Cpcu 520 - Assignment 8

Front 1

Two main objectives of the claims department

Back 1

(Memory Aid: P.E.)
1.Profit for the insurer
2.Ensuring that the promises made in the contract are fulfilled

Front 2

Four functions of post-loss review

Back 2

1.May reveal factors the underwriter would have investigated more thoroughly if the factor had been clearly stated on the application
2.Material aspects of teh covered exposures may have changed since the policy was originally underwritten
3.A minor loss may indicate a need for loss control services
4.A series of similar claims may indicate problems for a certain class of policyholder

Front 3

Five types of outside parties with which the claim department interacts

Back 3

1.State regulators: monitor the insurer's claim settlement activities in three ways:
a.Defense attorneys: management of defense expenses is critical to the claims function
b.Claimants' attorneys: the incidence of claimants hiring attorneys is increasing
c.General public: the claim department has a major effect on the public's image of the insurer
2.Claims organizations and associations

Front 4

Four steps in teh claims adjusting process

Back 4

1.Determine whether the applicable policy covers the loss
2.Identify legal liability and the cause of loss
3.Assess the extent of the loss or the amount of damages
4.Settle the claim

Front 5

Coverage depends on two considerations

Back 5

1.Whether the loss is within the insuring agreement
2.Whether any conditions or exclusions in the policy restrict or eliminate coverage

Front 6

Three sources of legal liability

Back 6

1.Statutes: the law dictates which actions may or may not be taken
2.Contracts: a contractual agreement dictates obligations to perform or not to perform a duty
3.Torts: all civil wrongs that are not related to contracts

Front 7

Three methods of establishing case reserves

Back 7

1.Judgment method: depends on the experience of the adjuster
2.Average-value method: appropriate for claims occurring with regular frequency
3.Tabular method: provides an average amount for all claims having similar characteristics in marital status, health, and age of the claimant

Front 8

Alternative dispute resolution (ADR): various prcedures used by adjusters as alternatives to litigation; six types

Back 8

(Memory Aid: MAP MAN)
1.Mediation
2.Arbitration
3.Pretrial settlment conferences
4.Mini-trials or summary trials
5.Appraisals
6.Negotiation

Front 9

Four factors to consider in deciding whether to defend a lawsuit

Back 9

1.If the first notice of the claim is the suit, the adjuster may request an extension to investigate and settle the claim
2.If the facts are known and liability is probable or clear, the adjuster may try to settle before legal costs are incurred
3.If the investigation shows the claim is not owed or is owed by some other party, the insurer may decide to defend
4.Nuisance settlement: there is little liability or no proof of damages but the insurer settles to save the legal costs of defending

Front 10

Actual cash value

Back 10

Replacement cost less depreciation

Front 11

Adjusters

Back 11

Responsible for the evaluation, investigation, and negotiation of the damages, liability, and coverage related to each claim

Front 12

Adjusting and other expenses incurred

Back 12

Expenses arising from teh overall operation of the claim function

Front 13

Alternative dispute resolution (ADR)

Back 13

Various prcedures used by adjusters as alternatives to litigation

Front 14

Average-value method

Back 14

Method of establishing case reserves that is appropriate for claims occurring with regular frequency

Front 15

Claims adjusting

Back 15

Administering demands for claim payments; primary function is to satisfy the insurer's obligations to the policyholder according to the insurance policy

Front 16

Closing report

Back 16

Final report, which describes how the settlement was derived or other conclusions

Front 17

Contracts

Back 17

A contractual agreement dictates obligations to perform or not perform a duty

Front 18

Declaratory judgment

Back 18

A lawsuit in which the court determines which rights are held by each party rather than awarding monetary damages

Front 19

Defense and cost containment expenses

Back 19

Claim costs specifically identified with a particular claim's settlement

Front 20

Examiners

Back 20

Evaluate coverage, damage factors, and liability of claims

Front 21

Extra-contractual damages

Back 21

Monetary awards for insureds paid by insurers for sums that are not identified in the insurance contract

Front 22

Field adjusters

Back 22

Duties are usually performed outside the claims office

Front 23

General damages

Back 23

Awarded for losses that cannot be easily documented, such as pain and suffering

Front 24

Independent adjusters

Back 24

Handle claims for a fee on a case-by-case basis; not employed by the insurance company

Front 25

Inside adjusters

Back 25

Adjust claims by phone and mail

Front 26

Insuring agreements

Back 26

Briefly define terms and incorporate other portions of the policy that must be understood

Front 27

Judgment method

Back 27

Method of establishing case reserves that depends on the experience of the adjuster

Front 28

Legal liability

Back 28

The state of being legally responsible for harming another individual

Front 29

Nonwaiver agreement

Back 29

Same function as the reservation-of-rights letter; distinguished from reservation-of-rights letter in that the nonwaiver agreement is signed and consented to by the policyholder

Front 30

Pre-settlement negotiation

Back 30

Allows an insurer and a policyholder to explore and agree on aspects of coverage

Front 31

Preliminary report

Back 31

A first report required by many insurers to report the filing of a claim

Front 32

Public adjusters

Back 32

Licensed to represent policyholders for property claims against insurance companies

Front 33

Punitive damages

Back 33

Damages that serve as punishment to the perpetrator for willful or outrageous conduct

Front 34

Replacement cost

Back 34

Cost to repair or replace the damaged property

Front 35

Reservation-of-rights letter

Back 35

Permits the claim adjuster to continue to process the claim without voiding the insurer's right to disclaim coverage at a later time

Front 36

Special damages

Back 36

Awarded for actual out-of-pocket expenses, such as medical bills

Front 37

Specialist adjusters

Back 37

Have met certain educational requirements and have a certain level of experience in particular areas of claims

Front 38

Stair-stepping

Back 38

Occurs when the claim is inadequately reserved initially and the reserves must be updated continually

Front 39

Statutes

Back 39

The law dictates which actions may or may not be taken

Front 40

Subrogation

Back 40

The legal process by which the insurance company has the right to collect amounts paid to or on behalf of the insured from the party liable to the insured

Front 41

Summarized report

Back 41

A detailed report regarding the investigation of the claim

Front 42

Tabular method

Back 42

Method of establishing case reserves that provides and average amount for all claims having similar characteristics in martial status, health, and age of the claimant

Front 43

Torts

Back 43

All civil wrongs that are not related to contracts

Front 44

Underwriting

Back 44

Concerned with claim information for specific accounts approved by the underwriting department