Claims Handling and Settlement
Claims process
Understand notification, investigation, coverage assessment, reserving, settlement and recovery. Know the role of the loss adjuster, the difference between loss adjusters and loss assessors, and the requirement to handle claims promptly and fairly.
Settlement
Know the bases of settlement: reinstatement, repair, replacement, market value and agreed value. Understand betterment, salvage, subrogation and contribution in practice. Understand the treatment of fraudulent claims and the effect of late payment.
Traps
Questions often test whether an insurer can settle on a new-for-old basis or must deduct betterment. Another trap is confusing salvage (insurer's right to sell damaged property) with subrogation (right to recover from a third party). Also know that a claim may be declined where a condition precedent is breached.
Worked example
A building is damaged by fire and the policy provides reinstatement cover. The insurer pays the cost of reinstatement, subject to the sum insured and any average condition. Rule of thumb: reinstatement is capped by the sum insured; underinsurance can trigger average.