P&c Topic 4- Claims- Part 1

Front 1

Claims Adjusting

Back 1

• Process of Determining :
• Coverage
• Legal Liability
• Damages
• Settling the Claim

Front 2

Claims Adjusting- Claims function

Back 2

• Claims function is over half the insurers cost
  

• Important to their profitability

Front 3

Employees in claims

Back 3

are some of the most visible to customers

Front 4

Goals of claims function:

Back 4

• Comply with contractual obligation
• Support the profit goal

Front 5

Claims function-Comply with contractual obligation

Back 5

• Pay, defend, or indemnify

• Fair, prompt, and equitable

• Directly
• Indirectly
• Keep in mind while claims are routine for insurer, they are not for insured
• Remember why people but insurance

Front 6

Direct claims

Back 6

When claims are filed, claim is made against insurer.

Front 7

Indirect claims

Back 7

When claim is files, to third party negligence.

Front 8

Claims function- Supports the profit goal

Back 8

• Controls expenses

• Don't overpay claims

• unpaid claims could result in angry policyholder, litigation or regulation issues- costing the business

• Protect reputation, goodwill

Front 9

Claim function- Support other Areas- Marketing

Back 9

• Customer satisfaction data
• settlement information
• loss data for a renewal
• Highlight positive claims performance for an account
• Inform of court ruling or settlement

Front 10

Claims function- Support other areas- Underwriting

Back 10

• Post-loss evaluations to understand the risk/potential for future losses

• Adjusting underwriting assumptions for particular risks or class of risk.
  

• Evaluate the underwriting decision for specific case.

• Identify trends

• Take corrective action- loss control.

Front 11

Claims function- Support other areas- Actuarial

Back 11

• Losses Paid

• Losses being reserved for, but not paid

• Assists IBNR calculation

Front 12

Who does the claims department interact with?

Back 12

• Public- policyholders and claimants

• Claimants Attorneys

• Defense Attorney

Front 13

What do adjusters do?

Back 13

• Investigate, evaluate, and negotiate coverage

• Work in the field( show up to place) and Inside(on the phone)

• Employee vs. Contractor

• General vs. Specialist

Front 14

Independent Adjusters

Back 14

• Handle of a case by case basis

• Not an EE of an insurer

• Paid a fee

• Specialized in some areas

• Hired during catastrophe because company does not have enough EE to handle claims
  

Front 15

Large carriers and Independent Adjusters

Back 15

• Large carriers can outsource function completely

• Or use occasionally- such as during catastrophic events or specialty.

Front 16

Public Adjusters

Back 16

• Represents policyholder

• Negotiate settlement with the insurer

• Paid a fee or percentage of settlement by policy holder.

Front 17

Speciality Adjusters

Back 17

• Deals with:
• Polition
• Marine
• Origin and Cause- fire
• Reconstruction- auto accidents

• Accountants
• Engineers
• Priviate Investigators

Front 18

What is Insurance Fraud?

Back 18

• Each state defines it differently

• Deception or misrepresentation of material fact to insurer or insurance agent.
• (Impacts the premium)
• (Affects the placement or under writing of risk)

Front 19

Insurance fraud results in:

Back 19

• Results in overpayment of claim or payment of claim that should not be paid

• Main goal is MONEY

Front 20

Hard Fraud

Back 20

Deliberately faking accident, injury, theft, arson, or other losses to collect money that they are entitled

Front 21

Soft Fraud

Back 21

• Normally honest people tell "little white lies" to their insurance company.

• People who would never think of robbing a bank, stealing, a car, or burglarizing a home find temptations of "easy money" from insurance fraud tough to resist.

• Many people think its harmless

• Volume cost most.

Front 22

What kind of people committee insurance fraud?

Back 22

Committed by people from wide range of occupations, socioeconomic status, walk of life, etc.

Front 23

Why is Insurance fraud so Prevalent?

