Chapter 10 - Claims Handling Flashcards
(121 cards)
1
Q
What 2 things should the claims team ensure they do?
A
- Leave a good impression on the client
- Play a role in terms of interfacing w/ other departments within the organisation, so that the organisation can flourish
2
Q
What are the points of interface between claims & underwriting team?
A
- Underwriting gives claims its view about commercial pressures to settle certain claims
- Liaise concerning intent if a claim appears to be outside the scope of coverage
- Provide up-to-date claims data to enable UWs to review risk performance at renewal
- Advise on clarity of new wordings before they’re put into use
- Report wordings that cause interpretation problems
3
Q
What are the points of interface between claims & outwards reinsurance team?
A
- Claims must know which reinsurance contains forms of claims control or co-op clauses designed to avoid unintentional breaches
- Provide adequate data to reinsurers, so clear advice is made
- Code losses accurately, so aggregation of reinsurance recoverable
- Keep claims data, especially reserves, up to date - so reinsurance renewals are based on accurate loss data
4
Q
What are the points of interface between claims & complaints team?
A
- Provide clear info about handling on any claim to enable complaints handlers to deal w/ issues
- Complaints to provide advice on regulatory info to claims & UWs
5
Q
What are the points of interface between claims & Management Information (MI) team?
A
- MI to liase w/ claims to get input on system designs or changes
- MI to review reports w/ claims to ensure data is being reported properly
6
Q
What are the points of interface between claims & legal team?
A
- Liaise over outsourcing of claims to ensure agreements are appropriate
- Liaise if claims go in litigation
- Legal work w/ UWs & claims to advise on any problems w/ wordings being used or proposed
7
Q
What are the points of interface between claims & compliance team?
A
- Ensure all claims handlers are trained & authorised
- Claims manager to ensure all staff are aware of regulatory requirements
8
Q
What are the points of interface between claims & marketing team?
A
- Marketing to use claims as a publicity tool
- Highlight issues that’ve arisen out of marketing material that have confused clients on the product, which then caused problems w/ claims
9
Q
What are the points of interface between claims & senior management / board?
A
- Report large claims
- Report matters that are of wider importance to the company - a director should be responsible for the critical function of claims
10
Q
What are the points of interface between claims & finance team?
A
- Give early warning to finance about large individual payments being made
- Liaise in cases of high volumes of claims - e.g. after a catastrophe loss, to ensure no cash flow issues
11
Q
What is the broker’s role in the claims process?
A
- Broker is 1st to find out about claims from the insured - (the 1st advice/notification)
- Gathers info about the loss & advises insurers electronically or using a paper file
- Provides updated info to insurers, as provided by the client & experts on an ongoing basis
- Negotiates on behalf of their client
- Sends claims funds from insurer to the client
12
Q
For Lloyd’s market, how is claims handling governed?
A
Governed by documents called: Lloyd’s claims lead arrangements
•Document contains the basic rules concerning the agreement parties required for claims
•It has expectations for certain classes (term life & satellite) & ant business written by only 1 syndicate (or 2 managed by same managing agent), known as ‘singleton’ business
• All other claims are ether single or dual leader agreements in Lloyd&:
13
Q
For Lloyd’s market, what is financial criteria for standard or complex claims?
A
•Claim will be complex claim (2 leaders) if: the amount claimed, net of any deductible, or to the Lloyd’s share on a single risk is: more than £1m for 3rd party business, more than £2n for 1st party business, or more than £5m for excess of loss reinsurance
•Each Lloyd’s risk code is assigned to 1 of the 3 financial categories, which covers the 1st & 3rd party business - the claims adjuster must decide the level to use
•For ‘potentially’ to be claimed trigger, the leader must believe that there’s a greater than 50% chance that the limit will be exceeded
14
Q
For Lloyd’s market, what is non-financial criteria for standard or complex claims?
