Flashcards in Study 7: Evaluation and Negotiation Deck (23)
The need for Evaluation - Explain why documents may need to be evaluated during the course of a claims investigation. (3)
-Adjusters may not know everything about a loss, and may have to call upon experts to appraise damage, assess fault, or determine causation.
-Evaluating docs may help raise certain suspicions the adjuster may have had, if that's the case, a thorough investigation is required.
-Evaluating documents allows adjuster to better understand the claim and allows them to negotiate a fair settlement.
How are repair estimates made for automobile losses? (3)
-Typically entered by a repair shop into a computer program maintained by the insurer.
-Program features set rates for various kinds of labours and prices for various parts.
-Estimates that fall within parameters of the program are automatically approved, and estimates that fall outside the parameter may need to be reviewed by an appraiser who has authority to approve estimates.
The evaluation process - Describe the process in which claims documentation is evaluated. (2)
-Claimants must substantiate their claims, ideally by providing receipts or visual docs of the more expensive items of their claim. However, providing a receipt is not necessary
-The adjusters must assess each claim (and its docs) individually and look for ways in which the value of the items can be established reasonably.
The evaluation process - What is the process adjusters follow when it comes to determining if documentation is false? (6)
-It is a crime to produce false documentation.
-The adjuster must be resourceful to establish the facts and prove that the document is false.
-For receipts, they could ask retailer to verify the purchase, or they could use a credit card statement to verify purchase.
-Can check invoice numbers to verify their validity. This is important to check as invoices and receipts can be readily fabricated on a computer.
-Along with reviewing invoices, adjusters should complete business searches on the internet, place telephone calls when fraud is suspected.
-Original receipts are preferred over photocopies, because its easier to alter a copy.
The evaluation process - What are important factors to consider when evidence is to evaluated in court? (3)
-The credibility of witnesses and claimants is important.
-Judges ask jurors to weigh the inherent probability or improbability of testimony in order to test its credibility.
-The test involves two elements: The credibility of the information disclosed, and the impression the witness makes.
The need for explanation - How can adjusters avoid misunderstandings with insureds related to replacement costs? (2)
-The insured, having paid their premium, are entitled to have the damaged insured items repaired or replaced.
-To avoid misunderstanding, the insured should immediately be informed of how the policy operates to cover replacement cost. (Ex: computer was bought for $2,800 5 years ago, but a far more powerful computer today can be bought for $1,000, the insurer would be required to pay only the $1000 to cover replacement of computer)
The need for explanation - What are the five bases of evaluations? (5)
-Actual Cash Value - A fair value of item at time of loss. Calculated as Cost to replace minus depreciation.
-Replacement cost - Cost to replace an item with another item of like, kind and quality.
-Competitive pricing - Having two or more companies compete or bid on a project.
-Safety requirements - When item is lost or damaged, there may be additional costs required to ensure the replacement or repairs are safe or up to code.
-Court decisions - adjusters can look to prior court decisions in determining settlement on certain types of losses.
What methods can be used to determine a reasonable ACV? (Actual cash value) (4)
-Replacement or repair cost less depreciation.
-Fair market value - amount that a person is willing to pay on the open market.
-Income value - Property may have more value to owner because of the income earned on it, rather than its value if it was sold.
-Special value to owner - Insurance does not pay for sentimental value (price cannot be measured)
What is the most common and effective formula used is loss adjustment? (1)
Replacement costs - depreciation = Actual Cash Value
Describe the Pair and Set clause. (2)
-Prevents the insured from claiming the total loss of a pair or set because part of it has been lost or damaged.
-The adjuster negotiates with the insured and pays them the value of the single part which has been lost or damaged, rather than paying them the total value of the pair, which would violate the principle of indemnity.
Describe the parts clause. (1)
Prevents the insured from claiming a total loss if only one part of an item of property has been lost or damaged.s
Describe what a replacement clause is. (5)
-Instead of making payment, the insurer has the option to repair, replace or rebuild the property damaged.
-In common law jurisdictions, the loss adjuster must inform the insured in writing of this intention within 30 days after the receipt of the POL, and they must start repairs within 45 days of receiving the POL.
