Flashcards in Study 2: The Claims Environment Deck (24)
What is the Office of the Superintendent of Financial Institutions (OSFI)?
-OSFI is the primary regulator of federally chartered Canadian and foreign property and casualty (P&C) insurance companies.
-Responsible for overseeing financial institutions and evaluates their financial soundness and sets their financial reporting requirements
-Statutes provide that insurance companies must set aside funds to pay future obligations
What is a loss reserve? solvency?
-An amount carried as a liability in an insurers balance sheet. Loss reserves are generally about 150% of the expected payment for a claim. They are set aside by insurers to cover claim payments.
-Adjusters can modify reserves to reflect changes in their investigation. They are updated during periodic file reviews and when new information arises during claim
-Under OSFI, the purpose of regulatory reserve requirements is to ensure the solvency of insurance companies
-Solvency is the possession of assets in excess of liabilities, the ability to pay ones debts
What is the Property and Casualty Insurance Compensation Corporation (PACICC)?
PACICC is a non-profit organization that responds to claims of policyholders under most policies issued by P and C insurance companies when an insurer becomes insolvent
Helps protect policyholders from the financial collapse of an insurer
Privacy rights- Personal information and electronic documents act (PIPEDA)
-PIPEDA is a federal statute that governs the collection and use of personal information
-IBC has developed a consent wording for use in applications of insurance to allow insurers to collect, use and discloses personal info for the purpose of communication with clients, assessing applications and underwriting polices
-When personal info such as financial info is required by loss adjusters to investigate a claim, the claimant must authorise release of such private info to the insurer. The loss adjuster has the claimant sign a form releasing the info, and the original signed doc is than provided to the party who will than authorise and release that specific info to the insurer. (Doctor, employer, etc)
What are two structural operations that are unique to insurance companies?
Underwriting department- invests the capital of an insurers shareholders by accepting or rejecting applications for insurance
Claims department- administers the loss adjustment process when a claim is presented, regulating whether and how funds are distributed
How does the claims department operate?
-It is organized to deliver on the promise made to the consumer when the insurance policy was sold. Processes are developed so that an insurer pays out losses it has contracted to cover in a way that maintains a balance between fiscal responsibility and customer service.
-Open communication connects departments within companies so they can become resources for each other
-Claims adjusters may have to work with underwriters at times, while a claims adjuster can determine if a claim should be denied, it is ultimately up to the underwriter to decide if the policy needs to be cancelled.
What happens when a loss adjuster recommends that a policy be cancelled?
Must follow correct procedures to ensure cancellation has legal effect, and must also be timed correctly to yield the correct result. When investigating claims and coverage for losses, adjuster must know if a policy is in force at the time of the loss
Insurer can cancel policy ab initio (to go back to beginning) or can can recommend the policy be cancelled because of info that was uncovered during the investigation of a claim
What are the two main methods to set up reserves for claims?
Average cost reserving - set up automatically when loss adjusters open a particular file. Actuaries predetermine a reserve amount for the particular type of claim by using historical data from a large sample of similar claims. Its used when a loss is highly predictable and there are a lot of similar claims in the past (Ex: Cost of windshield replacements)
Individual reserving - Used only when the loss adjuster can effectively estimate a reserve. The loss adjuster assesses each claim carefully in order to estimate how much should be put in reserve. (case by case basis)
What is the purpose of the voluntary claims agreements through IBC?
-Member and non member companies can be signatories to the IBC claims agreements
-Signatories to the agreements have committed themselves to resolving certain claims in certain ways. In this way, they can eliminate or reduce delays and disputes in the settlement of claims and serve consumers more efficiently.
What are the six IBC claims agreements? (6)
1) Agreement respecting standardization of claim forms and practices, and guidelines for settlement of claims
--provides for 60 day reporting period from independent adjusters on interim reports
--for property claims, waives right of POL for claims not exceeding $5,000, except for theft and subrogation
--Various rules govern how to interpret subro rights for automobile accidents
2) Agreement of guiding principles (property insurance)
--used to resolve claims when property policies overlap
3) Agreement of guiding principles between primary and excess liability insurers respecting claims
--used to resolve claims when liability policies overlap in coverage
What are the six IBC claims agreements? (6) continued.....
