The Claims Process
The process of filing a claim merits some scrutiny, as it is one of the more sensitive aspects of insurance: crooked insurance companies will attempt to deny or underpay claims that they legitimately owe, and crooked individuals will attempt to collect claims they are not owed or exaggerate the amount they are due, and even when both parties have honest motives, disagreements can occur. And so, there's quite a lot of ritual and legal intervention.
The Process
The process for filing and paying a claim is generally documented in the insurance policy contract, and can vary widely, but tends to follow a general pattern:
First, the claimant must report the incident that leads to a claim. An insurance company typically has a standard procedure for doing this, along with a "proof of claim" form.
The insurer evaluates the information submitted to substantiate the claim, and may request additional information from the claimant to substantiate the validity of the claim. They may also require the claimant to file a police report (for auto accidents and thefts).
The insurer may also conduct its own inspection and/or investigation to surface information to substantiate or invalidated the claim. If the insurer is satisfied with the validity of the claim, it is processed for fulfillment.
In cases where the claim involves damage to property, the insurance company may seek to repair or replace the item. The company may obtain estimates for repair and provide funds to the claimant, or it may contract with a repair company to perform the repairs and pay them directly.
Once the claim is settled, it is closed. However, it may be reopened at a later time, in the event that new damage is discovered (such as health problems that arise later)
Claims Disputes
When any claimant is dissatisfied with the decision of an insurer - whether the decision is that the claim is not valid, or the settlement of the claim is not to the claimant's liking - the dispute is settled in the court system. However, there may be instances in which the terms of an insurance policy specify a dispute resolution process that requires the policyholder to submit to a specific process, generally involving arbitration, prior to (or in lieu of) pursuing the matter in the courts.
In a claim dispute, the argument is between the policyholder and the company. A claimant that has not signed the insurance agreement is legally bound by its terms. In such situations, the claimant is making a claim against the policy holder (not the insurer), though the insurer indemnifies the policyholder against a loss. However, some state laws require a claimant to deal with an insurance company directly, or at least make a good faith effort to obtain satisfaction, before filing suit.
Consumer advice: should you find yourself in a situation of being a claimant who has no signed agreement with an insurance company, you may not be compelled to negotiate with them, but can exercise your right to bring suit in the civil courts. It's generally wise to do so only in cases where the settlement offered is significantly less than you believe is fair.
Acceptance of Settlement
In some states, accepting a settlement from an insurance company is construed by law to indicate the claimant's satisfaction with that settlement, unless there is a written statement to the contrary prior to accept the settlement.
In other states, a claimant may accept a settlement, but still bring legal action against an insurer for unpaid sums, unless there is a written statement that indicates that the claimant is accepting the settlement as payment in full of their claim.
To protect themselves, some insurance companies will require claimants to sign a statement of acceptance before payment will be tendered, indicating that the claim is paid in full or enumerating any outstanding items. Any claimant would do well to read such a statement carefully before signing.
In most states, a claimant who has signed such a statement may still press for additional payment if additional damage is discovered at a later date, though some states apply limitations (or extensions) when the delay in discovery is significant - see "longevity" under "controversies."
Claims Personnel
On the insurer's side, a claim is generally handled by the following personnel:
- Adjuster - Plans and schedules the work to process a claim and determine the amount of money owed the claimant. This person largely handles the paperwork (which may include photos and video) to document the claim to the requirements of the insurer. This may include coordinating with other professionals who can inspect the damage and provide estimates.
- Appraiser - Estimates the cost or value of an insured item. Some companies have their own appraisers, others use "freelance" appraisers, and still others will leave the task of appraisal to independent companies (generally, the companies who would bid to do the repairs).
- Examiner - Ensures the claim is in order by inspecting the paperwork and information provided by the claimant and adjuster. Also audits the financial settlement to ensure the fees paid are reasonable given the facts of the claim.
- Investigator - An individual whose primary job is to investigate claims where fraud is suspected (or deemed probable), whether it's a false claim by the claimant, a padded expense estimate, or any incident where someone is trying to bilk the insurer
On the insured's side, the claim is most often handled by an individual claimant, though it is not uncommon for an individual to hire an attorney to act on their behalf. Where insurance is handled by a business, the claims are usually handled by a specific department: properties, risk management, or legal counsel
Legal Requirements
One legal requirement is that an insured must file a claim within a reasonable amount of time. The insurance policy may stipulate a time limit (which may be challenged if it is unreasonable), legal statutes may specify one, or the "reasonableness" may be evaluated by a judge if litigation ensues. This is a matter of some controversy where claims are filed long in arrears, or by third parties (see "controversies").
Also regarding date, the insurer must honor the terms of a policy that were in effect on the date that a loss occurred. Even if the policy later expired, or was cancelled, or was renewed under different terms, the insurer is bound by the terms of the original policy on the dates it was in effect.
The claimant is also responsible, even in advance of receiving a settlement, for taking measures to prevent additional damage from occurring. For example, if a window is broken in a windstorm and the claimant fails to board it over, the insurer is not required to compensate for a theft that occurs in which the perpetrator gained access through the open window.
When a claim involves a cash settlement on leveraged property (an auto or home with an outstanding loan), the insurer may be required by law to provide any cash payment to the company that provided the loan (as it is often the legal "owner" until the loan is repaid), and the claimant must work through that company to arrange repairs or have cash disbursed.
Dueling Insurers
In some instances, two or more insurers may become involved in a dispute over which of them is responsible for paying a claim. The most common instance is an automobile collision, where drivers argue over who is at fault for an accident, and their insurance companies join the fray, but there may be other instances (which can be truly bizarre) in which insurers will argue over which company must indemnify.
In most states, there is no remedy for the claimant, who must wait out the battle (even if it's a prolonged court case) before receiving a settlement. No-fault insurance (see "controversies") was implemented to remedy this. Even where no-fault insurance is not required, some insurance companies include terms that permit/require them to pay their own customer in advance or receiving a judgment and collect from the other party's insurance company if/when blame is resolved.