HANDLING INSURANCE CLAIMS

THE point of claim is generally considered to be the moment of truth for the policyholder. It is at this point that the customer finGs oXt Zhether the Solic\ they purchased has met their e[Sectations or not anG Zhether their insurance company is reliable or not.

Outsourcing of claims handling by insurance companies is not recommended. Small and medium enterprise claims should by all means be handled within the insurance company. This is so, because Small and Medium Enterprises are less likely to be sophisticated customers and many exhibit similar novice knowledge and experience to that of retail consumers when buying general insurance products.

Justifiably, technically challenging claims by multinational companies can be handled by specialized outsourced claims settlement managers because larger claims tend to involve reinsurance companies and multiple partners.

How firms treat their customers is central to expectations of their conduct. I expect customers to be at the heart of how firms run their businesses and how they handle claims. The prompt and fair settlement of a claim may be of particular importance to SME’s as it could be critical to their business in the event of a major disruption.

Some of the rules of handling claims are such as the following; Handle claims promptly and fairly. Provide reasonable guidance to help a policy holder make a claim and appropriate information on its progress. Do not reject a claim unreasonably, including terminating or avoiding a policy. Settle claims promptly, once settlement terms are agreed.

More generally, insurance companies must conduct their business with integrity, due care and diligence. Take reasonable care to organize and control their affairs responsibly and effectively, with adequate risk management systems. Pay due regard to the interests of the customers and treat them fairly and pay due regard to the information needs of the clients and communicate information to them in a way

that is clear, fair and not misleading.

Insurers’ are obliged to their customers with regard to handling claims. As a result, even where the handling of claims is delegated (outsourced) to a third party, the insurer holds regulatory responsibility for any failings arising in the claims process or outcomes.

The loss adjuster is primarily responsible for ascertaining the nature of the claim and is the SME’s usual point of contact during the claim process. Adjusters evaluate and negotiate the coverage, liability and damages related to a claim. An adjuster can be an employee of an insurance company, an employee of an insurance company owned adjustment bureau or an independent adjuster retained either on a contract basis or on an individual adjustment basis.

On average, a big number of claims go very wrong for claimants. The consequence is that in some of the more complex claims, usually there is evidence of claimants being subject to financial and emotional stress. All of the elements surrounding the claims can take up considerable time and energy, and this can be damaging both to the business and the responsible individuals.

When handling the initial stages of a claim, the first notification of a loss by the customer is often to their insurance intermediary. If the customer buys a policy direct from an insurance company then initial contact could be with the insurance company’s own claims staff. If the loss occurs out of office hours the customer may also use a claims helpline where available.

How Tuickly firms make contact with a claimant following the first notification of loss is key as undue delays could have a significant impact on the speed of settlement of the claim. Whilst firms generally have service level agreements in place to arrange initial on site visits, performance varies significantly from company to company.

I can allude to numerous examples of delays in carrying out visits to make an initial assessment of the loss, which can be exacerbated when there are several parties involved in handling the claim. In some cases delays of up to ten days or more occur before the loss is assessed. I expect insurance firms to handle claims promptly taking into account the circumstances of the claim and to have regard to whether customers are being treated fairly.

A loss adjuster plays an important role in the management of claims and in some cases can make decisions by delegated authority on behalf of the insurance company. One of the responsibilities of a loss adjuster is to establish the cause of the loss and if it is covered under the terms of the policy. There is often a lack of consideration of the customer’s circumstances during this period.

Some insurers or insurance companies give clients a false sense of security and then, when they file in a claim, they are made to feel like a trickster from then on. They become untrusting of whatever the claimant says. This is not fair to the customer.

Delays in carrying out on site visits to assess the loss leave customers unclear about what action they should take in the interim. For instance, disposing of fire or water damaged items, and about business continuity arrangements to minimize disruption.

Insurance claim management is a core issue for the protection of insurance policyholders and hence a priority matter. From the insurance company’s viewpoint, claim management is a key element in the competition between insurance providers and for the improvement of industry’s public image.

This is a matter of concern since most policyholder complaints focus on claim management, suggesting that there is room for improvement in this area of client service.

Insurance claim good practices address every step of the insurance claim management process that insurance experts identify as particularly important: adequate information and assistance to the policyholder for claim reporting efficient claim filing methods operational fraud detection and prevention measures; adequate, fair and transparent claim assessment and processing; expeditious claim settlement; effective complaint and dispute settlement procedures; and appropriate supervision of claims-related services. Look out for Part II.

Note: In this column I offer general insurance information. Do not completely rely on this column in making insurance decisions. For specific guidelines email; insuculture@gmail.com