Claims Handling and Settlement
Claims Handling and Settlement tests the lifecycle from notification to payment or repudiation: documentation, investigation, coverage analysis, reserving, settlement, salvage and recovery. The exam expects defensible decisions, not just fast payments.
Core rules
- Notification should be prompt; late notice is assessed for prejudice, not automatically denied.
- Documentation includes claim forms, proofs, medical or police reports, invoices and title documents.
- Coverage analysis checks the policy period, insured subject, peril, exclusions, conditions and limits before quantum.
- Reserving sets a realistic estimate of ultimate liability, including incurred but not reported claims.
- Settlement may be cash, repair, reinstatement or replacement; salvage and subrogation reduce net cost.
- Fraud indicators include inflated bills, inconsistent dates and staged incidents; investigate before repudiating.
- Repudiation must cite the specific policy provision and be communicated clearly.
Worked example
A car with an IDV of 800,000 is a total loss. The policy has a 5,000 excess and the wreck has salvage value of 100,000. The insurer pays 800,000 - 5,000 - 100,000 = 695,000, or pays 795,000 and takes title to the salvage. Reasoning: the IDV is the maximum basis for total loss, the excess is the insured's first loss, and salvage belongs to the insurer once it pays the full value.
Traps
- Treating a cashless pre-authorisation as a final coverage decision.
- Paying an ex gratia amount as if it were an admission of liability.
- Denying a claim solely for late notice without showing prejudice.
- Ignoring salvage or subrogation in the net cost.
- Settling before confirming the policy period and exclusions.