Back 23

1. Insurance companies back off
2. Low-risk
3. Low legal priority
4. People tolerate fraud

Front 24

1.) Insurance companies back off

Back 24

• Insurance companies take a tough stand against fraud

• Companies underwrittingly encourage fraud by paying suspicious claims too easy

• Sometimes its cheaper to pay some smaller amounts than fight in court

Front 25

2.) Low-risk crime

Back 25

• Insurance cheaters view insurance fraud as a low-risk, high-reward game, and far safer than other crimes that are more dangerous with serious penalties.

• Three states still dont have specific insurance fraud laws, thus discouraging many prosecutors from tackling though fraud cases.

Front 26

3.) Low Legal Priority

Back 26

• Prosecutors often give priority to high-profile crimes (Drugs, violence, etc)

• Perception is that insurance crimes often are too complex and technical to successfully prosecute.

Front 27

4.) People Tolerate Fraud

Back 27

• Many consumers believe insurance fraud is justified

• Tolerance makes it much easier for people to perpetrate fraud and makes it more socially acceptable

Front 28

4 steps of the claims Adjusting Process

Back 28

• 1.) Determine if coverage exists
  

• 2.) Determine loss cause and/or legal liability

• 3.) Determine amount of damages or loss

• 4.) Settle the claim

Front 29

1.) Determine if coverage exists. (If we don't do step 1 don't keep going)

Back 29

• Insuring Agreement
• Exclusions
• Prompt Response

Front 30

-Insuring Agreement

Back 30

• Is the loss specially agreed to be covered? (Auto Part A)
• Review the clauses of the policy.

Front 31

-Exclusions

Back 31

• Coverage provided elsewhere (flood)

• Coverage not usually needed- so not included in regular policies

• Under control of policyholders- Liability

• Uninsurable- Pollution exclusions, war

Front 32

-Prompt response

Back 32

• Insurer must be notified immediately if coverage is being denied or informed about the process during investigation.

• Reservation of rights letter

• Declaratory judgement

Front 33

Reservation of rights letter

Back 33

• Notifies insured claims is being investigated
  

• Coverage Problem may exist

• Protects right to deny claims in the future

Front 34

Declaratory Judgement

Back 34

Court ruling that determines id coverage should

Front 35

2.) Determine Legal Liability

Back 35

• Legally obligation to pay damages

• Settled by court or through insurance company investigation.

• Cant dictate to insurer who to pay claims to- why? -Insurer will usually attempt out of court settlement

Front 36

3.) Determine Amount of Damages- Property and Bodily Injuries

Back 36

• Property:
• Pay, repair, replace
• Replacement cost vs. Actual cash value

• Bodily Injuries
• Medical expenses (Special Damages)
• Loss of earnings ( Special Damages )
• Pain and suffering (General Damages) - Elevator EX
• Punitive Damages- someone knows but doesnt do anything

Front 37

4.) Settle the claim

Back 37

• Determine if it is a valid claim

• Property claims- have insured sign sworn proof of loss

• 3rd party claims- Obtain a release form from claimant

Front 38

Settle the claim- Determine if it is a valid claim options.

Back 38

• Deny claim
• Deny part of claim and pay part of claim
• Negotiate amount

Front 39

Loss Reserving

Back 39

• Amount anticipated to pay a particular claim.

• Amounts owed (or will be owed) to policyholders.

• Funds required to pay insurer expenses- related to claims

• Estimating final losses is key adjusting skill

Front 40

What is the loss adjustment expense

Back 40

the cost carried by the insurer at the time of settling claims

Front 41

Loss adjustment expenses

Back 41

• Defense and cost containment expense
• Adjusting and other incurred expenses

Front 42

Loss adjustment expense- Defense and cost containment expense

Back 42

• When claims cost can be identified with a particular claim
  

• Legal fees- appraiser fees

Front 43

Lost adjustment expense- Adjusting and other incurred expenses

Back 43

• Amounts related to overhead claims expenses
  

• Salary of your claims employees, rent, etc.