An insurance claim involves a team of people including the Policyholder, the Insurance Broker, the Claim Preparer, the Insurer(s) and their loss adjuster.
The mutual goal should be to present and settle the claim. This is best achieved with open communication between all parties.
There are often three levels of communication.
Meetings
The circumstances surrounding the claim, information gathering, identification and resolution of claim issues is best communicated face to face. With larger claims it is often of benefit to schedule a regular fortnightly or monthly meeting date to ensure all parties are comfortable with the progress. Agendas and minutes help to maintain focus and update those parties who cannot attend.
Correspondence
Critical issues need to be confirmed in writing. E-mail is an efficient and convenient media to ensure all parties are aware of the issues. It is important this does not become a substitute for face to face contact. The written word can often be misinterpreted causing unnecessary dispute. Once misinterpretation occurs it is best resolved in person. Any attempt to clarify the position with further e-mails often leads to a barrage of misguided communications.
Formal Reports
Claim reports are made available to all parties. The loss adjuster uses these to verify the claim and report to the Insurer. The loss adjuster’s report is usually only available to their principal. Perhaps it should also be made available to the Policyholder to outline and explain the issues as they arise. The Policyholder should consider engaging specialist assistance to prepare a fully documented claim report consistent with the Basis of Settlement outlined in the Insurnace Policy.
Consider the following case study:-
A fire destroyed a motel in June 2001. The following circumstances prevailed.
- The cause of the fire was attributed to an electrical fault.
- The business was amply insured for both Material Damage and Business Interruption.
- The motel was the owner’s only source of income.
- The business was financed through a bank loan already at its limit. The loan was not in default prior to the fire.
- The Policyholder exhausted savings and then borrowed money from friends to meet daily living expenses pending payment of insurance proceeds.
In September 2001 the leasing company repossessed the Policyholder’s car when payments defaulted.
Liability was admitted in October 2001 and a progress payment of $250,000 was received, some 4 months after the fire. This magically appeared in the Policyholder’s bank account without the completion of any formal documentation e.g. Letter of Notification or Form of Release, i.e. without any formal correspondence.
The Policyholder utilised part of these funds to purchase a second hand car and repay loans to friends.
Within days friends advised the Policyholder that repayment cheques had bounced. On contacting the bank he was informed that his account had been frozen. The bank were concerned insurance proceeds were being utilised for purposes other than bank loan repayments and rebuilding. The bank had not communicated this to their client. After discussion the bank eventually progressively released funds.
The building was not reinstated by the end of the maximum indemnity period selected in the Business Interruption cover. This delay was partly attributed to poor communciation. Any Loss of Gross Profit after June 2002 was not Insured.
Perhaps these problems would not have arisen if:-
- Meetings involving all parties (includng the bank) were regularly convened.
- Liability had been admitted more promptly.
- Progress payments had been made sooner.
- Forms of Release had been signed so all parties were aware of the nature and extent of payments.
Communication is a vital to amicably settle insurance claims.
Author
Published with permission of Claim Solutions Pty Ltd.
Insurance Policy
Country: - Australia.
Policy Description: - All policies
Insurer: - All insurers
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