It must be emphasised that not all claims received in the offices of insurers originate through the intermediary of brokers. A considerable number of cargo claims is sent directly to the Underwriters, mainly, of course, where a Company has a 100% interest in the risk insured and no broker is involved. The complexity of dealing with these claims is that they are often presented by those with little awareness of marine insurance claims, and the documentation can range from the incomplete to the non-existent. It is not strange to receive a letter which does not even quote a policy number, stating a figure alleged to be the loss, and asking for a payment.
Very often the claimant may have very little appreciation of the cover afforded by the policy conditions, and when this is of a restricted nature, precluding the loss which has arisen, tact is a useful requisite. It can therefore be seen that considerable correspondence may arise, and where liability is admitted the staff of the department will need to state the claim. Moreover, they must examine each claim with a view to effecting any recoveries, either from carriers or under reinsurance arrangements. Many reinsurance contracts are placed through brokers and claims under these contracts will be collected through the same intermediary. In these days, with the rapid growth of reinsurance, there is a considerable extension of the principle of good faith as between insurer and reinsurer and often the only evidence required is a debit note or bordereaux of loss.
The Company may also operate as Claims Settling Agents for organizations abroad, and this function can attract a considerable volume of additional claims, although they are able to charge a fee for the service rendered.
Claims settled abroad by the agents of the Company will largely be advised, but other claims will be settled by branches of the Company or in the offices of Underwriting Agents abroad that are also empowered to deal with the claims. These will need to be examined, but apparently not in the same degree as claims dealt with directly. While agents typically make in no doubt that notice of claim is given to carriers, the claims department has the responsibility of pursuing the question of recovery.
Payment to claimants in overseas countries is not too difficult under present regulations, but some difficulty can be experienced in the matter of agency balances which involve claims; and recoveries obtained in countries abroad cannot always be remitted by the agent holding them, due to currency restrictions, which are invariably regarded as temporary, but sometimes tend to drag on.
The claims department also has responsibilities in the matter of statistics. In larger groups a special statistical department may be established, as it is regarded as a helpful positive attribute to be completely up to date. However, according to the details required, many claims departments will have to be organized in a manner which ensures that the figures are speedily absorbed into the Company’s records. Settlement of a large proportion of claims is necessarily delayed, particularly where liabilities are concerned, and, of course, claims which require to be stated by Average Adjusters take some time due to the detail work involved. In these circumstances study must be undertaken in the grounding of estimates, which should be under regular appraisal as clean information becomes available.
These outstanding claims contribute a significant part in the preparation of annual accounts, as well as influencing future underwriting attitudes. Also, of course, they are necessary in negotiating renewal of reinsurance contracts.
The main reason for keeping statistics is to form a proper rating pattern, for it will be readily appreciated that in marine insurance there is a wide diversity of cargoes, vessels, ownerships, seasonal hazards, port conditions and climates, so as to make it difficult to form any general premium scales. On the hull side regulations governing the renewal of policies, known as “Understandings”, are maintained by the Joint Hull Committee which comprises Underwriters of Lloyd’s and Companies, Hull statistics will normally be kept under the name of the individual owner, while cargo statistics tend to be kept only in respect of open covers.
However, it may be desirable to maintain figures for specific commodities, or certain geographical areas.
The primary function of the claims department in the matter of statistics will be to assist in the recording of claims against the premiums in the Underwriting records. A secondary function, although no less important, is to maintain individual records in the claims department for recovery purposes under contracts of reinsurance, particularly where excess of loss is concerned, to protect an account or groups of accounts, from catastrophes. Some brokers will maintain their own statistics on individual contracts for renewal purposes, embracing both income and outgo. These will frequently be compared with those kept by the Underwriters, and in cases where they do not agree further research will be required to establish where the discrepancy lies.
Takis Kalogerakos
Marine Underwriter