A
Claim will be complex (2 leaders) if: there’s a claim for extra contractual damages or damages in excess of policy limits, there’s an allegation against insurers of non-compliance w/ regulatory requirements in relation to claims handling, or there’re active/potential dispute resolution proceedings
15
Q
For Lloyd’s market, how can claims move between being complex & standard during their lifecycle?
A
•A claim may be considered complex on its facts rather than value, but as facts develop, it is downgraded
•This is the concept of dynamic triage & it underpins the expectation from Lloyd’s that rarely will a claim require 2 decision makers at every stage of its life
16
Q
Under the Claims Lead Arrabgment (CLA), leaders have responsibilities to the following Lloyd’s marker to ensure they’re kept advised, what does this include?
A
- Ensuring watch list codes are applied to claims
- Allow followers to monitor particular situations
- Sending structured Material Development Communications
- Calling market meetings
17
Q
For IUA Company Market (marine & aviation), what are the claims agreement rules?
A
•Basis of rule: IUA claims handling agreements
•Rules vary based on if the submission from the broker: is an advice or settlement, includes involvement w/ Lloyd’s, or is direct or excess of loss reinsurance
•Advices can be agreed by the lead Company Market UW
18
Q
For IUA Company Market marine business (not excess of loss), what are the settlement requirements for claims?
A
- If Lloyd’s involved, 1 company binds the rest of the Company Market
- If Lloyd’s not involved, the 1st 2 companies required to agree
19
Q
For IUA Company Market aviation business (not excess of loss), what are the settlement requirements for claims?
A
- If direct business, the 1st 2 companies required to agree
- If it’s facultative reinsurance, the lead company only
20
Q
For IUA Company Market excess of loss reinsurance, what are the settlement requirements for claims?
A
The 1st 2 companies must agree
21
Q
For IUA Company Market (non-marine), what are the claims agreement rules?
A
Basis of rule: no binding possible, so each insurer agrees its own share
•This applies to any info submitted by the broker, including advice or request for settlement
• Only exception: individual companies can set up the claims agreement system to bypass them w/ further advices if their share is below a pre-set financial limit
22
Q
Why was Single Claims Agreement Party (SCAP) put into force into the LM?
A
Brokers wanted to streamline the handling & agreement of smaller, less complex claims on business places within the LM
23
Q
What is Single Claims Agreement Party (SCAP)?
A
•A clause (LMA 9150) sets out the basis for the agreement & can be put into open market & lineslip MRCs
•Not used on proportional treaty reinsurance or binding authorities, unless a coverholder is putting a line down on open market subscription business, then SCAP can be within that
•A claim is potentially eligible under SCAP if the net financial value is less than £250k or equivalent to the slip, & the claim is simple
•If claim is handled under SCAP rules, then the slip leader binds all other insurers on that slip
24
Q
How does Lloyd’s market & Company Markets differ for Single Claims Agreement Party (SCAP)?
A
- If Lloyd’s leader agrees to allow the clause in the slip, then all Lloyd’s Ps on that slip are bound to it
- Company Markets can make their own decisions
25
What are the codes for the companies for non-marine?
A1234
26
What are the codes for the companies for marine/aviation?
3000/01
27
What is the role of Velonetic / Xchanging Claims Services (XCS) in the claims process?
XCS maintains the Lloyd’s Market claims database, including the technical processing service:
•Entering data, sending messages to Lloyd’s insurers, & moving funds from syndicates to brokers
•Leaders can choose to delegate their author to to another party to handle claims, which can be XCS
28
How are experts involved in the claims process?
Insurers in LM consider experts to investigate the claim & in liability matters to defend the insured against legal action against them
•Usually, the expert is appointed via the broker & their reports are sent to the insurer via tue broker
•Insurers may appoint experts themselves for advice, only when they’re concerned about the coverage under a policy
•When an expert is appointment, the insurer should provide them w/ an instruction letter covering the specifics of the task required
29
What are the 11 different types of experts that may be used in the claims process?
