Claims Handling and Investigation
The claim lifecycle
Claims handling follows a disciplined sequence: report and acknowledge, verify coverage, investigate, evaluate damages, negotiate/settle, and document. Each step must be timely and documented. Key concepts: first notice of loss (FNOL), proof of loss, reservation of rights, subrogation, and salvage.
Investigation
Investigation includes interviewing the insured and witnesses, inspecting the loss, obtaining police/fire reports, reviewing policy history, and checking for fraud indicators (recent policy inception, prior claims, inconsistent statements, unusual timing). Adjusters must distinguish covered perils from exclusions and determine causation.
Coverage verification
Confirm the policy was in force, the loss falls within the insuring agreement, no exclusion applies, and conditions (notice, proof of loss, cooperation) were met. A reservation of rights letter preserves the insurer's position while investigation continues.
Traps to watch
- Proof of loss is a formal, often sworn document with deadlines; missing it can jeopardize the claim.
- Subrogation is the insurer's right to recover from a third party after paying the insured.
- Salvage refers to damaged property the insurer may take after paying a total loss.
- Causation disputes (e.g., wind vs. flood) drive many exam questions.
Rule of thumb
Document the who, what, when, where, why, and how much for every claim decision. If it isn't in the file, it didn't happen.
Worked example
A roof claim arrives; the adjuster notes the policy started 10 days earlier and the insured has two prior claims. These are fraud indicators warranting closer investigation, not automatic denial - the adjuster still must investigate and document before deciding.