TOPIC 10 - CLAIM

At the end of this topic, students should be able to:

• Identify the importance procedures in settlement of claim

• Describe the post settlement action
• Identify the nature of disputes and their resolution
• Describe the concept of ex-gratia payments
• Describe the claim settlement agreement
Introduction
 The image of the insurance company depends greatly on
their claim services.
 The ultimate test of a responsible and efficient insurer is
the promptness and fairness compensation of claim to
insured as well as to third party.
 A satisfaction of customer on the claim services provided
by insurer will indirectly facilitate sales and marketing of
insurance product.
Claim procedure
Notification of loss

Checking coverage

Claim register

Investigation of claim

Ascertaining the amount of loss

Ascertaining subrogation rights and contribution duties

Claim documents
Burglary Motor own
Fire insurance Life Insurance
insurance damage
• photographs • Police report • Police report
• technician • Photograph • Certified copy • Death
report • purchase of registration certificate
• police report invoice, repair card and road • Certified copy
• fire brigade bills, sales tax of identity
report record • Certified copy card
• purchase of driving • Burial
invoice, repair license and certificate
bills, sales identity card • Police report
record of driver
• Post-mortem
• Repairer’s report
estimate
• Adjuster
report
• Repairer’s
final bill of
payment
Disputes
• Claim officer will see the claimant to settle the dispute
through discussion
Negotiation • The claim officer will try to explain why the claim was
rejected

• Arbitration clause provide that all disputes relating to quantum

only will have to be referred for arbitration before court action
can be taken by insured
Arbitration • Arbitration is preferred to litigation because it is speedier and less
costly than court action and hearing is in private rather than in
open court

• Alternative to the traditional litigation process – alternative dispute

resolution process
• Facilitate both the complainant and the service provider institution
Mediation concerned to resolve the complain
• The central person is the mediator – if both parties cannot reach an
amicable settlement, the mediator will make a decision based on
investigation, industry practices and the relevant applicable law

• When a claimant is unhappy with the outcome of

negotiation/arbitration/mediation he may take court action against the
Litigation insurer
• Insurer normally considers litigation as a last resort - unless it involves a
huge claim or an important point of principle
Ex-gratia payment
 Ex gratia is Latin for "out of goodwill."
 A sum of money paid when there was no obligation or liability to pay it.
 In insurance claims, it may take the form of payment for which the insurer
did not appear to be liable.
 A voluntary payment made by the insurer in response to a loss for which it is
not technically liable under the terms of its policy

 For example:
 Insured’s building was damage in a big fire caused by excluded peril. The insurer is
held no liability on the policy. However, because this particular insured is one of
their loyal customer, then insurer decided to pay certain amount of money to
lighten the burden.
Claim Settlement Agreement
Motor Insurers Bureau (MIB)
- The bureau which has executed an agreement with the MOT to secure
compensation to third party victims of road accidents in cases where such victims
are denied compensation by the absence of insurance as required under the Act
- MIB is a company limited by guarantee, this means that MIB hold no assets to
cover its potential liabilities, but that its members guarantee that they will pay its
liabilities as and when the need arises

Revised Knock For Knock Agreement (KfK)

- Made between insurance companies – each insurers will responsible for their
own policyholder’s vehicle, irrespective of who was responsible for the
accident (for comprehensive policy only)
- Each motor insurer agreeing not to exercise subrogation rights against each
other
It is a device which enables motor insurers to speed up the settlement of
claims and reduce legal and administrative expenses

Motordata Research Consortium Sdn Bhd (MRC)

- MRC develop the centralizes database for motor repairs estimation in 2001
- to minimizing subjectivity in motor repairs estimation and added benefit of
improving transparency in claims estimation and anti-fraud properties
 Post settlement action

• A claim may
reveal adverse
• Automatically • After payment

reinstatement

conditions
Termination of policy

Reduction of sum insured and

Imposition of news terms and

features which
terminated of partial loss, warrant new
when an the sum terms and
insurer has insured is conditions to
paid: underinsured – be imposed by
• a total loss or so insured the insurer
• the full sum would be
• It is up to the
insured under advise to
insured
the policy reinstate the
whether to
sum insured by
accept the new
payment of pro
terms amd
rata premiums
conditions or to
decline the
insurance