An insurance claim can arise from any number of events – from coverage of damage by water to damage of an insured’s house by fire. Insurance policies are like one-way contracts; the insurer is the lone person making a binding legal promise. Then again, for a policy holder to acquire the reimbursement of his/her policy and for the policy to be constantly renewed, there are certain necessities that he/she needs to carry out. If the insurance company discovers irresponsibility, in any way that could increase the chances of risk in a claim, it may consider discontinuing the insurance coverage.
When an accident takes place, the extent of damage is reviewed and if it is established that the claim meets the criteria, than depending on the agreement, time and sanction given in the policy, the insurer will have to pay within the fiscal limits of the policy i.e., depending on the kind of coverage one has. Also in the case of life insurance policies including cash values, the benefits possibly will decrease if there is any case of an outstanding loan. Insurance claims filed with local representatives of the insurance company. After a claim is filed, the insurance company sends out an investigator called an appraiser, for investigating the specific details of the insurance claim and negotiates the payment from the main insurers by assessing the extent of risk that each one of the potentially insured individual presents and indict a premium accordingly. The insurance appraiser calculates the insurance claim and determines if the repair estimates are even. They do this to avoid the risk of covering more claims than premiums which will result in them being incapable to hold up their part of the agreement proposed for the policy holders. Insurance companies are likely to accept the adjustor’s evaluation as the final word on the insurance claim. If any false information is discovered in the underwriting, there is a chance that the policy will be canceled and all the premium payments made will be returned.
Insurance companies keep aside a precise amount of their income pro policy reserves. Policy reserves signify the probable extent of claims that they will be obliged to pay since the money in the reserves, ensures their capability to pay it. The responsibility of the insured is to pay the premiums punctually, in their due time. If the premiums are not paid, the policy will expire and the insurance company will not be liable to pay the benefits any longer notwithstanding the number of premiums that have been paid earlier. The insurance provider should be kept updated incase of any changes. What both these parties have in common is that pressures are mounting on all sides whenever there is a hefty claim. In majority of the cases, companies are not being able to accumulate for future claim recoveries where there is a dispute on the claim. However in case of large claims this can cause major banking or stock exchange implications, in addition to the low cash flow outcome of delayed payment. In order for the notion of insurance to work properly, the relation between a policyholder and an insurance company should be a partnership. Both the parties should be able to count on each other and stand by the guiding principle of the contract.
In Risk Management a process of categorization is followed to determine the risks that can cause the maximum loss or impact and the most likelihood of incidents are dealt with first. Risks with lesser rate of occurrence and less loss are managed in descending method. However, in actual practice the process of assessing overall risk can be difficult as balancing of the resources to mitigate between risks with a high possibility of occurring but causing lower loss and a risk with lower probability of occurrence but high loss can frequently be mismanaged. Risk management is the classification, assessment, and prioritization of risks followed by coordinated and fiscal application of resources to reduce, monitor and control the possibility or impact of a disastrous incident or in order to maximize the opportunities. Risks can happen due to innumerable factors like uncertainty in economic, project failures, legal charge, credit risk, accidents, as well as natural disasters. Risk management presents a clear and planned approach to detect risks. It helps an organization to determine and prioritize the risks and take suitable actions to minimize the losses.
Nearly 40 percent of the workplaces that are closed due to an emergency never open again and 25 percent of the remaining, close within one year.
In order to counter the above statistic, employers must have a business stability and risk management plan to make sure that important business operations, are able to run continuously even when the building itself is closed. There are several types of insurance to aid businesses, ranging from ransom insurance to general liability insurance. An employer practicing sound business risk management should make sure that their insurance covers all the areas that might be practically affected. Also, employers in order of the safety of their employees should have specific safety plans for any workplace calamity whether natural or man-made and has a possibility of occurring in the workplace.
Employers should do two key things in order to protect their business from risk:
- Either appoint a person or hire an outsourced risk manager to lead a team for conducting risk assessments and ensure that the risk control procedures are executed without delay after the estimation while also informing all employees about the risks in order to minimize or if possible, eliminate it.
- Also maintain a risk assessment register and review assessment at least once in every three years or in case a significant change in the work takes place. All employers are required to maintain a register of injuries sustained by their employees, whether they conclude in a claim or not. Employees’ compensation is payable under the Workers Compensation and Injury Management Act to an employee who incurs a personal injury by accident taking place out of or in course of employment – or at the time when the worker is carrying out the employer’s instructions. The employee could be sanctioned for payment of weekly remuneration while he/she is unable to work, medical expenses, therapy expenses and permanent damage in some cases.
Proficient claims management is vital for an organization in today’s aggressively competitive and controversial claims market. Outsourced risk management firms like Auspice, can provide aid in generating an approach to claims where they are not just dealt with, but assertively managed. Auspice’s key responsibility is to negotiate contracts, establish Special Management Guidelines, appraise claim reserve valuation and carry claims into motion. It is also important to have a team that evaluates claims during various points in time starting from investigation to settlement, ensuring that all upgrading techniques have been exercised including analytical, medical, inability, legal actions and special investigation.
Girija Shaffer , CEO & Founder of Auspice Risk, has developed a full suite of customized risk management services offered nationally to Risk Managers, Insurance Program Managers, Brokers & Agents. Recognized for her ability to increase customer retention rates, increasing business development opportunities and providing outstanding customer service.