commit fraud without being caught) overcome by having trained fraud handlers investigations

rationalisation (used to overcome guilt or views insurers as evil) and overcome by communicating the consequences of fraud