5. Claims Handling Systems

1. Describe the key features, structure and objectives of different claims systems. 

   2. Understand the importance of data protection legislation and enforcement.

   3. Explain the roles of external support services used in the claims process.

   4. Describe the claims function as it appears in functional and divisional structures.

Introduction: 

In our consideration of the Information Technology (IT) recommended for the Claims department, this cannot be viewed in isolation but must encompass the entire company’s IT needs. In addition, we should also consider the other stakeholders who assist in the settlement of claims. There input must be considered and incorporated into or managed by the claims handling system.

     Analysis of Claims:-

The role of IT:

1. Any system must be developed to the required claims handling specification to meet the tailor-made needs of each company. 
2. IT relates to the storage, production or (processing) and communication of information.
3. IT already pays an important part in the insurance industry at present, however when looking at the future, the role of IT could mean the difference with survival or going out of business.
4. Even though we are looking at IT in relation to claims, do remember that of the company. Some companies have even digitized underwriting products etc. to meet the ever-changing needs of their client.
5. Another benefit of IT is in respect of management information – better quality, faster production and analysis, thus helping to meet their client’s expectation for claims related information.
6. Managers can use the IT to obtains key information for effective control and planning. The historical data being produced will form the background for future decisions.
7. The IT system must be in line with the company’s corporate claims philosophy and claims management system. The information must be processed in a way that is compatible with a company’s overall objective.
8. Electronic portals are increasing being used in claims settlement (personal injury pre action protocols) and well as other technology providers support the use of data bases to share information reference to decision making, especially in motor claims, subrogation and recoveries etc.
9. IT can be viewed as one part of the bigger picture; it actually controls the technical issues of the system that has been developed for the company’s future success and development.

Characteristics of claims and their impact on Claims Handling Systems:-

a. Volume of Claims:

Thousand of claims are being made daily, an insurer’s system must be able to

     i. process large numbers of claims reserving and processing.

     ii. There will possible many claims’ payments

     iii. As you pay claims, there will also be opportunities for recoveries (including reinsurance recoveries)

     iv. The system must also be able to cope with peak periods for certain claims eg: during winter, motor

          claims may be peak, during Christmas, liability claims may peak. The IT historical system can show such

b. Complexity of Claims

1. The following factors should be considered in an individual claims handling context
2. The process may involve many, stakeholders such as adjusters, brokers, legal experts and witnesses.
3. The greater the number of co-insurers, the greater the complexity
4. When brokers are involved, they will handle the flow and or production of documentation.
5. When a loss is reinsured, details of such will be sent to the reinsurer who had cover part of the risk.
6. Some claims may be fraudulent, repeat, or exaggerated and require more detailed investigation.
7. With larger commercial claims, many people can be involved, there complex systems must be in placed to collate information form all stakeholders as required, then analyzed and disseminated as appropriate.

As a result of the above, a claims system must be able to process a large amount of data, quickly, accurately, and in a meaningful manner. Hence the review of claims system, though is key, It is never a replacement for experienced claims staff.

Major components of a general insurance claims Handling Systems:-

a. The system chosen will vary by a number of factors such as the structure of the company, the type of business written and management decision to the extent to which their system should be developed.

b. For all Claims, irrespective of the class of business, the following information are recorded:

           i. The name of the Policyholder

           ii. The policy number and claims reference

           iii. The details of the claim including the dates.

           iv. Contacts

           v. Payments 

           vi. Reserves

c. In addition the above, the following underwriting information will also ne necessary:

           i.   A description of the Risk

           ii.  A description of the cover provided

           iii. Supporting Risk Information

           iv. Are there other co-insurers? Their share of the risk and reference