The Role of the Claims Manager


The claims department is not only the “Show Window” of the insurance company but the department with the largest expenditure hence there is the requirement that claims be paid without wastage of the funds which belongs to all policyholders. In addition, if the claims handler constantly under reserve, there may come a time when it may not have enough funds to pay the claims as well as pay the expenses of running the department. It is because of the above that claims must be adequately managed.


All insurer need to develop a coherent approach in dealing with all aspects of claims management including:

a.  A corporate claims philosophy

b.  Clear Claims Procedures including reserving practices.

c.  If appropriate a quality management system

d. An efficient use of Information Technology (IT),and

e. The use of outsourcing where appropriate

Please note that the Strategy will be developed by the Senior Management, but the claims manager will be responsible for its day-to-day implementation.

The Claims Manager Key Tasks:-

a.  To ensure that the company’s strategic direction is followed.

b.  To set business plans and objectives to ensure smooth operations of the plans. 

c.   Maintain a sufficiently status so that they can exert the influence the role demands. 

d.  Have sufficient resources budgeted to run the department and an effective structure to monitor workflow

e.  There is suitable links with other departments, eg: underwriting. Plus, where suppliers are used, oversight is

     required (best practice) to manage any complaints 

f.  Have suitable computer systems that produce effective, accurate reports with a workflow system

g. Maintain best practice within the claims department.

h. Be aware of current underwriting practice and reserving methodology.

Costs, There are two main aspects:-

1. Overseeing the internal costs of running the department, also called claims expenses the largest of which are:

       a. Staff salaries and benefits

       b. Outsourcing if this used

       c. Information Technology (IT) provision. 

2.  The cost of the claims themselves (claims indemnity). The average life cycle of each claim as well.

      a. Payment of Claims.

      b. Subrogated recoveries 

      c. Recovery from Reinsurers where appropriate. 


a.  A system should be in place to recruit, train, motivate and retain intelligent and competent staff.

b.  Effectively manage and motivate staff by:

                1. planning tasks and responsibilities

                2. acting as a senior point of referral for technical queries 

                3. providing leadership through decision making and proactive working methods.

                4. controlling and monitoring progress

                5. Co-ordinating training and ensuring staff development.


This is where there is overpayment of claims.

         i. A claims handler will need to ensure the validity of a claim where the claim must fall within the contract.

         ii. If it is a valid claims, the size of the payment.

         iii. The potential overpayment of the claims is referred to as leakage

         iv. Leakage is defined as the amount by which the actual settlement exceeds the amount that would have

              been required to make an acceptable settlement under the policy.

NB: George Badhurst’s article called “Blocking the leak” in a magazine Technology today, stated that leakage the UK amount to an average of  5% of claims annually.  Once can see the impact of this a company’s profit or none.

Ex gratia Payments:

       Such payments are made as follows:

      a. Where an exclusion is a borderline one

    b. Where hardship would be created

      c. To preserve good business relations

      NB: It is debatable if one should consider these as leakage, given they are paid under the policy    

       without any contractual obligation. The claims manager would authorize this so not leakage and

       finally, there could be challenges when reinsurance recoveries are attempted.

   How to identify overpayments, please review whether:

       1. The cause of loss falls within the policy scope

       2. The date of loss falls within the policy dates

       3. The claim was notified within the time limit

       4. There is sufficient proof of the extent of loss

       5. The correct policy excess has been properly applied

       6. Underinsurance has been corrected calculated and applied to the settlement figure

       7. All recoveries have been made

       8. All subrogation has taken place

       9. All contribution has been considered.

       10. Any fees paid are reasonable and not inflated

       11. deprecation has been taken into account

       12. It is not a repeat claims

       13. The insured damage or sight has been reinspected.

       14. The settlement was appropriate.

Leakage continued:

   Quantifying overpayment is not an exact science and entails a degree of  subjectivity:


        This is subjective and difficult to quantify, eg: failure to deduct an adequate amount for wear and tear.


        This is relatively easy for example, failure to deduct and excess.


        Overpayment or (leakage) = what was actually paid – what should have been paid.


       Steps which can be taken to prevent leakage area as follows:

        1. Senior Management focus – consider reducing claims payments and not only expenses. Also apply this

             to all claims and not only large ones.

        2. Employee Skills – encourage this, for legal, market practices and best practices all professional.

        3. Supervision of Staff – Requires all the skills of the employees plus management and presentation training.

        4. Quality Management – Checks should be in made to spot hard and soft leakage, use of regular audits to assist.

        5. IT Checks – design the IT system to stop certain leakage eg: if excess is not deducted, cheque will not print.

        6. Culture of the company – Insurers should allow a culture of accuracy and open challenge to flourish. This

            encourages staff to be more attuned to ensuring the accuracy and validity of their actions, and ultimately reduces

            errors and omissions.

      George Bathurst – The main cause of leakage to be poorly skilled, badly trained staff using ineffective, disparate system.

            He maintains that an improvement in business processes will directly affect profit. In essence, the longer it takes to

            process a claim, the more opportunities there is for money to leak out of the company. 

Monitoring financial performance:

1. An insurer must maintain an adequate solvency margin so that it will be able to pay  reported and estimated

    claims when they fall due, this is because, 

      a. Individuals and companies pay premiums faithfully

      b. There is the expectation that when they present a claim it will be paid.

      c. Insurer is a trustee of the vast amount of funds collected from the clients and must manage it and

         avoid wastage to ensure it can meet all requests for legitimate claims payment.

      d. There have been many cases of insurer failures hence there should be more care as a result of all

           this historical data.

  2. Solvency II directive is a European Union (EU) Directive for insurance companies. It directs insurers to  ensure that they have enough capital set aside to provide reserve funds to cover all insurance claims that they are likely to receive.

3. Why is it necessary to monitor a company’s financial performance?

       a. The regulators need to be satisfied that the company is solvent in order to allow it to continue to 

            underwriter and pay claims.

       b. Lloyds Syndicate are also required to file various financial performance indicators to Lloyds as well.

       c.  For purposes of their annual reports and accounts.

       d. To maintain management control (especially in respect of budgeting).