S9: Claims
A: These are the three (3) parties to a claim, but only two are regularly involved.
Q: What are the "insured first-party, the second-party insurer and the third-party, who is any person not party to the contract between the insured and the insurer, like in liability insurance".
(See page 9-3 in the textbook | LO1).
A: The co-insurance formula.
Q: What is "Amt DID carry / Amt SHOULD have carried x LOSS amt - DED, if applicable".
(See pages 9-8 to 9-10 in the textbook | LO2).
A: It's up to this person/entity to provide that the loss happened and that it was the result of an insured peril.
Q: Who is "the insured"?
The adjuster helps guide the process but it's up to the insured to prove and substantiate their loss. (See page 9-3 in the textbook | LO3).
A: This penalty is used where risk of total loss is remote compared to one of a partial loss. The policy stipulates what is considered adequate insurance.
Q: What is "co-insurance"?
Co-insurance is designed to make sure the insured carries enough coverage to match the value of their property—especially when the risk of a total loss is low, but partial losses are more likely. (See page 9-8 in the textbook | LO2).
A: These two (2) major shifts influenced how technology is changing how claims are adjusted.
Q: What are "the Covid-19 effect" and "the expertise gap"?
The pandemic pushed companies to find faster, safer, and more remote ways to work and at the same time, the industry is facing a shortage of experienced adjusters, so insurers are turning to tech to fill that gap. (See pages 9-19 and 9-20 in the textbook | LO4).
A: This type of reserve is used for regular or more common types of claims.
Q: What is an "average reserve"?
For common or routine claims, like auto or glass losses, many insurers use an average adjusting method, where once the claim is entered into the system, a reserve is automatically added. (See page in the textbook | LO3).
A: This means realistically and fairly evaluating the claim under the policy to come to a reasonable settlement.
Q: What is "negotiation"?
Negotiation is an ongoing process that continues throughout the life of the claim, so how the policy works should be explained as soon as possible. (See page 9-14 in the textbook | LO3).
A: This is the loss of a right because of the non-performance of some obligation or condition
Q: What is "forfeiture"?
If an insurer wants to deny a claim based on a broken condition, they must show that the insured’s action prejudiced their position. Courts are becoming more sympathetic to policyholders, and the law gives the courts the power to relieve forfeiture if it’s fair to do so. (See page 9-5 in the textbook | LO2).
A: This applies when two or more insurers have a policy covering the same loss. In Quebec, an insured can collect from any involved insurer, who then collects from the other involved insurers.
Q: What is "contribution"?
Each insurer pays their fair share of the loss, based on the amount and terms of their policy. (See page 9-8 in the textbook | LO2).
A: Explain the difference between direct losses and indirect losses.
Direct losses happen when the insured property itself is damaged or destroyed.
- If a car drives right through the front window of an insured’s house, the direct loss is vehicle impact damage to the house.
Indirect losses are the ripple effects—losses that result from a covered event but aren’t caused directly by it.
- If a car drives right through the front window of an insured’s house and they can’t live in it until damages are repaired because of structural concerns, the indirect loss is the inability to live in the home until repairs are done. (See page 9-4 in the textbook | LO1).
A: The limitation of time in which a claim may be brought by the policyholder; a limitation of time within legal action can be taken by a claimant.
Q: What is the "prescription" period?
For minors, the clock doesn’t start ticking until they reach the age of majority, which is usually either 18 or 19YO depending on the province. (See page 9-6 in the textbook | LO2).
A: The remaining value of property that has been severely damaged by an insured peril.
Q: What is "salvage"?
(See page 9-6 in the textbook | LO2).
Q: What are:
1.Verify policy coverage
2.Set reserves
3.Report the claim to others as needed (e.g., WCB)
4.Investigate the loss
5.Assess damage & quantum
6.Negotiate settlement & pay the claim, OR deny the claim & send a denial letter
(See pages 9-12 to 9-14 in the textbook | LO3).
A: These are the five (5) major responsibilities of a claims department.
Q: What are:
. Paying valid claims and rejecting fraudulent ones.
. Providing good customer service and a smooth claims process.
. Keeping accurate records.
. Controlling costs.
. Complying with legislation.
(See page 9-16 in the textbook | LO4).
A: Types of evidence
Q: What are "oral evidence", "physical evidence" and "secondary evidence"?
Oral evidence = written or recorded statements from the insured or witnesses
Physical evidence = reports, diagrams, photos, or items from the scene
Secondary evidence = expert reports.
(See page 9-13 in the textbook | LO3).