AIC 30 - Claim Handling Principles and Practices

Direct Loss

A reduction in the value of property that results directly and often immediately from damage to that property.

Federal Rules of Civil Procedure

A set of rules established to ensure that civil actions and procedures move through the U.S district courts as quickly as possible.

Nonwaiver Agreement

A signed agreement indicating that during the course of investigation, neither the insurer nor the insured waives rights under the policy.

Initial Credibility

The degree of credibility an individual has before interpersonal communication begins.

Service of Process

The delivery of a summons and complaint to a defendant by an authorized person.

Loss Adjustment Expense (LAE)

The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy.

First Party Claim

A demand by an insured person or organization seeking to recover from its insurer for a loss that its insurance policy may cover.

Independent Medical Examination (IME)

A direct intervention technique that includes a brief review of the patient's history and treatment and a physical exam of the patient. Insurers use this technique in disputed claims for determining causation, current physical impairment, and the need for present or future treatment.

Expert System Method

A method of setting reserves with a software application that estimates losses and loss adjustment expenses.

Cluster Analysis

A model that determines previously unknown groupings of data.

General Damages

A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses.

Internet of Things (loT)

A network of objects that transmit data to and from each other without human interaction.

Jurisdiction

A particular court's power or authority to decide a lawsuit of a certain type or within a certain territory.

Claimant

A party that makes a claim and that can be either a first-party claimant or a third-party claimant.

Punitive Damages (exemplary damages)

A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages.

Direct Question

A question that seeks specific information and that can often be answered with a short phrase or a yes or no response.

Loss Ratio

A ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses.

Sworn Statement

A signed record of events surrounding an event as told by the interviewee that contains language attesting that it is true.

K-Means

An algorithm in which "k" indicates the number of clusters and "means" represents the clusters' centroids.

Mediation

An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement.

Arbitration

An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement, which can be final and binding.

Mini-Trial

An alternative dispute resolution method by which a case undergoes an abbreviated version of a trial before a panel or an adviser who poses questions and offers opinions on the outcome of a trial, based on the evidence presented.

Reserve

The amount the insurer estimates and sets aside to pay on an existing claim that has not been settled.

Data Mining

The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions.

Centroid

The center of a cluster.

Actual Service

Hand delivery of a summons and complaint to a defendant.

Complaint

The allegations made by a plaintiff in a lawsuit.

Decoding

The process by which a receiver interprets a sender's message.

Average Value Method

A case reserving method that establishes a predetermined dollar amount of reserve for each claim as it is reported.

Leading Question

A question that seeks or suggests a particular answer.

Allegation

A claim made in the complaint by the plaintiff, specifying what the plaintiff expects to prove to obtain a judgment against the defendant.

Coinsurance Clause

A clause that requires the insured to carry insurance equal to at least a specified percentage of the insured property's value.

Contributory Negligence

A common-law principle that prevents a person who has been harmed from recovering damages if that person's own negligence contributed in any way to the harm.

Comparative Negligence

A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault.

Counterclaim

A complaint brought by the defendant against the plaintiff.

Third Party Claim

A demand against an insured by a person or organization other than the insured or the insurer, seeking to recover damages that may be payable by the insured's liability insurance.

Blockchain

A distributed digital ledger that facilitates secure transactions without the need for a third party.

Special Investigation Unit (SIU)

A division set up to investigate suspicious claims, premium fraud, or application fraud.

Answer

A document filed in court by a defendant responding to a plaintiff's complaint and explaining why the plaintiff should not win the case.

Summons

A document that directs a sheriff or another court-designated officer to notify the defendant named in the lawsuit that a lawsuit has been started and that the defendant has a specified amount of time to answer the complaint.

Misrepresentation

A false statement of a material fact on which a party relies.

Sarbanes-Oxley Act of 2002

A federal statutory law governing corporate directors in the areas of investor protection, internal controls, and penalties, both civil and criminal.

Special Damages

A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages.

Pleading

A formal written statement of the facts and claims of each party to a lawsuit.

Affirmative Defense

A legal defense arguing that even if the plaintiff's factual allegations are correct, there are overriding reasons the defendant should not have to pay damages.

Estoppel

A legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied.

Indirect Loss

A loss that arises as a result of damage to property, other than the direct loss to the property.

Formula Method

A method of setting claim reserves by using a mathematical formula.

Roundtable Method

A method of setting reserves by using the consensus of two or more claim personnel who have independently evaluated the claim file

Compensatory Damages

A payment awarded by a court to reimburse a victim for actual harm.

