CLAIMS MANAGEMENT

BY JUSTICE OFORI
Part 1
Some questions when a claim is reported
• Is the policy valid and effective?
• Did the event occur during the policy period?
• Has the insured complied with relevant policy conditions?
• Does the loss fall within the scope of the policy
• Is anyone injured?
• What policy limits affect the claim?
• Are salvage, subrogation and contribution likely to be involved in the
claim?
The claims environment
What do we mean by claims strategy
Claims strategy - Steps to be taken
• Corporate claims philosophy which spells out how to manage and
handle claims
• Efficient use of IT
• Use of quality Management (quality planning, quality control, quality
assurance, and quality improvement)
• Clear claims procedure, reserving practice
• Efficient use of outsourcing
Questions the claims manager should be
asking
• Do we have sufficient budget to meet our objectives?
• Is department structured in an effective way?
• Is work flow logical and smooth
• Do I have computers and IT know-how with the dept?
• Is there an appreciation of the corporate claims philosophy?
• Have I procedures for claims reviews for third party service suppliers?
• Do I have systems to identify potential recoveries?
• Do I have close relationship with reinsurers?
• Do I have a senior status within the company to exert influence
• Do I have a good cash management strategy in place?
• What internal guidelines do I have in place to aid claims processing?
• Is my team aware of current underwriting practices?
• Is my team and myself aware of relevant regulatory constraints for
relevant jurisdictions?
Organizational design & structure
• It is designed by the Board of Directors
• It should be designed to work towards the corporate vision
Structure of an insurance company
• Underwriting
• Claims investigation and payment
• Sales and marketing
• Investment
• ---some times you may find others like
• Reinsurance
• Recovery dept
Structure of a company may define things
like;
• Division of labor
• Chain of command and communication
• Type of task to be preformed
• Internal groupings which undertakes similar work.
• Management hierarchy
Two main ways to structure a company’s
departments are;
• By function(eg claims underwriting, marketing etc.)
• By division (eg. Product. Geographical area, type of customer)
Centralized and decentralized claims
settlement policies
• The choice depends on the following:

• -Size of the company

• -type of business being written
Centralized claims settlement system
The role of the claims department
• Provide high quality of service to differentiate itself from competitors
• Make sure claims payments are within contractual relationship
• Meet / Exceed customer expectation – efficiency of service
• Budgetary control – meet / exceed service standard
What is a claims philosophy?
• It is the tools or means used by the claims department to meet the
corporate objective

• Those affected by the claims philosophy can be divided into two;

• 1. Internal and
• 2. External
How to develop a claims philosophy
• Analyze what each stage of the claims department does
• Develop maximum and minimum future targets
• Develop key performance indicators for the quality of service you
wish to offer
• Define characteristics of a valid claim
Continue
• Deadlines should be noted
• Able to understand the conduct of parties
• Know information that needs to be exchanged between parties
• Be informed of current services offered
Continue
• Know minimum service offered

• Know the maximum service that can be handled

• Be able to know the ideal service

• Should be able to decide what he is going to put in place for the

future
The claims process
• The procedure varies according to;

• - Class of business
• -Type of cover
• -Amount of claim and
• -If it is a personal or commercial risk
Claim review
• -Event giving rise to the claim
• -Claim notification
• -Amounts claimed
• -Proposal form
• -Terms of the policy
• -Legal requirements
• -Cost benefit analysis of pursuing extra documentation
continued
• -Market practice
• -The insurer’s corporate claims philosophy
Response to claimants
• Investigation

• Negotiation

• Payment

• Rejection
Claim investigation
• Helps establish facts surrounding the claims
• Investigation may be done by internal or external adjusters
Claim negotiation and settlement

This is achieved by;

• -negotiation

• -mediation

• -arbitration Or

• -litigation
Review of performance – Claim audits
• It helps to ensure;

• -that standards of service are maintained

• -internal decisions are made correctly and
• -that reserves still attached to claims reflect their current position
and are in line with the corporate reserving policy
Claims is not an isolation
Control
• It is the steps taken to remedy a situation which could include the
following;

• - Cease writing a certain class of business;

• - Decide not to renew certain contracts;

• - Expand in relevant areas.

Reinsurance recoveries
• Late reinsurance recoveries affect cash flow
• Some insurers have reinsurance recovery teams or departments
• Reinsurers interact with the insurer’s claims team
• Reinsurance recoveries that are late or not at all affect an
organization’s cash flow and profitability
Notification condition
• The reinsured is bound to notify the reinsurer of claims or incidents in
certain circumstances.

• Two standard notification conditions used by the market are;

-Claims co-operation clause and
-Claims control clause
Accumulations
Chapter Two

•The role of the claims manager

and regulation
Funds and managers
• Managers of insurance companies are responsible for two sets of
funds:

• - funds provided by shareholders; and

• - funds created by the premiums paid by policyholders
Functions of the claims department are;
• Deal quickly and fairly with all claims submitted;

• Be able to distinguish between valid and invalid claims; and

• Operate at a minimum expense.

