Claims

Claims and loss handling is the materialized utility of insurance; it is the actual "product"

paid for, though one hopes it will never need to be used. Claims may be filed by

insureds directly with the insurer or through brokers or agents. The insurer may require

that the claim be filed on its own proprietary forms, or may accept claims on a standard

industry form such as those produced by ACORD.

Insurance company claim departments employ a large number of claims adjusters

supported by a staff of records management and data entry clerks. Incoming claims

are classified based on severity and are assigned to adjusters whose settlement

authority varies with their knowledge and experience. The adjuster undertakes a

thorough investigation of each claim, usually in close cooperation with the insured,

determines its reasonable monetary value, and authorizes payment. Adjusting liability

insurance claims is particularly difficult because there is a third party involved (the

plaintiff who is suing the insured) who is under no contractual obligation to cooperate

with the insurer and in fact may regard the insurer as a deep pocket. The adjuster must

obtain legal counsel for the insured (either inside "house" counsel or outside "panel"

counsel), monitor litigation that may take years to complete, and appear in person or

over the telephone with settlement authority at a mandatory settlement conference

when requested by the judge.

In managing the claims handling function, insurers seek to balance the elements of

customer satisfaction, administrative handling expenses, and claims overpayment

leakages. As part of this balancing act, fraudulent insurance practices are a major

business risk that must be managed and overcome. Disputes between insurers and

insureds over the validity of claims or claims handling practices occasionally escalate

into litigation; see insurance bad faith.