1. Lawyers
2. Loss adjusters
3. Loss assessors
4. Surveyors
5. 3rd party/delegated claims admin
6. Accountants
7. Investigators
8. Specialist experts - e.g. fire investigators or ship collision experts
9. Average adjusters who specialise in marine claims
10. Translators & interpreters
11. Subrogation/recovery specialist
30
How are lawyers used in the claims process?
To defend the insured or advise the insurer about policy coverage
31
How are loss adjustors used in the claims process?
To inspect damage & make recommendations for repair
32
How are loss assessors used in the claims process?
To assist the insured w/ prep of their claim
33
How are surveyors used in the claims process?
To evaluate loss / damage
34
How are accountants used in the claims process?
For business interruption type claims
35
How are investigators used in the claims process?
For personal injury claims
36
How are average adjustors who specialise in marine claims used in the claims process?
Assesses, calculates, & presents claims for particular & general average
37
How should insurers manage experts hired for the claims process?
1. Insurer should brief the expert, so they understand what is required of them
•Insurer can issue ‘terms of engagement’ document to help the expert understand what is required of them
2. Insurer should provide expert w/ an instruction letter covering the specifics of the task required
3. Insurer should hold expert accountable if they don’t deliver what is required
38
What are the 7 stages of the claims handling process?
1. Insured notifies broker of a loss
2. Broker submits info to insurers via paper of an Electronic Claims File (ECF)
3. Insurers consider this info & respond on paper or electronically - insurers should consider whether it has a conflict of interest
4. For Lloyd’s, Velonetic / XCS enters claims data onto claims system to be sent to all syndicates on the risk
5. Broker reads comments from insurer on electronic claims system / paper claims file
6. If there’s a request for settlement, then funds are sent from insurer’s accounts to the broker
7. Broker updates its’ file
39
As part of the claims handling process, who is the 1st notification of loss?
•Generally, the broker
• But, some insurance requires the insured to advise named experts in the event of a loss & the insurer will name these experts in the policy
40
In professional indemnity insurance, who did the insurer state should be the 1st notification of loss?
A lawyer
41
In cargo insurance, who did the insurer state should be the 1st notification of loss?
A surveyor local to the insured at the time/place of loss
•They will review & suggest potential remedial action for damaged cargo
42
In cargo insurance, what is the benefit of the 1st notification of loss being a surveyor who is local to the insured at time/place of loss?
•Losses can occur at any time, where brokers/insurers may not be contactable, & immediate action may be required
•So, having pre-agreed experts may reduce later dispute
43
What is an example of a conflict of interest in marine hull insurance for insurers’ claims handling?
•Insurers may be handling claims for both vessels in a collision situation, as they are both insureds
•So, they need to consider whether they can appropriately manage the conflict internally
•E.g. have separate claims personnel handling the claims & making sure there’s no visibility of each other’s files
44
What would happen if there is a substantial conflict of interest in the insurers’ claims handling which can’t be managed internally?
•The broker will approach another insurer to take over part of the risk
•But, the conflicting insurer will still pay the share of the claim, but won’t be involved in the decision making
45
As part of the claims handling process, what is the process of electronic claims handling that uses the Electronic Claims File (ECF)?
(LM uses this)
1. It allows brokers to load & submit data/documents to insurers - but, not all claims can be handled using ECF as they may be on the ‘out of scope’ list
2. Once leaders have considered the presentation, they can agree or query it, then the next agreement party can see
3. Agreement parties use ‘radio buttons’ & text boxes to put their comments on the broker’s presentation - e.g. to request more info or appoint an expert
46
What are the 2 components of the Electronic Claims File (ECF)?
(This is what is used for electronic claims handling)
1. Data messaging system/database: CLASS
2. Document repository - broker adds all documents, including MRC
47
What is the process of the data messaging system, CLASS, which is 1 component of the Electronic Claims File (ECF)?
(This is what is used for electronic claims handling)
1. Broker sets up the electronic message & creates Unique Claims Reference (UCR) - each claim is linked to policy’s MRC using its Unique Market Reference (UMR) code
2. Broker sets up claims data using UCE & UME, & completes data message field w/ info about the claim
3. CLASS’s message is sent to the leaders first
48
In subscription market, how does the messaging order differ for Company Markets & Lloyd’s for electronic claims handling that uses the Electronic Claims File (ECF)?
(LM uses this)
1. Company Markets: when the leaders circulate the message, the system puts data into all followers databases w/ no involvement of Velonetic
2. Lloyd’s: a 2nd syndicate can see the claim before Velonetic if the leader says so, then it goes to Velonetic which sends out a message to the syndicates
49
What are the advantages of electronic claims handling that uses the Electronic Claims File (ECF)?
(LM uses this)
1. All data/documents can be accessed by all insurers simultaneously through CLASS, which is available most of the time
2. The insurers’ claims personnel & broker doesn’t need to be in London
3. Once leader has dealt w/ the transaction, the system automatically sends it to the next agreement party
50
What are the disadvantages of electronic claims handling that uses the Electronic Claims File (ECF)?
(LM uses this)
Scanned documents take practice to read & the system takes time to learn how to use
51
What does the new project want to replace the current 3 versions of the Electronic Claims File (ECF) with?
(This is the system used for electronic claims handling)
A single cross market claims system
52
As part of the claims handling process, what is the paper / email file process for claims handling?
1. Broker will make a paper file of claim info insurers need, including MRC, endorsements, info about the loss, & if claim is on binding authority
2. Broker contacts insurers to obtain instructions
3. All insurers need to consider whether they have a conflict of interest
53
How does the the paper / email file process for claims handling differ for Company Markets & Lloyd’s insurers?
1. Company Markets: the paper/email file supports an electronic message that the broker sent
2. Lloyd’s: the paper/email file is the 1st notice of loss; the leader considers the file, asks questions, & appoints experts; then the broker takes their file to Velonetic & enters data for Lloyd’s market
54
In the claims handling process, how should the insurer deal with an organisational conflict of interest?
•Insurer decides it can’t be an agreement party on the claim & decision making role is passed to the next insurer on the just
•But, conflicted insurer still pays its share of the claim
55
In the claims handling process, how should the insurer deal with an individual conflict of interest?
•This is known as ‘Chinese/Ethical Walls’
•The insurer should seek to manage the conflict internally - the insurer’s claims adjuster ensures files are marked to tell brokers who to see within the organisation
56
What are the advantages of the paper / email file process for claims handling?
Everyone is familiar with the format of reading a paper or scanned document
57
What are the disadvantages of the paper / email file process for claims handling?
1. Insurers have to wait their turn to see the physical file, although with email it’s simultaneous
2. Paper can get lost from a file, although not with email
3. Broker has to physically take file from leader to next agreement party, although not with email
4. If broker is attending insurer’s office to discuss claim, then insurer may want to keep the file for abit as they aren’t ready to make a decision yet
58
In the claims handling process, how does the Company Markets & Lloyd’s claims data transmission to insurers differ for paper file process?
1. Company Markets: broker uses an electronic message as well as a paper/email file submission - once this is cleared by the leader, the data is converted into an electronic message which goes to each insurer
2. Lloyd’s: uses Velonetic - after presented w/ paper/email file submission, they input claims data into claims database, which sends message to Lloyd’s syndicates
59
In claims handling, what is the process for further claims handling?
1. When a broker receives more info from their client or expert report, then they need to advise the insurers
2. The agreement parties can also obtain their own expert advice, which isn’t received through the broker
60
In claims handling, what is the process for settlements?
Monies can be paid any time during the claim lifecycle as an ‘interim payment of indemnity’ (payment of account’ or for ‘expert fees’
•Enterprise Act 2016 states that claims will be settled in a reasonable time subject to English Law - so, insureds can commence an action for damages for late payment of their claim up to 12 months after the claim was paid
61
In claims handling, what info should be considered for settlements?
1. Is the amount requested reasonable?
2. Is the claim covered under the policy?
3. Has applicable deductible/excess been taken off the claim amount?
4. Are there parties named in the policy that have control over where claims payments are made? - e.g. when banks have lent money as mortgages, so they appear as loss payees in the policy
5. What currency is the claim being presented?
6. For indemnity payments, is there a receipt/similar
documentation?
7. Where is the money being paid? - the broker?
62
In claims handling for Lloyd’s, what are the rules with settling claims?
Lloyd’s can only settle claims in 14 currencies & if premium was in USD then claims can only be paid in USD
63
During the settlements process in claims handling, what is the ‘loss payee clause’?
•When banks have lent money as mortgages, so they appear as loss payees in the policy
•The loss payee clause may permit small claims to be paid to the insured, but larger ones to be paid directly to the bank
64
During the settlements process in claims handling, how does Company Market & Lloyd’s move payment money?
1. Company Market: when agreement parties agree to the settlement transaction by the broker on the electronic messaging system, this triggers the movement of money from accounts
2. Lloyd’s: Velonetic enters the settlement info on its database once all agreement parties have agreed the settlement, then Velonetic triggers the movement of money from accounts
65
Who can insurers delegate some claims handling authority under binding authorities to?
Coverholders or Third Party Administrators (TPAs)
•In Lloyd’s, the term ‘Delegated Claims Administrators’ (DCAs) is used, which also includes entities such as medical assistance companies who provide claims related services, but don’t hold authority to make coverage decisions
66
What is the process of claims handling under binding authorities?
1. Coverholder/TPA receives info from broker or directly from insured
2. They handle claims within their authority (including financial & factual limits) & refer anything outside their authority to their principal - this referral goes via the London broker & is done via paper file or ECF
3. Usually monthly, they send a ‘bordereau’ via the broker to insurers - this info is updated onto the insurers system after review
67
What is the ‘loss fund’ in claims handling under binding authorities?
1. Insurers often provide coverholder/TPA w/ an amount of money up front to enable them to settle claims promptly, this is the ‘loss fund’
2. When bordereau is submitted monthly, the loss fund is replenished by insurers on claims that’ve been paid out during the previous month
3. At the end of binding authority when claims are concluded, the loss fund is returned to insurers in full
•Unless they agreed to let the fund run down & stop the replenishment process in previous months, therefore only the balance left in the fund is returned to the insurers
68
What is the new ‘Lloyd’s Faster Claims Payments’ solution for claims handling under binding authorities?
•It removes the need for coverholders/DCAs to hold loss funds
•It facilitates the ability for DCAs to draw directly on managing agent funds held within a platform
69
What are indemnity issues that claims adjusters & brokers need to consider when reviewing claims info?
1. Not all policies are policies of indemnity, such as personal accident policies
2. The insured shouldn’t end up better off after a loss - wordings may have provisions for betterment, preventing any dispute on the subject
3. Certain policy features, such as ‘policy limit’, ‘excess’, & ‘sublimits’, can reduce the amount the insurer has to pay
4. If there’s underinsurance, then insurers have the right to reduce the claim by an equivalent proportion - ‘underinsurance’ in non-marine is known as ‘average’
70
What is ‘claims leakage’ under subrogation issues that claims adjusters & brokers need to consider when reviewing claims info?
E.g. failure to obtain a recovery where it was potentially available
71
What is subrogation?
Insurer claims against 3rd parties that contributed to the loss
72
What is the key to successful subrogation?
Not loosing evidence or the right to make a claim
73
What is ‘leakage’ in claims?
Over payment of claims
74
What is an example of ‘hard leakage’ in claims?
E.g. forgetting to apply a deductible
75
What is an example of ‘soft leakage’ in claims?
