2005
Insurance Reference Manual
Personal Insurance Federation of California Insurance Reference Book
DE-MYSTIFYING THE CLAIMS PROCESS
After any natural disaster or insured loss comes the effort to put one's life back together. Part of that process is dealing with an insurance company by filing and processing a claim. Over the years, a distrust of the insurance claims handling process seems to have arisen. This distrust has been fueled by "self-appointed consumer activists," lawyers, public adjusters and politicians.
Insurance companies are not out to defraud their customers. However, in the press of handling claims, adjusters may make a mistake. Many mistakes are simply human error caused by the tremendous pressures created by disaster claims handling. Claims adjusters are, however, required to review claims for possible fraud. Remember, every dollar overpaid or paid for a fraudulent claim adds cost to everyone's insurance premium. Fairness is the ultimate goal of the insurance industry.
An insurance contract is supposed to restore policyholders to where they were before the disaster. Insurance is not entended to enrich policyholders beyond either the limits of the policy or their pre-claim lifestyle.
Mistrust, misunderstanding and the mystery of the claims process create problems where few should exist. Toward eliminating all three, the Federation provides this information in an effort to assist the media reporting on the aftermath of disasters.
The very first thing policyholders should do upon suffering an insured loss is to find their insurance policy (if available) and look for the section usually entitled "Duties After Loss." This section enumerates the duties of the insured and usually reads something like this:
After a loss to which this insurance may apply, you should see that the following duties are performed:
a. Give immediate notice to your company or its agent. Also notify the police if the loss is caused by theft. Notify the credit card company or bank if the loss involves a credit card or bank fund transfer card;
b. Protect the property from further damage or loss, make reasonable and necessary repairs required to protect the property. Keep an accurate record of repair expenditures;
c. Prepare an inventory of damaged or stolen personal property. Show in detail the quantity, description, actual cash value and amount of loss. Attach to the inventory all bills, receipts and related documents that substantiate the figures in the inventory;
d. As often as we (the insurance company) reasonably require:
(1) exhibit the damaged property;
(2) provide the company with records and documents requested and permit the company to make copies;
(3) submit to examinations under oath and subscribe the same; and
(4) produce employees, members of the insured's household or others for examination under oath to the extent it is within the insured's power to do so;
e. Submit to the insurance company, within 60 days after the loss, a signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
(1) the time and cause of loss;
(2) interest of the insured and all others in the property involved and all encumbrances on the property;
(3) other insurance which may cover the loss;
(4) changes in title or occupancy of the property during the term of this policy;
(5) specifications of any damaged building and detailed estimates for repair of the damage;
(6) an inventory of damaged or stolen personal property described in "c." above;
(7) receipts for additional living expenses incurred and records supporting the fair rental value loss;
(8) evidence or affidavit supporting a claim under the Credit Card, Bank Fund Transfer Card, Forgery and Counterfeit Money coverage, stating the amount and cause of loss.
The main point is that everyone should read their insurance policy and try to understand it. An agent or company representative will be happy to answer any questions that any policyholder may have.
The claims process can be mysterious, lengthy and confusing. This generally occurs because the claims adjuster knows the process and the customer doesn't. While every effort is made by a company to outline and explain the claims process, the insured usually doesn't understand everything the first time through.
The process can be intimidating. There are many new company representatives the insured is dealing with and a myriad of forms that compose the file created by the claim. At times it may appear that claims adjusters do not trust the insured or that the company is being overly finicky, rigid or fussy about the circumstances surrounding the loss or the items that are claimed to be lost.
Sometimes, it's hard not to take these perceptions personally. However, it usually signifies a thorough claims adjuster working toward a fair settlement.
The type of loss will generally dictate the amount of information and time needed to close the claim.
If the loss is a damaged automobile, resolving the claim is relatively standard. Parts costs and repair labor costs can usually be firmly identified and a settlement figure is reached quickly. Repairs are at the mercy of workload at the auto repair facility and delays can occur if parts needed are not on hand or must be ordered.
If, on the other hand, the loss involves a home and/or the contents therein, the resolution becomes more complex. The number of forms used and the depth of the process of verifying the loss are greater.
DWELLING OR STRUCTURE CLAIMS
If there is damage to the dwelling or building structure, the adjuster will use some or all of the following forms:
. Claim Activity Log : A report on the dates and times the adjuster worked on a particular claim.
. Estimation Forms : (Building Estimate and/or Building Estimate Scope Sheet). These deal with identifying the actual damage and the estimate of repair or replacement costs. The Scope Sheet is an inventory, in great detail, of damaged areas.
. Repair Estimate Recap : A detailed comparison of projected costs and actual contractor prices for items like carpentry, painting, flooring, plumbing, electrical, carpeting, etc.
. Claim Acknowledgment Form : Requires the claimant's signature and acknowledges that he/she is free to obtain additional bids for the work to be done and that he/she is responsible for contracting for repairs. It also reminds the claimant that the insurance company does not warrant the work of the contractor chosen by the claimant.
. Authorization Form : Permits the adjuster to enter the dwelling and to make contact with banks, employers, creditors and others, if necessary, to process the claim. This authorization can assist in spotting fraudulent claims.
. Insured's Authorization to Pay Account : This form authorizes the insurance company to pay vendors directly for repair of, or replacement of, property.
PERSONAL PROPERTY CLAIMS
. Receipt for Advance Payment : This form is what it says, a receipt for advance payment on a claim. This is for money paid immediately after the loss. It includes Additional Living Expense (ALE) funds and emergency repair money.
. Personal Property Inventory Form : Designed to permit the claimant to list all personal property lost or destroyed for which reimbursement is being requested.
. Additional Living Expense (ALE) Worksheet : A form for itemizing personal expenses and providing receipts for those expenses. If initial ALE funds are insufficient, this report provides justification for additional funds.
. Purchase Verification/Gift Verification Forms : These forms, along with instructions, are used to verify ownership or possession of the items listed on the personal inventory form. This information is designed to prevent fraudulent claims.
. Claim Photo Sheets : In certain cases photographs will be taken of the damage or they will be provided by the claimant to verify items that were lost as a result of the damage.
. Recorded Statement Envelope : This document holds audio tapes of interviews between the adjuster and the claimant. Many times oral interviews reveal additional losses that may not have been reported earlier.
. Sworn Statement In Proof of Loss : This witnessed and notarized statement provides the foundation for prosecution should the claimant attempt to defraud the insurance company.
. Payment Register : A compilation of payments, check numbers, etc., made to the claimant or vendors.
. Underwriting Review : A one page form that summarizes the loss.
. Subrogation Receipt : After paying the claimant all the funds due for the claim filed, the insurance company may subrogate with another insurance company, which may share liability in the claim, for return of a portion of the total funds paid for the claim at issue.
. Salvage Disposition Form : A report of the final disposition of items, such as a wrecked automobile, that the insurance company may end up owning after paying the claim.
. Claim Resume : A report on the claim that is used as a final review of the claim file and how it was handled.
It should be noted that not all insurance companies use all these forms nor are all the forms used on every claim.
While this may appear to be a large number of forms, they have been proven over a long period of time to be the minimum necessary to complete the claims resolution process.
Through the establishment of a clear paper trail, the insurance company not only assures an accurate, efficient handling of a claim; it also creates a means of defending itself against possible accusations of negligence.
Consumers who educate themselves about the claims process will not only be able to make a better informed purchase of insurance, but will also expedite the resolution of any claim they may file.
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