Chapter 13

Question 1

Claim administration is the insurance function that is responsible for what?

Answer 1

evaluating, processing and paying valid claims for contractual benefits that policyowners or beneficiaries present.

Question 2

why is it important to have effective claim administrations?

Answer 2

1. prompt payment of benefits when an insured event occurs
2. primary contact point with customers
3. data obtained from claims, reflects u/w decisions and making new insurance products
4. reducing/eliminating mistaken of fraudulent claims.

Question 3

what happens if a claim is not paid within a certain number of days?

Answer 3

laws require insurers to add interest to the benefit amount

Question 4

what happens if claims are paid out too quickly?

Answer 4

you risk the change of paying non-valid claims.

Question 5

what is a claim analyst?

Answer 5

is an insurance company employee who is trained to review individual claims and determine the company’s liability under each claim.

Question 6

Name four other departments claims with interact with

Answer 6

1. u/w,
2. legal,
3. product development
4. actuarial

Question 7

who are audits reflected in the claims department?

Answer 7

internal auditors check the accuracy of claims to determine if claim decisions were made accordingly to policy wording.

Question 8

What is a claimant?

Answer 8

a person usually a beneficiary or policyowner who submits a ife insurance policy claim to the insurance company.

Question 9

What is a claim philosophy?

Answer 9

a statement of the principles the insurer follows when conducting claim administration.

Question 10

what are claim practices

Answer 10

statements that guide claim department employees in the day-to-day handling claims.

Question 11

what are the goals, and practices of most claimants?

Answer 11

1. process claims timely and cost-efficiently
2. apply policy provisions consistently
3. investigate questionable claims
4. obtain medical and legal advise when necessary
5. train claim staff

Question 12

what is a claim form (claimant statement)?

Answer 12

provides information about the loss and authorizes others to provide the insurer with relevant information so that the insurer can begin the claim evaluation process.

Question 13

what are the 4 basic steps of the insurance claim routine processing?

Answer 13

1. determine if benefits are payable
2. calculating the amount payable
3. identifying the proper payee
4. paying the proceeds.

Question 14

what is the steps involved in the claim administration process
?

Answer 14

1. checking the insures’ policy administrating system. (was it in force)
2. was the deceased the insured?
3. is the policy contestible?
4. is there material representation/ did the loss occur?
5. was the loss covered?

Question 15

What is the purpose of a third-party administrator, in terms of claims?

Answer 15

they are often used to maintain the records for group insurance.

Question 16

when does claim fraud occur?

Answer 16

when the claimant intentionally uses false information in an unfair or unlawful attempt to collect benefits under an insurance policy.

Question 17

when is a claim considered a mistaken claim?

Answer 17

when a claimant makes an honest mistake in presenting a claim to the insurer.

Question 18

What is material misrepresentation?

Answer 18

a statement made in an application for insurance that is not true and that caused the insurer to enter into a contract it would not have agreed to if they had known the truth.

Question 19

What is the term given for the legal process of voiding an insurance contract because of material misrepresentation?

Answer 19

rescission

Question 20

what is a contestable period?

Answer 20

the period following policy issuance during which the insurer has the right to rescind the policy if the application for insurance contained a material misrepresentation. Usually 2 years.

Question 21

What happens when a claim analyst suspects material misrepresentation or fraud?

Answer 21

they launch a claims investigation, which is the process of obtaining the additional information necessary to make an appropriate claim decision.

Question 22

What is an exclusion?

Answer 22

provision that describe circumstances under which the insurer will not pay the policy’s proceeds following the death of the insured.

Question 23

What is the most common exclusion in an insurance contract?

Answer 23

suicide exclusion- if the insured dies as a result of suicide within a certain period (1-2 yrs) the insurance company does not have to pay the policy proceed.

Question 24

What are the two specific situations that require the claim analyst to conduct further investigation.

Answer 24

1. insurer dies outside the country of policy issue. and insurer is unable to obtain acceptable proof of death
2. the insurer disapears. (two kinds explainable and unexplainable)

Question 25

When would a company paid out on an unexplainable disappearance?

Answer 25

5-7 years, if the policy has been kept in force during the insured;s disappearance.

Question 26

What happens following claim approval?

Answer 26

the insurer determines the amount of the policy benefit payable, and how to distribute the policy proceeds

Question 27

What happens following a claim denial?

Answer 27

typically a manager or member of legal department reviews and approves the denial. And the claimant is notified in writing of the reason.

Question 28

What are common additions to calculating the benefit amount?

Answer 28

1. premiums that were paid in advance 2. accumulated policy dividends 3. policy dividends that the insurer declared but remained unpaid 4. paid up additional coverage 5. accidental death benefits

Question 29

What are some common subtractions to calculating the benefit amount

Answer 29

1. outstanding policy loans 2. accrued policy loan interest 3. premiums due and unpaid.

Question 30

What is an accidental death benefit?

Answer 30

a supplementary benefit under which the insurer pays an amount of money in addition to the basic death benefit if the insured dies as a result of an accident.

Question 31

what are the two ways an insurance company may pay the proceeds?

Answer 31

1. lump sum | 2. settlement options

Question 32

there are typically 4 settlement options. What are they?

Answer 32

1. interest option 2. fixed-period option 3. fixed-amount option 4. life income option (5) retained asset account (RAA) option

Question 33

define the retained asset account (RAA) option

Answer 33

the insurer pays the proceeds into an interest-bearing acount in the payee's name. - the payee can withdraw a portion or the entire amount at any time.

