As part of the re/insurance eco-system you are likely aware that insurance companies are expected to pay claims in a timely manner. And rightly so as all parties involved can benefit from this. Direct writers and assumed reinsurance deals get their expenses paid, ceding reinsurers receive their income/assets and claimants get their coverage. The expected 'timely manner' is a 90-day period. Unfortunately this doesn't always happen which can have consequences. So how can you strive to keep outstanding claims under the 90-day old threshold? Read on to find out!
What happens when a claim goes over the 90-day mark?
Depending on the perspective taken (accounting, valuation, etc.) a claim can move from an admitted asset to a non-admitted asset which can have a major (negative) impact on the bottom line if the dollar amount in question is large. In a perfect world, all claims would be paid prior to reaching the 90-day mark.
Why do claims go beyond the 90-day threshold?
There are various reasons why a claim goes beyond this threshold, three common ones include:
- Disputes on poorly written/incomplete treaty documentation (this usually happens on older blocks of business)
- Data conversions where original data is difficult to find slowing down processing/communication
- Missing data due to manual entering of data
As soon as a ceding entity knows that an insured has died, a pending claim is setup and the expected income to offset the original expected expense can be recognized. I say 'expected income' and 'expense' because at this point it is not known how much will be paid out to the beneficiary(ies). Direct insurers usually do not settle a claim until they have received legitimate proof of death and a claim form from the beneficiary requesting their rightful proceeds.
As I learned recently at the Canadian Reinsurance Conference,some insurers are starting to push the envelope on this. Under certain circumstances a benefit is paid without requiring the beneficiary to provide any documentation. When the claim has been processed, the payment will include the death benefit, applicable interest, additional payouts (depending on the product), and deductions for any outstanding loans or unearned premium on the policy at the time of death.
What needs to happen for a ceded reinsurance claim to be paid in a timely manner?
There are three key components:
- Streamline your process for submitting claims
- Identify & address any retention/ceding issues as soon as possible
- Initiate dialogue between the ceding assumed entities on any discrepancies or concerns early in the process
In most cases, issues are addressed and resolved long before a claim reaches the 90-day mark. However in order to successfully move claims through to completion, you should have a plan in place to accomplish the three components mentioned above. I'll walk you through the first component, streamlining your claims submission, now and in my next blog share how to accomplish components 2 & 3.
How to streamline your claims submission process?
One way to streamline this process is by submitting claims notices electronically. This eliminates the manual process of copying, printing or faxing which can be very time consuming. It also ensures more accurate data as you don't have to manually enter the data. And allows you to send claims consistently to reinsurers versus various time throughout the month. If you are currently using TAIB300 Claims program, you have the ability to submit claims electronically. (Reference this article if you aren't sure how to set them up).
Once you have a streamlined process, your next priority is having strong communication with your business partners. (This will help you accomplish components 2 & 3 mentioned above).
Stay tuned for part 2 of this blog, I'll explain my communication approach for moving claims through to completion. In the meantime, get step by step instructions for setting up electronic reinsurance claims.
Learn how to set up electronic reinsurance claims here: