Flashcards in Chapter 13 Deck (61):
Claim administration is the insurance function that is responsible for what?
evaluating, processing and paying valid claims for contractual benefits that policyowners or beneficiaries present.
why is it important to have effective claim administrations?
1. prompt payment of benefits when an insured event occurs
2. primary contact point with customers
3. data obtained from claims, reflects u/w decisions and making new insurance products
4. reducing/eliminating mistaken of fraudulent claims.
what happens if a claim is not paid within a certain number of days?
laws require insurers to add interest to the benefit amount
what happens if claims are paid out too quickly?
you risk the change of paying non-valid claims.
what is a claim analyst?
is an insurance company employee who is trained to review individual claims and determine the company's liability under each claim.
Name four other departments claims with interact with
3. product development
who are audits reflected in the claims department?
internal auditors check the accuracy of claims to determine if claim decisions were made accordingly to policy wording.
What is a claimant?
a person usually a beneficiary or policyowner who submits a ife insurance policy claim to the insurance company.
What is a claim philosophy?
a statement of the principles the insurer follows when conducting claim administration.
what are claim practices
statements that guide claim department employees in the day-to-day handling claims.
what are the goals, and practices of most claimants?
1. process claims timely and cost-efficiently
2. apply policy provisions consistently
3. investigate questionable claims
4. obtain medical and legal advise when necessary
5. train claim staff
what is a claim form (claimant statement)?
provides information about the loss and authorizes others to provide the insurer with relevant information so that the insurer can begin the claim evaluation process.
what are the 4 basic steps of the insurance claim routine processing?
1. determine if benefits are payable
2. calculating the amount payable
3. identifying the proper payee
4. paying the proceeds.
what is the steps involved in the claim administration process
1. checking the insures' policy administrating system. (was it in force)
2. was the deceased the insured?
3. is the policy contestible?
4. is there material representation/ did the loss occur?
5. was the loss covered?
What is the purpose of a third-party administrator, in terms of claims?
they are often used to maintain the records for group insurance.
when does claim fraud occur?
when the claimant intentionally uses false information in an unfair or unlawful attempt to collect benefits under an insurance policy.
when is a claim considered a mistaken claim?
when a claimant makes an honest mistake in presenting a claim to the insurer.
What is material misrepresentation?
a statement made in an application for insurance that is not true and that caused the insurer to enter into a contract it would not have agreed to if they had known the truth.
What is the term given for the legal process of voiding an insurance contract because of material misrepresentation?
what is a contestable period?
the period following policy issuance during which the insurer has the right to rescind the policy if the application for insurance contained a material misrepresentation. Usually 2 years.
What happens when a claim analyst suspects material misrepresentation or fraud?
they launch a claims investigation, which is the process of obtaining the additional information necessary to make an appropriate claim decision.
What is an exclusion?
provision that describe circumstances under which the insurer will not pay the policy's proceeds following the death of the insured.
What is the most common exclusion in an insurance contract?
suicide exclusion- if the insured dies as a result of suicide within a certain period (1-2 yrs) the insurance company does not have to pay the policy proceed.
What are the two specific situations that require the claim analyst to conduct further investigation.
1. insurer dies outside the country of policy issue. and insurer is unable to obtain acceptable proof of death
2. the insurer disapears. (two kinds explainable and unexplainable)
When would a company paid out on an unexplainable disappearance?
5-7 years, if the policy has been kept in force during the insured;s disappearance.
What happens following claim approval?
the insurer determines the amount of the policy benefit payable, and how to distribute the policy proceeds
What happens following a claim denial?
typically a manager or member of legal department reviews and approves the denial. And the claimant is notified in writing of the reason.
What are common additions to calculating the benefit amount?
1. premiums that were paid in advance
2. accumulated policy dividends
3. policy dividends that the insurer declared but remained unpaid
4. paid up additional coverage
5. accidental death benefits
What are some common subtractions to calculating the benefit amount
1. outstanding policy loans
2. accrued policy loan interest
3. premiums due and unpaid.
What is an accidental death benefit?
a supplementary benefit under which the insurer pays an amount of money in addition to the basic death benefit if the insured dies as a result of an accident.
what are the two ways an insurance company may pay the proceeds?
1. lump sum
2. settlement options
there are typically 4 settlement options. What are they?
1. interest option
2. fixed-period option
3. fixed-amount option
4. life income option
(5) retained asset account (RAA) option
define the retained asset account (RAA) option
the insurer pays the proceeds into an interest-bearing acount in the payee's name.
