The handling of claims is key to successful customer relationships.

Fiona Andrews outlines the essentials that claims personnel need to know

When people buy insurance they are buying the promise that their justified claims will be paid swiftly and according to the stipulations of the policy.

Thus claims represent the acid test for any insurance company. Handled well, they satisfy expectations, build confidence and improve perceptions. Handled badly, they jeopardise relationships and threaten commercial profile.

Companies must remain vigilant in determining the merit of any claim. The central plank of any successful claims strategy is fairness to would-be claimants, other policyholders and shareholders.

That said, it is easy to see how problems can arise: the insurer's definition of ‘fair' might differ from that of the policyholder. It is therefore necessary to treat claims with sensitivity, skill and openness.

The FSA is committed to monitoring the performance of insurers in claims handling. Successful compliance hinges on carrying out claims activity in line with FSA regulations.

Changing attitudes
A degree of tension will often exist between claimants and insurers. Many people's (mistaken) attitude is that, while insurers are happy to accept premiums, they always resist paying claims. To counter this belief the industry needs to address its own approach. Only then can it reasonably expect something similar in the wider world.

Improvements will flow from an acknowledgement that claims are a marketing tool.

A claim should not be the end-point of a relationship but an integral part of it. But improving the way claims are viewed generally does not mean paying out in dubious or unjustified cases.

Claims may be a deeply technical subject, but it is also about communication. It demands clarity and consistency coupled with humanity. Claims personnel need a balance of specific qualifications and ‘soft' skills.

The CII and the Chartered Institute of Loss Adjusters have acknowledged the importance of claims with the creation of the Faculty of Claims, which will champion the development of this vital element of insurance.

All those involved in the claims handling process should as a minimum have a knowledge and understanding of the claims handling process, including notification, assessment, settlement and associated financial factors.

Core knowledge
Claims personnel require a core knowledge and understanding for this class of business that should include the following elements.

General procedures for notification of claims

  • The legal requirements for a valid claim
  • The principles concerning the operation of policy conditions affecting claims
  • The insured's duties after a loss
  • The documents and supporting evidence that are required when notifying a claim
  • The principles of proximate cause.
  • Insurance products and related services
    Practitioners should know the features and the detail of typical policy cover of common products and the claims-handling procedures associated with them. This extends to additional product services such as helplines, authorised repairers, risk control/advice, legal costs services and uninsured recovery services.

    Claims considerations

  • The role of the claims department
  • The importance of service standards and managing customer expectations
  • How the management of third-party claims differs from that of first-party claims
  • The significance of estimating and reserving for claims
  • The procedures commonly used to discourage individuals from making fraudulent claims
  • The procedures and tools commonly used to detect fraudulent claims
  • The consequences of fraudulent claims for the insurance industry, policyholders in general and insurers, their insureds and fraudulent claimants
  • The key features of the ABI General Insurance Claims Code as it relates to claims handling
  • The key features of the ABI Statement of General Insurance Practice as it relates to claims handling
  • The procedures for complaint handling including dispute resolution and the Financial Ombudsman Service.
  • Claims handling systems

  • Know the key features, structure and objectives of different claims systems
  • Understand the integration of the claims function with the overall organisational structure
  • Understand the role of outsourcing companies, loss adjusters, disaster recovery companies, surveyors and solicitors.
  • Claims settlement
    Practitioners should know how claims can be settled by payment of money, paying for repairs direct, replacement and reinstatement coupled with an understanding of:

  • How the process of reserving operates
  • Why a claim may be invalid or only partly met
  • The methods of claims recovery open to insurers
  • How salvage affects claim payments
  • How market agreements affect claims settlements
  • How excesses, franchises and deductibles work
  • The provisions of the Motor Insurers' Bureau agreements for untraced and uninsured drivers
  • How arbitration clauses operate.
  • Management of expenses .
  • The role of the claims manager.
  • What ‘leakage' is and how to identify and reduce it
  • How the financial monitoring of claims can impact on insurance company results
  • The basis and significance of reserving practice.
  • Given the importance of claims to the fortunes of insurers and their customers, it is essential that staff acquire the necessary technical understanding so that they can deliver an accurate and proper service. But they must also recognise the unique nature of the claims environment and tailor their approach accordingly. IT

    ‘ Fiona Andrews is manager of the Faculty of Claims and head of CPD at the CII

    Test yourself on claims
    The market-standard examination subject for those wishing to gain a formal measure of their understanding of the subject is the paper within the CII's Certificate in Insurance qualification: Insurance claims handling process (IF4). See how you do with these questions taken from the examination guide:

    Q1. The Claims and Underwriting Exchange was set up to help detect fraud in which class of business?

    A Commercial insurance
    B Health insurance
    C Life insurance
    D Personal lines insurance.

    Q2. Within what maximum timescale is an insurer able to initiate a claim against a police authority following a riot?

    A 7 days
    B 14 days
    C 21 days
    D 30 days.

    Q3. A policy condition where claims below a set level are NOT paid but claims above this level are met in full, is known as a policy:

    A Excess
    B Franchise
    C Indemnity
    D Value.

    Q4. Under the Arbitration Act [1996] the resultant decision from any arbitration is binding on:

    A Neither the insured nor the insurer
    B The insured only
    C Both the insurer and the insured
    D The insurer only.

    Q5. In calculating claims reserves, motor insurers will make most allowance for ‘incurred but not reported' (IBNR) under the heading of:

    A Own vehicle damage
    B Rugs, clothing and personal effects
    C Third party personal injury
    D Third party property damage.

    Answers next week