Expanding Your Claims Perspective
Claims inside the business
AIC 301 widens the lens from file handling to the insurer’s economics. Claims is part of a value chain that includes underwriting, actuarial, finance, reinsurance, legal, sales, and customer service. Understand reserves (case and incurred-but-not-reported), loss adjustment expense, paid versus incurred losses, recoveries (deductibles, salvage, subrogation, reinsurance), and ratios such as loss ratio and combined ratio.
Metrics and judgment
Common measures include cycle time, severity, frequency, leakage, reopen rates, and customer satisfaction. None is meaningful alone: fast closure can hide leakage; low expense can hide poor outcomes; high subrogation can be offset by collection costs. Claims also involves negotiation, litigation management, fraud indicators, vendor and TPA oversight, and fair-claims-practice compliance.
Traps
Candidates confuse reserves with payments-reserves are estimates, not money paid. Subrogation and salvage are recoveries, not guaranteed income; net incurred reflects them only when recoverable. A lower combined ratio is not always better if it comes from under-reserving. Do not treat every claim with the same workflow; segmentation is a core idea.
Worked example
A property claim has $100,000 covered damage, a $5,000 deductible, and a $40,000 subrogation recovery. The insurer pays $95,000 to the insured. Gross incurred is $95,000; net incurred after recovery is $55,000, before recovery expenses. Rule of thumb: “follow the dollar”-reserve it, pay it, recover it, and report it consistently.