- the payee can withdraw a portion or the entire amount at any time.
Define the interrest option in terms of policy settlement options.
insurer pediodically sends interrest payments on the deposited amount to the benefiticary, and so on to the next benefiicary
define the fix-period option in terms of policy settlement options.
the insurer pays the beneficiary equal monthly payments with interrest for the next X amount years
define the fixed-amount option in terms of policy settlement options.
the payees receives a specified payment of principal and interest for as long as the proceeds last
define life income option in terms of policy settlement options.
the policy proceeds are used to purchase an annuity that will provide the beneficiary with a series of periodic payments of a specified amount for the remainder of his lifetime.
What happens is there is no named beneficiaries surviving the insured?
the insurer generally pays the proceeds to the insured's estate.
In the US, if the insurer can't identify the proper payee, the insurer can initiate a legal process called interpleader. Define this.
under this, the insurer pays the policy proceeds to a court, advises the court that the insurer cannot determine a beneficiary, and ask's the court to handle.
what is the process when theres a claim on a reinsured policy?
upon approval, the direct writer pays the full amount of the policy proceeds to the beneficiary. Then the direct writer request reimbursement from the reinsurer for the amount of the risk.
Why is it important for the direct writer to notify the reinsurer of a reinsured claim?
1. gives reinsurer time to verify its liability and resolve admin questions
2. reinsurer claim staff can assist the direct writer in assessing validity
3. reinsurers may be alerted to situations involving multiple claims submitted for the same insured to different direct writers.
what is an investigative consumer report
contains information obtained through personal interviews with an individual neighbors, friends, associates, or other who may have information about the individual.
What is a special investigative unit (SIU)?
a group of individuals who are responsible for detecting, investigating and resolving claims.
- usually used to handle claim investigations (specially with fraud)
What are 2 benefits to an insurance company's employees, that emphasizes quality control in claim processing?
1. they comply with laws and regulations related to claim settlement practices
2. adhere to the insurer's claim philosophy and claim practices.
Name 3 steering control mechanisms in claim administration
1. claim philosophy and claim g/l
2. tiered approval levels for claim analyst
Name 3 concurrent control mechanisms in claim administration
1. supervisory approval on claim checks that exceed auth
2. claim investigations checklist, for claims with certain suspicions
3. u/w reviews of death claims submitted during the contestable period.
Name 3 feedback control mechanisms in claim administration
1. internal audits
2. market conduct examinations
3. external audits of claim process
In the US, most state laws are build on the NAIC's unfair claims settlement practices act. Define this act.
describes specific actions that are considered unfair claims practices if done
1. in conscious disregard of the law
2. so frequently as to indicate a general business practice
What are 4 prohibited claims practices?
1. failing to promptly acknowledge receipt of claim-related communications
2. attempting to settle claims based on an application that was materially altered without the policyowners knowledge
3. failing to affirm or deny coverage of claims within a reasonable time after the claim investigation is completed
4. compelling claimants to initiate lawsuits to recover death benefits by offering substantially less than the amount due.
Who provides protection against unfair claim practices in canada?
provincial laws and guidelines for members of the Canadian life and health insurance association ( CLHIA)
What are the terms of a deferred annuity contract?
require insurer to pay a specified death benefit if the annuitant dies before schedules annuity income payments begin.
What is included on the claim form for an annuity death benefit?
1. deceased identity
2. contract for which the death benefit is claimed
3. how beneficiary wants to receive the proceeds.
What are the 4 steps for claim processing an annuity death, once a claim form has been received.
1. authenticating and documenting the claim
2. determining the amount of the death benefit
3. paying the death benefit
4. addressing applicable tax issued.
What do you call the period during which the annuity benefit payments are made?
what is annuity date?
the date on which the insurer begins to make the period income payments under the annuity contract.
When does the annuitant have to submit a tax identification information and other required tax information forms?
when an they select a payout option.
Name 3 types of nonannuitized annuity payout options
2. fixed-period distributions
They are not linked to the life expectancy of any person.
Name 4 types of annuitized annuity payout options.
1. life annuity
2 joint and survivor annuity
3. life income with period certain annuity
4. life income with refund annuity
Payments are tied to the life expectancy of the annuitant.
define a joint and survivor annuity payout
a life annuity that provides series of periodic payments based on the life expectancies of two or more annuitants. (goes until last death)
define life income with period certain annuity payout
guarentees annuity payments will be made throughout the annuitants lifetime and that payemnts will continue for at least a specified period, even if the annuitant dies before that period. falls to a contingent payee