Chapter 3 Claims considerations and administration Flashcards Preview

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Flashcards in Chapter 3 Claims considerations and administration Deck (47)
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What are the roles of claims staff?

- estimating accurately the final cost of outstanding claims

- distinguishing between genuine and fraudulent claims

- dealing quickly and fairly with all claims submitted

- settling claims with the minimum of wastage or avoidable overpayment.


What service standards will insurers have in respect of key claims issues?

- the quality of service aimed for

- how valid claims will be handled

- the nature of the claims service at each stage of the claims process

- the speed of the claims service

- the economic efficiency of the claims process.


What is claims reserving?

The accurate estimation of the cost of settling claims.


Why is claims reserving important?

- to be sure that adequate funds are available to meet all claims

- to enable the ongoing assessment of the profitability of the insurer

- it is a regulatory requirement for insurers to submit financial statements every year to the PRA.


How is a 'global' claims reserve established?

- a value is applied to each claim

- an allowance is added for direct claims expenses

- the total is adjusted to take into account the estimated date of payment


What are some of the common indicators of fraud?

Claim soon after policy taken out
Frequent change of insurer
Uncharacteristic increase in cover
Financial difficulties
Delay by insured
Excessive pressure to settle
Inconsistencies in story
Lack of co-operation
Poor or missing documentation
Perfect documentation


What is "The Motor Insurance Anti-Fraud and Theft Register" (MIAFTR)?

A database which contains details of all total loss and theft claims.


What is the "Motor Insurance Database" (MID)?

A database which contains details of all registered vehicles in the UK and their related insurance details.


What is the "Claims and Underwriting Exchange" (CUE)?

A database shared by insurers containing information on personal lines claims from the previous three years.


How does the "Claims and Underwriting Exchange" (CUE) work?

Subscribing members submit their claims data on individual claimants and check the true claims history of those individuals.

Its aim is to eliminate multiple claims and parallel policies held by a single insured.

CUE now covers household, motor and personal injury claims.


What is the aim of the Art Loss Register (ALR) initiative?

The ALR aims to:

- increase the recovery rate of stolen art and antiques

- deter theft by making the resale of stolen articles more difficult.


Who can access the Art Loss Register (ALR)?

The ALR is available to the insurance industry, the art trade, law enforcement and custom agencies, collector and museums.


What are the consequences of undetected fraud?

for the insurer - claims cost rise, profits reduce

for the policyholders - premiums are higher than they otherwise would be

for the fraudulent claimant - if successful, temptation to make more fraudulent claims.


Name 3 types of dispute resolution.

- Arbitration
- Mediation
- Concilliation


What are the main mechanisms in place for dealing with disputes?

- Arbitration
- Alternative dispute resolution (mediation and conciliation)
- The Financial Ombudsman Service
- The Woolf reforms


What types of dispute does arbitration deal with?

Disputes that arise over the amount to be paid in settlement of a claim under a policy.

If the dispute concerns whether or not the claim is covered, it will not be dealt with under an arbitration clause.


How does mediation work?

A neutral mediator is appointed and discusses the dispute with both parties but makes no decisions.

The idea is to identify the real issues at the heart of the disagreement and for the parties themselves to work out a mutually acceptable settlement.

If agreement cannot be reached the parties are free to pursue other options.


How does conciliation work?

Similar to mediation except that the parties decide in advance whether they will be bound by the conciliator's recommendation.

If they agree to this they will not usually have any recourse to the more formal court system afterwards.


What types of dispute does the Financial Ombudsman Service (FOS) deal with?

FOS deals with disputes between insured and insurer where the insured is:

- A consumer

- A micro enterprise or small business
- annual turnover of less than £6.5 million
- Balance sheet total of less than £5 million or employs fewer than 50 employees

- A trust with a net asset value of less than £1,000,000

- A charity with an annual turnover of less than £1,000,000.

- Membership of the FOS is compulsory for all insurers and intermediaries.

The maximum award the Ombudsman can make is £350,000.

The insurer only is bound by the decision: the insured can either accept or reject the decision, and may still take legal action.


What are the Woolf reforms?

The Woolf legal reforms were introduced in 1999 to reduce costs, delay and complexity in the way personal injury claims are handled. They:

- encourage the early settlement of disputes through pre-action protocols

- allow active case management by the courts, together with cost penalties for parties who refuse.


Who do the ICOBS rules on claims handling apply to?

- consumers
- commercial customers


What are the ICOBS rules on claims handling?

Amongst other things, the ICOBS rules confirm:

- The insurer will remain responsible for claims handling, even if they have outsourced this function

- No claim should be rejected unreasonably (there are specific rules as to what is unreasonable with regard to claims from consumers)

- The insurer must provide reasonable guidance on how to make a claim and give appropriate information on its progress.

- Once settlement terms are agreed, the claim should be settled promptly.

- Conflicts of interest must be managed fairly.


Wha are the six FCA Fair treatment of customers outcomes?

1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to corporate culture.
2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale."
4. Where consumers receive advice, the advice is suitable and takes account of their circumstances.
5.Consumers are provided with products that perform as firms have led them to expect and the associated service is both of an acceptable standard and as they have been led to expect.
6. Consumers do not face unreasonable post-sale barriers imposed by firms to change products, switch provider, submit a claim or make a complaint."


What has driven insurers to improve their claims service?

Consumer awareness
Expectation of service


What are the benefits to insurers of giving good customer service?

Customer loyalty
Attracts new customers
Attracts high quality employees
Marks the company out from competitors
Improves profitability
Increases productivity
Improves working environment


In insurance who are the first second and third parties?

First party = insured
Second party = insurer
Third party = claimant


The process that an insurance company carries out in order to assess the level of funds sufficient to meet current and future liabilities is known as?



Ir fraudulent act makes no difference to claim can insurers deny liability for the claim



Under the Insurance Act 2015 if an insured commits a fraudulent act from when can insurers terminate the policy?

Date of fraudulent act


Under the Insurance Act 2015 if an insured makes a fraudulent claim can insurers recover payments made on previous non-fraudulent claims?