E.g. failing to obtain a full recovery or paying more in experts’ fees than necessary
76
What would failure to monitor ‘leakage’ in claims result in?
Overall larger claims costs, which have an ultimate impact on profits
77
What are contribution issues that claims adjusters & brokers need to consider when reviewing claims info?
The 2 insurers share the claim
78
What is contribution?
2 insurers covering the same subject matter against same risk
79
What is the most commonly used approach with contribution for claims handling?
Independent liability method
•This is what each policy would be liable to pay if it were the only 1 on risk
•If both are for the same amount, then the claim is split 50/50
80
What is proximate cause?
The dominant cause for a loss
81
What are proximate cause issues that claims adjusters & brokers need to consider when reviewing claims info?
1. Policies don’t cover every loss that occurs in respect of a subject matter - there has to be fortuity, there may be a set of named perils, & there will usually be some exclusions
2. If there’s more than 1 proximate cause & the resultant damage can’t be unravelled
82
If there’s more than 1 proximate cause & the resultant damage can’t be unravelled, what are the 2 scenarios for settling the claims?
1. If policy covers 1 of the causes & is silent on the other, then the whole claim is paid
2. If policy covers 1 of the causes & states it excludes the other, the whole claim is excluded
83
What are deductible/excess issues that claims adjusters & brokers need to consider when reviewing claims info?
1. Many LM policies have more than 1 deductible/excess - e.g. separate ones for different aircrafts
2. Many LM policies have different deductibles/excesses for different causes of loss - e.g. a higher excess for an earthquake in a property policy
3. Claims adjustors need to be careful that any amount paid in indemnity takes into account the correct deductible/excess - in some policies, the deductible/excess may reduce once a certain number of individual claims have been paid, so need to ensure the correct amount is identified
4. Claims leakage - e.g. failure to apply the correct deductible/excess
84
What are exclusions issues that claims adjusters & brokers need to consider when reviewing claims info?
1. Claims adjuster needs to check whether the insured’s claim is excluded in whole or in part, or not excluded
2. There should be communication between the insured & insurer, including if there’s a potential issue w/ the claim or interpretation of an exclusion
85
What is ‘Reservation of Rights’ (ROR) that an insurer could issue during the claims handling?
It’s a warning to the insured that there may be a problem w/ the claim & the insurer is investigating
•The legal issue here is estoppel - the insurer could be ‘estopped’ or prevented from declining a claim as it led the insurer to believe that it had no quieres w/ the claim, so by issuing the ROR, the insurer is making clear that there’s a problem
86
How could artificial intelligence (AI) impact claims?
1. For the LM to digitise contracts, it aims to enable the 1st notice of loss process to be partially automated
•This is enabled by comparing details about a claim w/ policy details - e.g. checking whether the date of loss falls within the policy period
2. AI could look for patterns as part of fraud detection work or identifying potential claims earlier in the process
87
What are key fraud triggers that claims personnel (brokers & insurers) should watch out for?
1. Excessively documented claims file
2. Pressure to settle
3. Reluctant to answer questions
4. Stories don’t add up
88
What is an example of claims leakage linked to insurance fraud?
Failing to spot & prevent fraudulent claims
89
What is the UK regulation of claims handling from the FCA handbook: Insurance Conduct of Business sourcebook (ICOBS)?
1. ICOBS 8.1.1: an insurer must handle & settle claims promptly & fairly, & provide guidance to help ploxyhomder make a claim
2. ICOBS 8.1.2: a rejection of consumer policyholder’s claim is unreasonable if it’s for non disclosure of fact that policyholder couldn’t be expected to disclose or non-negligent misrepresentation of a fact, or breach of warranty unless its material to the risk or in ‘life of another’ contract
3. Insurers can’t invoke non-disclosure & misrepresentation w/out showing that fraud has occurred for consumers
4. ICOBS 8.8.3: firms need to manage conflicts of interest fairly & SYSC 10 requires intermediaries to take steps to prevent conflicts
5. ICOBS 8.3.4: a firm w/ no authority to deal w/ a claim should forward it or tell the insured they can’t deal w/ it
90
What is the UK regulation of claims handling around conduct risk?
