Chapter 5 - Renewals

Question 1

What is a renewal an opportunity to do?

Answer 1

It is a new contract - thus you can reassess the risk and change coverage if need be

Question 2

What are six things that may trigger a review on renewal?

Answer 2

• Economic issues
• Major personal changes (divorce, job loss)
• Several cancellations for non payment
• Number of claims higher than average
• Increase in insurance limits requested
• Insurance on new items that had no insurance prior

Question 3

What is the relevance of economic issues when it pertains to insurance fraud?

Answer 3

There has been a correlation between fraud and economic issues

It will not happen immediately and will increase over time

Thriving economy does not mean fraud will not exist

Wealthy are just as likely to commit fraud

Question 4

Why is it important that brokers/agents are aware of changes at a personal level?

Answer 4

It could make them more likely to commit insurance fraud

Question 5

What are five things that brokers can communicate to their clients?

Answer 5

1) Connection of insurance fraud to insurance rates
2) Principle of indemnity and how it works
3) Typical exclusions and how they operate
4) Additional coverage that can be purchased
5) How to report fraud; such as Crime Stoppers

Question 6

Outline what you would investigate in regards to economic issues

Answer 6

• Correlation between bad economy & increased fraud
• Changes in local economic conditions
• Major employer/industry suffers, can affect neighbourhood prompting area to be assessed
• Business needs could change to reflect market conditions
• Financial position must be reviewed
• Attitude of policyholder toward problem
• Deep financial difficulties is vulnerable time for anyone

Question 7

Outline what you would investigate in regards to major personal changes

Answer 7

• Brokers and agents must prepare clients for adjustments due to marital breakdown/illness
• These changes can precipitate fraud
• Moral hazards may emerge

Question 8

Outline what you would investigate in regards to cancellations from nonpayment

Answer 8

• Responsible enterprises expect to receive payment for services/products
• If credit is acceptable, banks offer overdraft protection or assist in financial challenge
• Concern grows with repeated disrespect toward debt
• Habitual disregard for finances is considered a red flag
• Random review of risks w/ claim frequency expose clients who have financial challenges
• Seasoned fraudsters understands the cancellation period and could pursue claims w/in this time
• Correlation between chronic poor credit and claims frequency

Question 9

Outline what you would investigate in regards to a high number of claims

Answer 9

• Each new claim should trigger review
• Some criminals earn living through fraudulent payments
• Claim rate higher than average or pattern of multiple claims, close review is required
• Is client concerned with insurance costs?
• Technology allows for quick access to databases
• Enquiries can be automated by report flagged on new claim

Question 10

Outline what you would investigate in regards to increased limits

Answer 10

• Fraudsters increase amounts of coverage so fraud is worthwhile
• Would claim a combination of items (ie. cash, stamps, jewelry, liquor, cameras, designer clothing, etc)

Question 11

Outline what you would investigate in regards to atypical items being insured

Answer 11

• Most insureds need to insure big ticket items
• People purchase more items (antiques, unique collectibles, rare jewelry, spec equipment)
• Special limits under floaters
• Subject to special limits on policy