INS 21 Assignment 6: Claims

Provide examples of factors that can complicate the negotiation phase of the property insurance claims process

a large number of damaged items, property of high value, or disagreement between he insured and the claims rep regarding the value or circumstances of the loss

Identify the most common property valuation methods

actual cash value, replacement cost, and agreed value

Describe the activities of the claims handling process

-acknowledging & assigning the claim -contacting the insured or the insured's representative -investigating the claim -documenting the claim -determining the cause of loss, liability, and the loss amount -concluding the claim

Provide examples of changes that insurers can make to their work operations to address catastrophes

-developing and using abbreviate claims handling procedures to speed processing -temporarily increasing claim settlement authority to producers for the duration of the catastrophe response -temporarily transferring claim settlement authority to preselected independent adjusting firms

Identify examples of possible insurer responses to having insufficient claims staff to handle the volume of incoming claims associated with a catastrophe

-identify and train staff from other areas to assist -establish relationships with independent adjusters to help manage overflow -bring in catastrophe teams of claims reps from other regions

Identify the special considerations for property catastrophe claims

-identifying weaknesses, bottlenecks, and potential difficulties -permitting staff to clearly understand their roles and responsibilities -keeping the organization free to focus on handling claims without reallocating essential resources to resolve problems for which it was unprepared

Identify the 3 factors that can be used to determine the replacement cost of real property

-square footage of the property -type and quality of construction -construction cost per square foot

Describe the elements of good-faith claims handling and the practices prohibited by unfair claims practices laws.

-thorough, timely, and unbiased investigation -complete & accurate documentation - fair evaluation -good-faith negotiation -regular & prompt communication -competent legal advice - effective claim management examples of prohibited claims practices: -knowing misrepresenting facts about coverage -failing to promptly acknowledge communications from insureds and claimants -failing to promptly investigate and settle claims -failing to settle claims in good faith, promptly, fairly, and equitably when liability is reasonably clear

Identify the elements of good-faith claims handling

-thorough, timely, and unbiased investigation -complete & accurate documentation -fair evaluation -good-faith negotiation -regular & prompt communication -competent legal advice -effective claims management

Identify examples of possible insurer responses to increased employee stress levels in the aftermath of a catastrophe

-train employees in stress management & have counselors available on site -provide temporary daycare services and meals as other businesses are closed and employees work longer hours

What are the 3 steps involved in initial verification of coverage

1. confirming that a valid policy was in effect 2. determining that the date of the loss falls within the policy period 3. establishing whether the damaged property is insured under the policy

Identify the 4 questions for which the claims reps. must seek answers to verify that a claim is covered

1. does the insured have an insurable interest in the property? 2. is the damaged property covered by the policy? 3. is the cause of loss covered by the policy? 4. do any additional coverages, endorsements, or coverage limitations apply?

Identify the two types of performance measures used to evaluate a claims department's performance

1. profitability measures 2. quality measures

Identify 3 reasons why liability claims adjusting differs from and may be more difficult than property claims adjusting

1. the claimant is a third part who has been injured or whose property has been damaged by the insured 2. a liability claim may involve bodily injury 3. liability claim settlement sometimes involves a claim for damage that the insured has allegedly caused to the property of others.

What are the two primary goals of the claims function? What contractual promise does an insurer fulfill, and how is it fulfilled?

1.compliance with the contractual promise 2.support of the insurer's profit goals the contractual promise that the insurer fulfills is to pay, defend, or indemnify the insured in the event of a covered loss. The insurer fulfills this promise by providing fair, prompt, equitable service to the policyholder, either directly or indirectly

Describe the claims personnel to distinguish their position: Independent Adjusters

are claims reps with whom insurers contract to handle claims in strategic locations, such as disaster sites; to meet desired service levels, or when special skills are needed

Describe the claims personnel to distinguish their position: Staff Claims Representatives

are employees of an insurer, and they handle most claims. they may include inside claims reps, who handle claims exclusively from the insurer's office, and field claims reps, who handle claims both inside and outside the office

Identify the purpose of compensatory damages

are intended to compensate a victim for harm actually suffered. they include special damages and general damages

What are damages?

are money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible

What are salvage rights?

are the insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss

Explain why promptness is a crucial element of fair claims evaluation

because compliance with statutory time limits for completion of evaluations of coverage and damaged can help reduce the insurer's exposure to bad-faith claims. promptness is also important in responding to the claimant, the insured, or their respective lawyers' demands. promptness is particularly important when there is a demand for settlement that is at or near the policy limits

Why do most bad-faith claims for breach of the implied duty of good faith and fair dealing arise under insurance-related contracts rather than other types of contracts

because in insurance contracts, the insurer not only dictates the terms of the contract, but also usually controls the claims investigation, evaluation, negotiation, and settlement and therefore has more bargaining power than the insured

Explain why claims reps' actions may be closely scrutinized and are often criticized

because interactions with claims reps are often the only personal contacts that the general public has with an insurer

Explain why establishing reserves for liability claims can be difficult

because the eventual payment on a liability claim, which may not be made for several years after the claim is made, can vary significantly from the original reserve

Explain why communicating with all parties to a claim is a crucial aspect of good-faith claims handling and resolving claims

because they expect it, they are most likely to make a bad-faith claim, and they may have the most important information about an accident

Describe the claims personnel to distinguish their position: Producers

can include agents, brokers, employees of insurers, or intermediaries. insurers give some producers the authority to pay claims up to a certain amount. those producers can issue claim payment, called drafts, directly to insureds for covered claims, thus reducing the time an insured waits for payment