Tools required by claims dept to work

• Competent and well trained staff

• Efficient administrative support
• Efficient claims procedure
• Efficient record – keeping and management information’ and
• A clear corporate claims philosophy
The claims manager’s role
Responsibilities of the claims manager

• Cost

• Service

• Personnel

• Technical
Cost
• Two types of cost to consider
• - Internal cost of running the claims department – eg. IT, staff
salaries, premises(rental)

• - Cost of claims; The total amount of claims paid, expenses

associated with claims paid eg. Legal fees, independent adjusters
fee, speed of claims payments and recoveries.
Services
• The identification of valid claims
• Payment of valid claims in a timely manner
• Making all possible recoveries promptly; and
• Provision of advice to internal customers regarding issues affecting
claims such statutory requirements, etc.
Why the claims manager should delegate
responsibilities
• To enable him concentrate on claims that require higher level of
technical skill
• Helps him concentrate on claims requiring a higher level of seniority;
and
• Concentrate on claims requiring an increase amount of experience
• To concentrate on claims that are likely to set precedent for the
future
• Concentrate on reporting and planning strategy
Personnel
• Recruiting and training of competent staff
• Effectively delegating responsibility within the department
• Managing and motivating staff
• Controlling the staff
• Monitoring staff progress
Technical Role
• He is responsible for the technicians in the department.
• The technicians handle claims made against policies issued by the
company.
• More experienced staff may be responsible for a number of junior
technicians and handle more complex claims. They are often referred
to as team leaders.
Referral Points
• This is the situation where certain claims are referred to;

• a more experienced staff,

• the claims manager, reinsurers or even

• the board.
Authorities
• This explains which claim level one is permitted to settle in terms of
claim amount. These restrictions could be built into the computer
system to prevent one from settling a claim that does not fall within
his authority.
Escalation procedures
• This refers to the manner in which claims move from a technician to
their immediate supervisor and then to the next level, and so on. This
is normally documented in the company’s authority document.
Quality Management
• Quality Management is meant to meet customer expectation
• It is a mechanism used by insurance companies to make sure their
work is efficient and their product effective
Quality Management continued

• It can be considered to have four main components:

• quality planning,
• quality control,
• quality assurance and
• quality improvement
Quality management & its implication on
claims management
Arrow visits
• They are high-level compliance audits.
• It is carried out by the Insurnce Regulator
• The audit covers all aspect of the business including claims so claims
manager will be involved
• The Regulator is required to make sure insurer is complying with
requirements
• It is concerned with how conflicts of interests are managed and the
fair treatment of customers.
Two pressing claim issues for the Regulator
are;
• Treating customers fairly; and

• Conflict of interest
Contract certainty
• This means that the policyholder and the insurer have agreed to the
policy wording prior to its inception.
• It means insurer is certain about its exposure
• The wording should be easy to understand.
• Contract should be clearer
CHAPTER THREE
• CLAIMS SERVICE MANAGEMENT
What should claims handling be?
• Consistent
• Flexible
• Fair
• Transparent
• Accurate
• Timely
• Secure and
• Compliant
Customer expectation of the policy
• Customer’s expectation of insurance coverage if not in line with
coverage delivered can result in dissatisfaction and disputes.
• It is important to make sure that customers understand the policy
wording and the obligations of both the insured and the insurer.
• It is therefore important to know customer expectations and then
provide services that meet or exceed those expectations.
What do customers expect?
• Clear communication
• Fast and efficient claims service
• Financial security
• Ability to make changes to their insurance coverage easily
• Simple ways to purchase insurance
• Clear policy wording and
• Elimination of errors
What makes customers satisfied
• Being made clear of what is expected of them in the event of a claim.
• When they are sure to receive fair settlement
• When claims service is fast
• When they trust the insurance representative
• When insurance representative returns phone calls quickly; and
• When the insurance representative is able to convey what options
are available to them.
The Positive side of claims to the insurer
• Opportunity to deliver value to customers
• It is critical in determining whether customers will renew or take out
their business
• Can be used as a sophisticated marketing tool if handled correctly
• New source of business emanates from satisfied customers
Why customer expectation cannot be
managed completely
• They are affected by their awareness of what is available in the
insurance marketplace due to advertising
• Different levels of service available to them for all products and
services
• And what they instinctively feel is acceptable due to social
background or other factors
But insurers can manage customer
expectations by;
• Providing appropriate advertising of the claims
• Appropriate presentation of policy documents
• Providing guidance to the insured at the time of claim notification
• And the means by which claim is negotiated and settled
How to retain customers
• They should receive the service they expect
• It should be made very burdensome for them to leave
• The insurer should have trained, intelligent, experienced and well
qualified staff to ensure the success of the business
Breach of contract and policy litigation
• The insurance policy is a contract, therefore all elements of a
contract applies to an insurance policy

• If one party breaks any of the promises made within the contract
that could be considered a breach of contract
Alternate Dispute Resolutions available
- Discussion between disputed parties (negotiations)

- Mediation

- Arbitration

- Litigation
Dispute clause
Some policies contain a dispute clause which explains the process
parties must adopt in the event of a dispute

Negotiation can still continue during litigation

How to legitimately decline claims

• Denial should be based on reasonable interpretation of the insurer’s

rights and obligation under the policy.