Claims Management

WHY DO INSURANCE COMPANIES EXIST ???

To protect against un-foreseen events

To indemnify losses

To pay claims

WHAT IS CLAIM ???

Claim is a right of insured to receive the amount secured under the policy of insurance contract promised by Insurer.

Claims management means and includes all the managerial decisions and processes concerning the settlement and payment of claims in accordance with the terms of insurance contract. It includes carrying out the entire claims process with a particular emphasis on monitoring and lowering the claims costs.

CLAIMS MANAGEMENT

WHY IS CLAIMS MANAGEMENT IMPORTANT ???

You need to identify and pay the valid claims

You need to identify and reject the invalid claims

Mistakes cost money and impact on brand

Claim settlement can be used as a marketing tool

3 month review

182 claims

13 major errors

Value £844,382

THE COST OF NOT TAKING CLAIMS SERIOUSLY – EXAMPLE 1

STAGES IN CLAIM MANAGEMENT

Claims Management

Claims Handling

SYSTEM OF CLAIMS MANAGEMENT

Claims management means and includes all the managerial decisions and processes concerning the settlement and payment of claims in accordance with the terms of insurance contract.

The claims philosophy is defined as procedure or specified approach to settle the claims. It contains the claims management principles and also claims handling methods and procedures.

The claims process includes the basic claims procedure and handling of claims. The handling of claims includes the monitoring of situation or events, which cause the loss to the insured subject matter and give a cause to the insured to make a claim.

The claims handling is the integrated part of the claims management and executes the decisions made by the claims management machinery of an insurance company.

TYPES OF CLAIMS

LIFE INSURANCE CLAIMS

Life insurance is broadly categorized as Maturity claims Death claims.

Maturity claims are payable as per the terms of the policy. These policies are generally endowment policies including money back policies.

If the insured dies before the expiry of the term of the policy, it is called as death claim. The death of the life assured has to be intimated in writing to the insurer.

MARINE INSURANCE CLAIMS

Marine insurance claims can be broadly categorized into -

Marine cargoMarine hullOcean going vesselsSundry hulls

FIRE INSURANCE CLAIMS

The main documents generally required for processing fire claims are:-

Claim form duly completed by the insured. Copies of the policy complete with terms,

conditions and warranties. Photographs (if necessary) Police report and (if necessary) Fire brigade report (if necessary) Where the loss estimate is more than Rs. 1

crore, intimation is to be sent to tariff Advisory committee ( TAC )

MOTOR INSURANCE CLAIMS

Motor insurance claims are broadly categorized into: 1. Own-Damage claims, and 2. Third party claims.

Own-Damage claims-

Immediately on receipt of intimation of loss, either in writing or over telephone, a surveyor should be appointed based on the estimate of repairs.

The documents generally required for settlement of motorclaims are:

Photographs of the vehicle at the spot of the accident, showing all the external damages and the number plate of the vehicle.

Claim form duly filled in. Registration Certificate Driving LicenseLoad Challan/Trip Sheet Fitness CertificateCopy of the FIR Survey Report

In case of partial loss claims, submission of bills can be dispensed with for claims up to Rs.50,OO0 in respect of private cars and two wheelers only, subject to:o The Survey Report indicating the cost of parts allowed for replacement.

THEFT CLAIMSTheft claims are either total loss claims or partial loss claims. If claims settling authority is not fully satisfied, investigation of the theft to be arranged by an investigator who may be appointed with specific terms of reference.

The following documents should be collected from the insuredin addition to a certified copy of FIR:

Surrender of the Registration Book and the Tax Book to the insurer duly transferred in the name of the insurers. Ignition keys of the vehicle Certificate of insurance and the original insurance policy, if not stolen with the vehicle. Specially worded discharge voucher.

If the vehicle is recovered subsequently the insured will have the option to repay the claim amount already paid and retain the recovered vehicle. If the vehicle is found damaged, the insured will be indemnified against loss of damage.

THIRD PARTY CLAIMS

The procedure for settling third party claims is broadly on thefollowing lines: Intimation of Claim: Intimation about an accident resulting into third party claim is received through various sources:

Insured Claimant Courts by notice Through accident report from police in Form 54 prescribed under

Central Motor Vehicle Rules, 1989.

Investigation: Investigation about the accident to collect the relevant data to quantify reasonable and just compensation as per the formats enclosed in respect of all third party claims is mandatory.

Appointment of Advocate: A competent advocate may be appointed if necessary to ensure that the proper defence is taken where necessary and no frivolous statements are made.

In the case where the fault of the driver is not proved, company should take immediate steps to deposit No Fault Liability amount as per section 140 of the MV Act, 1989.

MISCELLANEOUS INSURANCE CLAIMS

Miscellaneous Accident Insurance includes a number of covers, which are in the nature of package policies. In this situation specific guidelines applicable to the representative sections are to be followed.

BURGLARY INSURANCEThe following documents are important while processing burglary insurance:

Duly completed claim form Final investigation report from the police Survey Report Photographs

It is considered preferable to appoint an investigator with surveyor’s license and knowledge of accounts as assessment of losses sometimes involves checking books of accounts.

WORKMEN'S COMPENSATION INSURANCE

The necessary documents for processing workmen'sCompensation claims include:

Medical Certificate. Wages statement. Proof of age as recorded by the employer.

For the permanent total disablement claims, the memorandumof agreement is required to be submitted to the workmen'scompensation commissioner while disposing compensation as perWorkmen's Compensation Act.

For total claims, the perusal of death certificate and postmortem report is important before depositing the amount with workmen's compensation commissioner.