Claims Rep

A person responsible for investigating, evaluating, and settling claims.

Appraisal Clause

A policy provision that prescribes a method for resolving a disputed claim about the value of property or the amount of a property loss.

Deposition

A pretrial discovery tool involving oral examination of a witness under oath to produce a written verbatim.

Discovery

A pretrial exchange of all relevant information between the plaintiff and the defendant.

Open-Ended Question

A question that seeks an answer that explains or elaborates on the circumstances under consideration.

Conflict of Interest

A situation that occurs when a decision maker's personal interests interfere to the extent that he or she makes decisions that adversely affect customers or employers.

Examination under oath (EUO)

A statement given by a person who has sworn to tell the truth before an officer of the court.

Proof of Loss

A statement of facts about a loss for which the insured is making a claim.

Unsupervised Learning

A type of model creation, derived from the field of machine learning, that does not have a defined target variable.

Hard Fraud

Actions that are undertaken deliberately to defraud.

Staged Accident

An accident deliberately caused by a person who intends to feign injury and collect on the ensuing claim.

Summary Jury Trial

An alternative dispute resolution method by which disputing parties participate in an abbreviated trial, presenting the evidence of a few witnesses to a panel of mock jurors who decide the case.

Pro Rata Contribution

An approach to other insurance by which the insurers contribute to the loss payment in the proportion to which they contribute to the total amount of coverage purchased (their limits of liability).

Independent Adjuster

An independent claim representative who handles claims for insurers for a fee.

Terminal Credibility

An individual's perceived credibility after interpersonal communication in a given situation has occurred.

Derived Credibility

An individual's perceived credibility during interpersonal communication.

Bad Faith

An insurer's denial of coverage without cause, which can result in extracontractual damages, punitive damages, or both.

Reservation of Rights Letter

An insurer's letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that the insurer may later deny coverage should the facts warrant it.

Insurable Interest

An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.

Third Party Administrator (TPA)

An organization that provides administrative services associated with risk financing and insurance.

Public Adjuster

An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee.

Insurance Fraud

Any deliberate deception committed against an insurer or an insurance producer for the purpose of unwarranted financial gain.

Substituted Service (Constructive Service)

Any method of notifying a defendant of a lawsuit other than personal delivery of a summons and complaint.

Producer/Agent

Any of several kinds of insurance personnel who place insurance and surety business with insurers and who rep either insurers or insureds, or both.

Nonverbal Communication

Communication that is not spoken or written, including eye movement, body language, appearance, and time and space.

Health Insurance Portability and Accountability Act (HIPAA)

Federal legislation establishing standard for health insurance info exchanges and health coverage protection when jobs are lost or changed.

Soft Fraud, or Opportunity Fraud

Fraud that occurs when a legitimate claim is exaggerated.

Material Fact

In insurance, a fact that would affect the insurer's decision to provide or maintain insurance or to settle a claim.

Alternative Dispute Resolution (ADR)

Procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation.

Negligence

The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.

Breach of Contract

The failure, without legal excuse, to fulfill a contractual promise.

Statutory Law

The formal laws, or statutes, enacted by federal, state, or local legislative bodies.

First Notice of Loss (FNOL)

The initial report notifying the insurer of a claim

Waiver

The intentional relinquishment of a known right.

Legal Liability

The legally enforceable obligation of a person or an organization to pay a sum of money (called damages) to another person or organization.

Venue

The locale in which the lawsuit may be brought.

Good Faith

The manner of handling claims that requires an insurer to give consideration to the insured's interests that is at least equal to the consideration it gives its own interests.

Medium

The means by which a message is transmitted from sender to receiver.

Receiver

The person who chooses from the verbal and nonverbal symbols in the sender's message to interpret the message's meaning.

Sender

The person who initiates the communication process.

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Active Listening

The process of listening with mental and physical openness to more clearly determine a message's meaning.

Encoding

The process of translating a message into words.

Social Network Analysis

The study of the connections and relationships among people in a network.

Network Analysis

The study of the nodes (vertices) and edges (lines) in a network.

Ethics

The study of what constitutes good and bad behavior, dealing with moral duty and obligation.

Telematics

The use of technological devices to transmit data via wireless communication and GPS tracking.

Message

The words a sender uses in the communications process and their underlying theme.

Individual Case Method

a method of setting reserves based on the claim's circumstances and the claim representative's experience in handling similar claims.

Concealment

an intentional failure to disclose a material fact.