1. Insurers shouldn’t put any barriers in the way of insureds making a claim or complaint
2. Need to ensure that there are methods in place for insureds to do so
91
What are the UK regulations around anti-money laundering training?
1. Regulated firms are required to put adequate processes in place to minimise the risks of the firm being used by criminals to commit financial crime
2. All personnel should be adequately trained to spot signs of potential money laundering activity & report them
92
Why did many states in USA (e.g. California & Florida) create their own insurance claims handling regulations?
To temper the behaviour of local insurers & protect the innocent insureds from bad insurers
93
What info should LM claims personnel be aware of when handling Californian (USA) claims?
1. Timelines for acknowledging receipt of claims
2. Timelines for updating the insured should investigations be ongoing
3. Info that insureds need to be given should claims be denied, so they can complain to the California department of insurance
4. LM need to ensure that all personnel handling Californian claims are certified annually
94
What are sanctions?
Governments can ban parties (countries, governments, businesses, & individuals) from doing business w/ all parties
95
Why are sanctions imposed?
To control access of funds for regimes, countries, companies, or persons who are are less than desirable - e.g. may be linked to terrorism
96
What are examples of financial sanctions?
1. Prohibiting the transfer of funds to a sanctioned country
2. Freezing the assets of a company or an individual
3. Freezing the assets of a government, as well as the companies & residents of the country
97
Who are EU regulations imposing sanctions applicable to?
They’re part of EU law & applicable in the member states
•This applies to nationals of the member states, entities incorporated under the law of 1 of the member states, & those doing business in the EU
98
What is an example of a US sanction?
Cuba
99
What are problems that could arise from sanctions in claims?
1. W/ US sanctions, the US dollar payments will go through a US bank, so it can be frozen if there’s a problem - the penalty for an insurer is the total freezing of their USD bank accounts
2. The offending entity may not be party to the insurance - insurers need to be careful when paying claims to consider to whom the money is actually being claimed
•E.g. in LM w/ piracy claims handled by marine insurers, in Somalia the pirates to whom ransoms are being paid might be linked to terrorist organisations
100
What are 3 different ways insurers can find out about sanctions?
1. Info is available on websites for HM Treasury & US Department of Treasury, & Office of Foreign Assets Control (OFAC)
2. Lloyd’s insurers & brokers can access the ‘Crystal’ system
3. Market Associations also provide guidance to their members
101
Under FCA ICOBS requirements, how should insurers’ complaints process be for clients & why?
•It should be made clear to clients before any contract is concluded
•This is because complaints can arise from any time of the process
102
On complaints handing, what info should insurers communicate to insureds?
1. Who to contact in the event of a compliant & their details
2. Timescales of the consideration & resolution of the compliant
3. That the FOS exists should the insurer be unable to resolve the complaint to the insured’s satisfaction
4. That referring the matter to the FOS doesn’t remove any of the insured’s rights
103
What is the Financial Ombudsman Service (FOS)?
A free service that deals with unresolved disputes
104
Who does the Financial Ombudsman Service (FOS) deal with complaints from?
1. Consumers & guarantors
2. Charities w/ annual income less than £6.5m
3. Small businesses w/ annual turnover less than £6.5m & less than 50 employees or balance sheet total of less than £5m
4. Trustees of trusts w/ net asset value of less than £5m
5. Mico-enterprises w/ fewer than 10 employees & turnover/balance sheet total less than EUR 2m
105
What must the complainant do before going to the Financial Ombudsman Service (FOS)?
1. They must have gone through the internal complaints procedure w/ an organisation
2. They must withdraw from any legal proceedings
106
What time period can a complainant refer their compliant to the Financial Ombudsman Service (FOS)?
