Claim Management

1. Claim Management PRESENTED BY: Dr. tariqAbdulsalam Omer

2. By the end of this course you will know: • The role of claims in insurance and their importance. • The legal principles of insurance • The difference between health, life, and non-life claims • The Claim submission • Keeping Control of claims • Acquiring Knowledge • Managing Fraudulent and Malingering Claims

3. Insurance is about: being insured and being able to claim

4. Steps involved in taking out insurance • Decide what risks you want covered. (ask a broker) • Fill out proposal form. • Pay your premium. • File your policy in a safe place.

5. Steps involved in making a claim. • Contact guards & ins. co. • Obtain estimates of lost/stolen items. • Fill out claim form. • Talk to assessor and agree on compensation.

6. Importance of claims • Payment of claims is primary service in insurance to the public. Proper settlement of claims requires a sound knowledge of the law, principles and practices governing insurance contracts and thorough knowledge of policy terms and conditions.

7. TheFundamental Legal Principles of Insurance Contracts

8. Fundamental Legal Principles of Insurance Contracts • 1. Principle of insurable interest • 2. Principle of indemnity 3. Principle of utmost good faith 4. Principle of subrogation 5. Principle of contribution • 6. Principle of proximate cause

9. Principle of Insurable Interest • The insured must be in a position to financially suffer if a loss occurs. • Why? • To prevent gambling • Insurance on a property and wait for a loss to occur. • To reduce moral hazard • Issue a life insurance policy on a person and cause his/her or just pray for his/her death for insurance proceeds. • In order not to indemnify more than an insured’s financial interest • It supports the principle of indemnity.

10. Principle of Indemnity • The insurer agrees to pay no more than the actual amount of the loss suffered by the insured. • Why? • The purpose of the insurance contract is to restore the insured to the same economic position as before the loss. • The insured should not profit from a loss. • It reduces the moral hazard by eliminates the profit incentive.

11. Principle of Indemnity • To support the principal of indemnity an insurance contact uses Actual Cash Value (ACV) method • Replacement cost (RC) less depreciation • RC – current cost of restoring the damaged property with new materials of like kind and quality. • Fair market value • The price of a wiling buyer would pay a willing seller in a free market. • Broad evidence rule • The determination of ACV should include all relevant factors an experts would be required to determine the value of the property.

12. Principle of Indemnity • To support the principal of indemnity insurance contact includes “Other Insurance Provisions”. • Escape clause • The policy (or insurance) would not apply if the insured was covered by another policy. • Primary-Excess • It (or This insurance) is excess insurance over any other valid and collectible insurance. • Pro-rata provision • Proration by face amounts • Proration by amounts otherwise payable • Contribution by equal shares

13. Contribution • If a risk is insured with two insurance companies each will pay half of the compensation. • Eg: A ring insured with two ins. co.’s. for AED5000 • Each will settle : • AED2500 only

14. Principle of Indemnity • Pro-rata by Face Amounts • It limits an insurer’s maximum obligation to the proportion of the loss that the insurer’s policy limit bears to the sum of all applicable policy limits. • Assume that there are three polices covering the same loss and the loss amount is $150,000.

15. Principle of Indemnity • Exceptions to the Principle of Indemnity • Valued policy (or agreed value) • Pays face value of insurance if a total loss occurs • Life insurance, disability insurance, fine arts, antiques • Ex.) Value of a fine art is agreed at $250,000. • Valued policy law • A law that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a covered peril, regardless of the property’s ACV. • Replacement cost • No deduction for depreciation in determining the amount paid for a loss.

16. Principle of Utmost Good Faith • A higher degree of honesty is imposed on an insurance contract than is imposed on other contracts • Honesty is mainly imposed on the insurance applicants. • It is supported by three legal doctrines • Representation • Concealment • Warranty

17. Principle of Utmost Good Faith • Representation • Statements made by an applicant • Insurance is voidable at the insurer’s option. • Concealment • Intentional failure to disclose a material fact • Warranty • A statement of fact or a promise made by the insured, which is part of the insurance contract and must be true if the insurer is to be liable under the contract. • In exchange for a reduced premium, a store owner warrants that a burglar alarm will be always on.

18. Principle of Subrogation • Substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third party wrongdoer for a loss paid by the insurer. • Why? • To prevent collecting twice • To hold the negligent party responsible • To hold down insurance rates

19. Principle of Subrogation • The insurer is entitled only to the amount it has paid under the policy. • What if the insurer collects more, from the negligent party, than the amount the insurer paid to its insured? • The insured cannot impair the insurer’s subrogation rights. • Subrogation does not apply to life insurance and to individual health insurance contracts. • The insurer cannot subrogate against its own insured.

20. Proximate Cause • The efficient cause which brings about a loss with no other intervening cause which breaks the chain of events. • Example:Firemen remove undamaged stock from a burning building to avoid its involvement in the fire. It is stacked in the open yard and subsequently damaged by rain. • Question: • Was the proximate cause of the damage the fire or the rain ?

21. Proximate Cause • Answer: • If the rain damage occurred before the Insured had an opportunity to protect it then the proximate cause of the damage would be the fire and fire is covered under a fire policy. However, if the stock was left unprotected for an unreasonably long period, the rain would be a new and independent cause of damage and damage caused by rain may not be covered under a policy.

22. Health Insurance Claims

23. Risks Covered Health Insurance Provided by Employer Health insurance - provides money to pay for health care Government And/or Individual If dollars are limited, health insurance is extremely important to protect against high medical bills Mental health treatment Hospital bills Preventative care Vision care Prescription drugs Doctors’ visits Medical procedures Dental care

24. Rejection of claims The main reasons for claim not being passed in full are : • Insured has pre-existing disease and it was already mentioned in policy document as an exclusion. • The specific disease is not covered under the policy • Disease is a pre-existing disease and it was not revealed by the insured at the time of issue of policy. • The main reasons for claim being passed in part are : • Some of the tests conducted/treatment were not relevant to the disease for which patient was admitted. • Some costs like consumables are not payable by the insurance company

25. Life Insurance Claims

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