4) Agreement respecting disputed losses between property insurance and boiler and machinery insurance policies
5) Owned and non owned contents agreement - Quebec only
6) Insurance industry alternative dispute resolution (ADR) commitment
What is the Canadian Insurance Claims Manager Association? (CICMA)
-CICMA developed an arbitration mechanism for settling disputes between insurers efficiently and cost effectively
-The CICMA makes rules and regulations concerning how claims are presented and determined under CICAA. It also chooses the arbitration facilities
-The CICMA can compel the withdrawal of a signatory insurer for failing to comply with the rules
-An arbitration chairperson is appointed and chooses the arbitration panels. The the members of the panes must not have an interest in the case being heard to avoid any potential conflicts
What is the Canadian Inter-Company Arbitration agreement? (CICAA)
Many insurers are signatories to the CICAA., which provides the mechanism for insurers to arbitrate their disputes over qualified physical damage subrogation claims among themselves. Only the interests of insurance companies are arbitrated and not the interest of insureds.
What are the benefits for insurance companies of having supplier partnerships? (4)
-Help protects insurance companies and insureds against sub-par workmanship that may be performed by independent companies
-Help control claims costs, since insurers work with suppliers to negotiate reduced rates on service or products
-Some insurers have designated auto body shops to handle auto claims. These designated shops always guarantee repairs and discounts are negotiated.
-Benefits adjusters and appraisers b/c they deal with fewer select locations, so appraisals and length of investigation and claim cycle times can be reduced
What is the definition of fraud? And who can commit fraud? examples of fraud?
-Methods use to deceive and cause an unwarranted favourable decision for one's own benefits. Deliberate misrepresentation or misstatement and concealment of facts.
-Can be perpetrated by anyone with a connection to a claim. (Policyholders, suppliers, adjusters, health practitioners, etc.)
-Claims investigations are carried out to ensure the info reported is factual. Examples of how fraud may occur include:
--policy is issued for property that does not exist
--policyholder intentionally misrepresents how insured property is used to obtain lower premium
--claimant stages an accident to submit fraudulent claim
--policyholder stages a burglary
--policyholder reports vehicle theft when no theft occurred
What type of property is excluded under most policies?
Property that has been illegally acquired, imported, stored or transported.
As an initiative to fight fraud, some insurers have formed special investigations units (SIUs), to deal with claims where fraud is suspected.
How does the IBC help prevent fraud?
IBC investigative services serves its member companies and the insuring public by detecting and preventing insurance related crime.
IBC advises any member of the public who suspects insurance fraud to contact their insurer. IBC also invites members of the public to provide info by:
--Submitting confidential tip using IBC's online form
--Calling IBC's Canada wide tip line (open 24 hrs)
--Contacting Canadian anti fraud centre
What knowledge must loss adjusters have? (3)
-Loss adjusters require a wide range of both general and specialized knowledge
Legal knowledge - required knowledge includes civil law. In particular, the adjuster must study contract law, tort law, regulatory environment, consumer protection, etc.
Knowledge of company protocol - must be familiar with company protocol of handling claims. One company might prefer managing money, while other prefers exceptional customer service. Adjuster must act responsibly in influencing the distribution of insurance funds. If to little is paid, can damage reputation. If too much is paid, financial resources can be depleted.
What are some skills and characteristics that a loss adjuster must have?
-The claims environment requires clear and logical thinking, as well as the ability to communicate effectively, manage expectations, prioritize tasks, and solve problems.
-Adjusters should be empathetic and understanding, and must be able to work well with others.
What is the standard of conduct for loss adjusters?
-Must conduct themselves in fair and responsible way. Professional conduct is measured against principles such as honesty, integrity, justice.
-Must assess the honesty of the claimant and the claim with integrity, fairness and due diligence.
-Any confidential info must be respected and must not be disclosed unless appropriately authorized by law
What is the Canadian Independent Adjusters Association?(CIAA)
-The CIAA represent the collective interest of independent adjusters to government, industry and the public, encouraging understanding, cooperation, and good relations
-The CIAA leads through
--Recognized professional standards
-Provides opportunities for training, education, and professional development
Discuss the CIAA code of ethics and fair practice policies (6)
A high standard of professionalism is defined through CIAA code of ethics and fair practice policies. The model of acceptable practices in relation to insureds and claimants follows:
-Insureds and claimants are entitled to receive courteous, fair and objective treatment from adjusters
-A copy of a written statement should be made available without charge to the statement maker
-Adjusters do not provide legal advice to insured unless given permission by claimant counsel
-Relevant insurance coverage must be explained to insured
-Written consent required to obtain medical records
-Adjusters must identify themselves to claimants and insured
What standard of conduct do adjusters owe insurers and self insurers? (5)
-Report all facts that are relevant to a claim to insurer
-Represent only one interest and immediately report and conflict of interest
-Must not have any financial interest in the adjustment or take title of any salvage without written authority
-Receive consideration only from their principals and do not engage in price setting
-Info is to be treated confidentially, to be disclosed as authorized by insurer or by law