The claim settlement is the final stage of the claim process in insurance. At this point, the claim has been notified by the insured, all parties involved have carried out their respective duties. The insurer can settle claims that arise and accepted under the terms of the insurance contract in the following ways:
- Payment of money
- Replacement of the item covered
- Paying for repairs
Let us break them down below.
Payment of money: This could be done in cash, cheque, or an electronic transfer to the beneficiary of the claim proceeds as stipulated in the contract. It is the easiest way to grant indemnity. This can be seen mostly in life insurance. You can refer to this post to learn about professional indemnity insurance.
Replacement: there could be an arrangement by the insurer to replace the lost, damaged or stolen goods. The most common type of replacement is in car insurance.
Reinstatement: An insurer can agree to reinstate a claim settlement, especially in the case of a damaged building. This also means that the insurer will pay the cost of restoring the building in full even if it exceeds the agreed sum insured.
Paying For Repairs: An insurer can easily opt for payment for repairs. In this case, the insurer requests for a written estimate for cost of repairs and paying the cost directly to the repairer. This type of settlement is also common in car insurance
Methods of Claim Recovery
There are three significant ways an insurer can recover insurance claims once the claim has been fully paid, and they include the following:
- Contribution: this is the right of an insurer that has paid the claim in full to ask other insurers who are also liable to share the claims payment
- Subrogation: this is the right of the insurer to make recovery from any third-party who must have caused or contributed to loss or damage
- Right Of Recovery: this may occur where the lost or stolen item is recovered after the insurer must have paid the claim. If the claim money is returned to the insurer in full by the insured, he has the right to collect the property back from the insurer.
Some insurance claims could be fraudulent, and the insurer has to investigate claims before settling the claims at all costs. In Nigeria, it becomes an offence for any insurer who doesn’t investigate claims upon notification from the insured.
Every insurance company has its claims unit for fraud prevention. This unit works closely with the underwriting and audit units respectively to confirm the authenticity of any claim notification received by the insurer.