Jason, a claims manager for insurance company, held a meeting of the claims reps. in his department. Jason asked the claims reps to identify specific ways that they can help the company comply with its contractual promise and support its profit goals. From the viewpoint of a claims rep. in this meeting, explain the claims rep's roles in fulfilling these two goals of the claims functions

claims reps help the insurer fulfill its contractual promise by handling claims in a way that promotes peace of mind for the policyholder and that quickly restores a claimant to his or her pre-loss condition. claims reps can support the insurer's profit goals by avoiding overspending on claims handling, operations, and other expenses. in addition, claims reps can help the insurer avoid costly litigation, regulatory oversight, and penalties by treating policyholders and other claimants fairly to ensure satisfaction with the claims service

Identify the elements of a thorough claims investigation

claims reps should collect all relevant and necessary evidence, develop the information and documentation necessary to determine liability and damages, and make decisions when they believe they have sufficient information to do so. in a thorough investigation, the claims rep is alert for new information that may change the course of the claim

Identify how claims reps should resolve disputes over settlement amounts

claims reps should use policy provisions, such as arbitration clauses, when applicable.

Identify three crucial parts of claims documentation

diary systems, file status notes, and file reports

Describe the process a claims rep follows to verify that a property claim is covered

establishing whether a valid policy was in effect and, if so, determining whether the date of the loss falls within the policy period and whether any additional coverages, endorsements, or coverage limitations apply. the claims rep must also determine whether the insured is legally responsible for the loss.

In what way do the following claims function personnel help the insurer generate an underwriting profit? Claims Staff

helps the insurer generate an underwriting profit by avoiding overspending on costs of handling claims, claims operations, and other expenses

In what way do the following claims function personnel help the insurer generate an underwriting profit? Claims Manager

helps the insurer generate an underwriting profit by managing all claims function expenses, setting appropriate spending policies, and using appropriately priced providers and services

In what way do the following claims function personnel help the insurer generate an underwriting profit? Claims Representatives

helps the insurer generate an underwriting profut by working to settle claims fairly, thus reducing the possibility of costly litigation and regulatory oversight or penalties

Describe the claims personnel to distinguish their position: Public Adjusters

is an organization or a person hired by an insured to represent the insured in a claim in exchange for a fee. generally, the public adjuster prepares the insured's claim and negotiates the settlement with the staff claims rep or independent adjuster

Describe the basic purpose of subrogation

is to prevent an insured from collecting from both the insurer and the party at fault for the same loss

Identify the purpose of punitive damages

is to punish the wrongdoer and to deter others from committing similar wrongs

Explain why establishing and maintaining adequate reserves is important for an insurer's financial stability

its important for ah insurer's financial stability because reserves affect the insurer's ability to maintain and increase business

Explain how an insurer's claims function achieves each of its primary goals: -keeping the insurer's promise -supporting the insurer's profit goal

keeping the insurer's promise: the first goal of the claims function is to satisfy the insurer's obligations to the policyholder as set forth in the insurance contract. the insurer's promise is to pay for direct physical loss to covered property (for property insurance), the insurer fulfills its promise by providing fair, prompt, and equitable service to the policyholder either directly or indirectly. supporting the insurer's profit goal: the second goal of the claims function is to support the insurer's profit goal. achieving this goal is generally the responsibility of the marketing and underwriting departments; however the claims function serves a role in generating underwriting profit by controlling expenses and paying only legitimate claims

Identify examples of alternative dispute resolution (ADR) techniques

mediation, arbitration, appraisals, mini-trails, and summary jury trials

Describe the claims personnel to distinguish their position: Third- Party administrators

self-insured businesses can often contract with third-party administrators, who handle claims, keep claims records, and perform statistical analyses. TPAs are often associated with large independent adjusting firms or with subsidiaries of insurance companies

If it is apparent from the loss notice that coverage may not be available for the loss, the claims rep. should prepare either one of which two documents to notify the insured of this concern will still preserving the insurer's rights?

the 2 documents that preserve the insurer's rights when coverage is doubtful are a nonwaiver agreement & a reservation of rights letter. the claims rep should prepare either 1 of the 2 documents in such a situation

Describe how the claims department is structured

the claims department can be organized in several different ways. usually, a senior claim officer heads the claims dept. and reports to the CEO, CFO, or CUF. the senior claim officer may have a staff located in the same office (home office), within the office, there are any number of technical and management specialists that can provide advice and assistance.

A covered cause of loss destroys a family's 3-year-old TV. The TV would cost $800 to replace with a comparable new TV. A TV is generally expected to be used for 6 years. Explain how the claims rep would determine the covered TV's actual cash value

the claims rep must place a value on the TV by determining the extent of depreciation that should be considered. because a TV might be used for 6 years and is now 3 years old, the claims rep estimates the depreciation from normal wear at 50%. Therefore, with a replacement cost of $800 and depreciation estimated at 50%, the ACV of the destroyed TV is $400. A payment of $400 would indemnify the insured for the loss of the TV.

Identify the goal of assigning a claim

the goal is to assign the claim to a claims rep who possesses the appropriate skills to handle it

When an insurer pays a claim to an insured for a loss caused by a negligent third party, how can the insurer recover that payment amount from that negligent third party?

the insurer can recover that payment amount from the negligent third party through the right of subrogation

When determining the amount of loss for a personal property claim, what is the most important information?

the most important information is what property was damaged or destroyed

What do claims reps use to determine the cause of a loss

use the facts of the loss to determine the cause of the loss

Identify the 3 crucial components of the claims handling process for property insurance claims

verifying coverage, determining the amount of loss, and concluding the claim and exercising subrogation and salvage rights

Identify the 4 key aspects of claims handling for liability insurance claims

verifying coverage, determining the cause of loss, determining the amount of damages, and concluding the claim

When do insurance regulators usually learn of unfair claims practices?

when they receive complaints from insureds and claimants