Question 34

Define the interrest option in terms of policy settlement options.

Answer 34

insurer pediodically sends interrest payments on the deposited amount to the benefiticary, and so on to the next benefiicary

Question 35

define the fix-period option in terms of policy settlement options.

Answer 35

the insurer pays the beneficiary equal monthly payments with interrest for the next X amount years

Question 36

define the fixed-amount option in terms of policy settlement options.

Answer 36

the payees receives a specified payment of principal and interest for as long as the proceeds last

Question 37

define life income option in terms of policy settlement options.

Answer 37

the policy proceeds are used to purchase an annuity that will provide the beneficiary with a series of periodic payments of a specified amount for the remainder of his lifetime.

Question 38

What happens is there is no named beneficiaries surviving the insured?

Answer 38

the insurer generally pays the proceeds to the insured's estate.

Question 39

In the US, if the insurer can't identify the proper payee, the insurer can initiate a legal process called interpleader. Define this.

Answer 39

under this, the insurer pays the policy proceeds to a court, advises the court that the insurer cannot determine a beneficiary, and ask's the court to handle. - $$$$

Question 40

what is the process when theres a claim on a reinsured policy?

Answer 40

upon approval, the direct writer pays the full amount of the policy proceeds to the beneficiary. Then the direct writer request reimbursement from the reinsurer for the amount of the risk.

Question 41

Why is it important for the direct writer to notify the reinsurer of a reinsured claim?

Answer 41

1. gives reinsurer time to verify its liability and resolve admin questions 2. reinsurer claim staff can assist the direct writer in assessing validity 3. reinsurers may be alerted to situations involving multiple claims submitted for the same insured to different direct writers.

Question 42

what is an investigative consumer report

Answer 42

contains information obtained through personal interviews with an individual neighbors, friends, associates, or other who may have information about the individual.

Question 43

What is a special investigative unit (SIU)?

Answer 43

a group of individuals who are responsible for detecting, investigating and resolving claims. - usually used to handle claim investigations (specially with fraud)

Question 44

What are 2 benefits to an insurance company's employees, that emphasizes quality control in claim processing?

Answer 44

1. they comply with laws and regulations related to claim settlement practices 2. adhere to the insurer's claim philosophy and claim practices.

Question 45

Name 3 steering control mechanisms in claim administration

Answer 45

1. claim philosophy and claim g/l 2. tiered approval levels for claim analyst 3. training

Question 46

Name 3 concurrent control mechanisms in claim administration

Answer 46

1. supervisory approval on claim checks that exceed auth 2. claim investigations checklist, for claims with certain suspicions 3. u/w reviews of death claims submitted during the contestable period.

Question 47

Name 3 feedback control mechanisms in claim administration

Answer 47

1. internal audits 2. market conduct examinations 3. external audits of claim process

Question 48

In the US, most state laws are build on the NAIC's unfair claims settlement practices act. Define this act.

Answer 48

describes specific actions that are considered unfair claims practices if done 1. in conscious disregard of the law 2. so frequently as to indicate a general business practice

Question 49

What are 4 prohibited claims practices?

Answer 49

1. failing to promptly acknowledge receipt of claim-related communications 2. attempting to settle claims based on an application that was materially altered without the policyowners knowledge 3. failing to affirm or deny coverage of claims within a reasonable time after the claim investigation is completed 4. compelling claimants to initiate lawsuits to recover death benefits by offering substantially less than the amount due.

Question 50

Who provides protection against unfair claim practices in canada?

Answer 50

provincial laws and guidelines for members of the Canadian life and health insurance association ( CLHIA)

Question 51

What are the terms of a deferred annuity contract?

Answer 51

require insurer to pay a specified death benefit if the annuitant dies before schedules annuity income payments begin.

Question 52

What is included on the claim form for an annuity death benefit?

Answer 52

1. deceased identity 2. contract for which the death benefit is claimed 3. how beneficiary wants to receive the proceeds.

Question 53

What are the 4 steps for claim processing an annuity death, once a claim form has been received.

Answer 53

1. authenticating and documenting the claim 2. determining the amount of the death benefit 3. paying the death benefit 4. addressing applicable tax issued.

Question 54

What do you call the period during which the annuity benefit payments are made?

Answer 54

payout period.

Question 55

what is annuity date?

Answer 55

the date on which the insurer begins to make the period income payments under the annuity contract.

Question 56

When does the annuitant have to submit a tax identification information and other required tax information forms?

Answer 56

when an they select a payout option.

Question 57

Name 3 types of nonannuitized annuity payout options

Answer 57

1. lump-sum 2. fixed-period distributions 3. fixed-amount They are not linked to the life expectancy of any person.

Question 58

Name 4 types of annuitized annuity payout options.

Answer 58

1. life annuity 2 joint and survivor annuity 3. life income with period certain annuity 4. life income with refund annuity Payments are tied to the life expectancy of the annuitant.

Question 59

define a joint and survivor annuity payout

Answer 59

a life annuity that provides series of periodic payments based on the life expectancies of two or more annuitants. (goes until last death)

Question 60

define life income with period certain annuity payout

Answer 60

guarentees annuity payments will be made throughout the annuitants lifetime and that payemnts will continue for at least a specified period, even if the annuitant dies before that period. falls to a contingent payee

Question 61

Define life income with refund annuity payout

Answer 61

provides annuity payemnts throughout the lifetime of the annuitant. Guarentee that at least the purchase price of the annuity will be paid out.