1. 6 months from the letter advising claimant of its final decision of the complaint
2. 6 years after the event complained about
3. 3 years after complainant knew that they had cause for complaint - after this, the organisation can object to the FOS taking on the complaint as it’s time-barred, but FOS can consider w/ exceptional circumstances (e.g. cases involving pension transfers & opt outs)
107
What is the time period that the Financial Ombudsman Service (FOS) needs to answer the complaint?
Within 3 months
108
How are complaints resolved under the Financial Ombudsman Service (FOS)?
•Most are resolved through mediation or informal adjudication by a caseworker
•But, they may need to hold a hearing
109
If 1 of the parties appeals the complaint outcome, what would the Financial Ombudsman Service (FOS) do?
Someone on the panel of ombudsmen will make a decision
110
What does the Financial Ombudsman Service (FOS) take into account?
1. The law - (but isn’t bound by it)
2. FCA rules
3. Good industry practice, including relevant ABI statements & codes of practice
111
What does the Financial Ombudsman Service (FOS) aim to do?
Ensure customers are treated fairly & insurers aren’t avoiding paying claims
112
What are the 2 ways that the Financial Ombudsman Service (FOS) awards redress?
1. Money award - they tell firms how much money to pay customers to cover financial losses they’ve suffered as a result of the problem they complained about
2. Directions award - tells firms actions it needs to take to put things right for its customer - (e.g. to pay an insurance claim that was rejected or apologise to the customer, etc)
113
What is the max amount the insurer would have to pay the complainant according to the Financial Ombudsman Service (FOS)?
(This is a money reward)
1. If event occurred after April 2019 & complained to FOS after April 2024 = £430k
2. If event occurred before April 2019 & complained to FOS after April 2024 = £195k - FOS may reccomend higher, but this isn’t binding on the firm
•FOS can tell firm to pay interest on top of compensation - this is calculated at 8% per year
114
If the Financial Ombudsman Service (FOS) awards redress in a directions award, what is the process?
1. The decision must be notified in writing to the complainant & respondent (the firm)
2. Complainant then accepts or rejects the decision within the time limit set by the FOS
•If they accept, then it’s binding on the respondent
•If they reject, then it isn’t binding on the respondent & can pursue the matter in court
115
Who is the Financial Ombudsman Service (FOS) funded by?
A general levy paid by all firms & a case few payable by the firm to which the complaint relates
116
How does the Financial Ombudsman Service (FOS) issue guidance to firms?
Through the ‘Ombudsman news’
117
What is the complaints department for policies written at Lloyd’s?
•This acts as an interface between the FOS & individual managing agents
•They handle complaints from insurers who would be eligible to go to the FOS
•Lloyd’s complaints department receives notification of complaint from FOS or directly from the client
•The department works w/ the syndicate & insured to try to resolve the complaint, but if it doesn’t resolve then eligible insureds can go to the FOS
118
What does the Financial Services Compensation Scheme (FSCS) do?
They protect insureds if their insurer can’t pay valid claims
119
How much of the claim would the Financial Services Compensation Scheme (FSCS) cover?
1. Protection is 90% of the claim w/ no upper limit for other types of policy, including general insurance advice & arranging
2. Protection is 100% for compulsory, professional indemnity, & long-term (e.g. pensions & life assurance) insurances; & certain claims for injured & sickness of insured
120
When would the Financial Services Compensation Scheme (FSCS) get involved with the insurer & why?
If the insurer is going into ‘default’ & unable to pay claims
•This is usually because they’ve been put into professional liquidation & ceased to operate normally as a company
121
What is the Central Fund at Lloyd’s & how does it link to the Financial Services Compensation Scheme (FSCS)?
•If a syndicate subscribing to a risk cannot pay its share of the claim, then the Central Fund will provide money once members’ various deposits have been used up
•Lloyd’s is a member of the FSCS & Lloyd’s insurers pay a levy for the FSCS funding, as well as other insurance companies, & this levy is paid partially out of the Central Fund