MEDICLAIM

The following documents are required:

Duly completed claim forms Bills, receipts and discharge card from the hospitalCash memos from the hospitalBills from chemists supported by proper prescription Surgeon’s bills and receipts, bills from pathologist supported by proper prescription

GUIDELINES FOR CLAIMS SETTLEMENT BY IRDA

Except in cases of a marine insurance cover, where current market practices do not insist on a written proposal form, in all cases, a proposal for grant of a cover, either for life business or for general business, must be evidenced by a written document. It is the duty of an insurer to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form.

Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in languages recognized under the Constitution of India. In filling the form of proposal, the prospect is to be guided by the provisions of Section 45 of the Act. Any proposal form seeking information for grant of life cover may prominently state therein the requirements of Section 45 of the Act.

Where a proposal form is not used, the insurer shall record the information obtained orally or in writing, and confirm it within a period of 15 days thereof with the proposer and incorporate the information in its cover note or policy.

Wherever the benefit of nomination is available to the proposer, in terms of the Act or the conditions of policy, the insurer shall draw the attention of the proposer to it and encourage the prospect to avail the facility. Proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer.

FACTORS AFFECTING THE CLAIMS MANAGEMENT

The policy should be in force on the date of the event.

The risk and cause of event should be covered by the policy.

The cause of loss or the event should be directly related to the loss. A remote cause has no place in the settlement.

The loss should not have been caused with an intention to gain from the situation.

Sufficient documentary evidence of loss should be presented along with the application form.

Multiple claims and reciprocal claims will be settled as per the terms of the contract of insurance.

Presence of insurable interest, in case of the property insurances, at least at the time of happening of event or loss sufferings. Without having the insurable interest in the subject matter, no person can get benefit or compensation.

IMPORTANCE OF TIME ELEMENT IN THE CLAIMS PAYMENT

The delay in the claims settlement will have an adverse impact on the goodwill and marketing of the insurance.

The cost of claims will increase with the extension of time because the insurer may be asked to pay the interest on the unpaid insurance amount because of the delay. The court may direct the insurer to pay the costs of the case to the assured, which results in mounting up of costs.

The delay in payment may lead to litigation which is expensive.

 -Unproductive use of manpower to defend -expenses incurred -waste of time -will affect on the productive areas of the business

particularly in the marketing of the insurance business. 

DELAY IN CLAIMS SETTLEMENT

REASONS FOR DELAY IN CLAIMS SETTLEMENT

Late submission of claim form along with sufficient proof or supporting documents

Innocence and illiteracy of the assured Not submitting the claims forms in full Lack of motivation or knowledge about the importance

of the claims settlement Lack of awareness among the staff of the

organizations or defective supervision The delay on the part of the insurer may be intentional

or due to the pressure of work.

ROLE OF SURVEYORS AND LOSS ASSESSORS

Maintaining confidentiality and neutrality without jeopardizing the liability of the insurer and claim of the insured;

Examining, inquiring, investigating, verifying and checking upon the causes and the circumstances of the loss in question including extent of loss, nature of ownership and insurable interest;

Conducting spot and final surveys and comment upon excess/under insurance etc

Surveying and assessing the loss on behalf of insurer or insured;

Assessing liability under the contract of insurance; Pointing out discrepancy, if any, in the policy wordings; Satisfying queries of the insured/insurer and of persons

connected thereto in respect of the claim/loss; Giving reasons for repudiation of claim, in case the

claim is not covered by policy terms and conditions; Taking expert opinion, wherever required; A surveyor or loss assessor shall submit his report to the

insurer within 30 days of his appointment. which can be extended with the consent of the insured and the insurer.

UNDERWRITING

Insurance underwriting is the process of classification, rating, and selection of risks.Thus the underwriter fixes the premium of the product considering various factors such as cost of risk, administration expenses, brokerage or marketing expenditure, claims settlement expenses and budgeted profit. The premium is the present value of the future risksources include:

The policy application; Medical history and examinations; Inspection reports; The Medical Information Bureau (MIB); and The producer or insurance agent.

UNDERWRITING IN INSURANCE

Claims settlement has a direct impact upon underwriting. If the claims of certain insurance products are frequently received they have an impact upon the claims reserves and warrant review of the product and take decision either to modify the terms or continue.

IMPACT OF CLAIMS ON UNDERWRITING

FRAUDS IN CLAIM SETTLEMENT

Insurance fraud is any deliberate deception/dishonesty committed against or by an insurance company, insurance agent, or consumer for unjustified financial gain.

may be committed at different points in the transaction by different parties such as policy owners, third-party claimants, intermediaries and professionals who provide services to claimants.

The fraudulent claims may be of two categories:The cause or the claim itself is fraudulent The claim may be genuine but the method of calculation or the evidences, or the information submitted may be fraudulent in nature.

WHAT IS FRAUD ???

FOR EXAMPLE :

Creating forged documents such as wills, legal heir certificates, assignments of the policies and other papers to support their claim

deliberate destruction of the insured subject with an intention to get the policy amount

HOW IS IT DEALT WITH ???

As such any fraud made by the insured or the insurer in concluding the insurance contract or the claims settlement, makes the entire contract viocable at the option of the person on whom the fraud is played.

The fraudulent claim by the assured will deprive him the right to claim as the insurer has the right to reject it.

The success of claim management depends on the satisfaction of the customers. The customers are attracted to an insurance company by its state of art claim service.

CONCLUSION

An experienced, competent claims team can’t on it’s own make your CI business profitable…

…BUT…

…An inexperienced, claims team can make your business unprofitable even if you have got the pricing and underwriting right.

(and damage your brand at the same time)

One Final Thought…

THANK YOU FOR YOUR TIME AND PATIENCE