-In Quebec, the general conditions outline qualifiers and exceptions for such replacement, the timing for replacement is not specified.
-The insurer may be estopped from exercising the replacement option if the insurer has already agreed (orally or in writing) to settle in cash.
-The amount of insurance does not effect the insurers responsibility to complete repairs. Whatever the cost, the insurer is responsible for it.
Negotiation skills in practise - Describe the negotiation skills an adjuster should have when negotiating settlements with claimants. (11)
-Prepare for negotiations by obtaining and reviewing all info in advance.
-Visualise the end results of the negotiation. (helps adjuster usually get to where they need to go)
-Must be honest and fair in order to establish atmosphere of trust.
-Should strive for a win win situation where both parties benefit.
-Give claimants opportunity to explain their needs, and try to accommodate the claimants needs in order to make settlement more likely.
-Adjusters must have settlement goal in mind and recognise when a claimant is willing to accept a claims evaluation. The claimant may not have a settlement goal in mind, in that case its up to the adjuster to level the playing field and be fair.
Negotiation skills in practise - Describe the negotiation skills an adjuster should have when negotiating settlements with claimants. Continued.... (11)
-Structuring discussion process can make final negotiations less difficult. (start with broad, general questions and move gradually to narrower, specific questions)
-How a question is asked is as important as the question itself. (In some situations, asking permission to ask questions can start the move towards agreement)
-Be cooperative, pleasant, and friendly, being abrasive or combative might break down negotiations.
-Using technology has benefits, allows insureds to follow along on websites with info on vehicle pricing and values so they can see what the adjuster is telling them is true.
-Sound reasoning should properly support any concessions made.
*Review pages 7-10 and 7-11 for further negotiation skills
Loss adjusters must be mindful that their actions may be scrutinized in court at a later date to determine the following: (4)
-Was the insured placed under duress?
-Did the loss adjuster ask the insured to sign an agreement such as a non waiver?
-Did the insured have a legal disability that the loss adjuster should have considered?
-Should the insured have sought independent legal advice?
Describe Salvage negotiation. (2)
-Adjusters may have opportunity to sell property salvaged from the loss back to the insured at a reasonable cost.
-If the sale to insured cannot be negotiated,the insurer may be faced with the choice between trying to sell the salvage, donating the salvage, or throwing it out.
What tips should an adjuster follow when trying to resolve a conflict with a claimant during a negotiation? (5)
-Separate the person from the problem.
-Determine the options for mutual gain.
-Avoid being defensive or aggressive.
-Focus on interest of both parties.
**Important to confront the message, not the person. You must respect the feelings and dignity of a claimant
When should insurers consider involving legal counsel for a claim? (2)
-When litigation seems probable, the insurer may consider involving counsel early.
-This provides an opportunity for counsel to ensure that privilege is being maintained over sensitive documents when possible, and also to offer advice.
What does privileged status mean for piece of evidence? (1) and what is the two part test a document must meet to claim privilege?(2)
-Privileged status for a piece of evidence allows the insurer to keep it private.
To claim privilege over a document, it must meet a two part test:
1) Was litigation a reasonable prospect at the time the doc was produced?
2)If so, was the dominant purpose for the document's production to conduct or aid in the conduct of litigation or to obtain a legal opinion?
*If answer to both is yes, than its considered privileged.
What are the two most popular forms of alternative dispute resolution? (ADR) (2)
Describe mediation. (3)
-Alternative method of ADR, in which representatives of each party meet in private with an impartial mediator to try and reach a settlement.
-The mediator helps the parties define the differences in their positions, identify real areas of dispute and consider solutions.
-Mediator has no authority to decide the dispute or force parties to accept settlement. (It is non binding)
Describe arbitration. (4)
-In arbitration, the parties agree to be bound by the decision of an impartial third party. (the arbitrator)
-Settlement is legally binding.
-Process is businesslike, and private, strict rules of evidence and court procedures do not apply, which simplifies the process and makes it faster, and cheaper than going to court.
-Helps reduce the chances of ill will between parties.