Insurance WAEC

Insurance Claims

Overview

A policy is only a promise until something goes wrong. The claim is the moment that promise is tested: the shop burns, the lorry overturns, the warehouse is broken into, and the insured turns to the insurer and says, in effect, now keep your word. How that request is made, checked and paid is the claims process, and it is where insurance either earns its reputation or loses it.

In this lesson you will follow a claim from the first phone call to the final cheque: what the insured must do, what the insurer must do in reply, and the two very different experts who may be called in to value the loss. You will learn why some claims are paid in full, why others are cut down, and why a few are turned away completely. Get this topic right and you understand how the whole promise of insurance is actually delivered.

Objectives

  1. Describe the claim procedure from notification of loss to final settlement
  2. State the duties of the insured when a loss occurs
  3. State the duties of the underwriter in handling a claim
  4. Distinguish the roles of the loss assessor and the loss adjuster
  5. Explain the grounds on which an insurer may repudiate a claim

Mind map

This topic is mapped out so you can see how the ideas connect.

Flashcards

Quick recall practice on the facts this topic is tested on.

Lesson Note

Musa runs a provisions store in Kano. One night a wiring fault sets the shop alight and destroys most of his stock. He has a fire policy, so he assumes a cheque is simply on its way. Instead a stranger arrives to inspect the ruins, he is handed a form to fill, and he is asked for receipts he never kept. Weeks pass before any money moves. None of this is the insurer being difficult. It is the claims process working exactly as it should: a series of steps that protects the honest insured, the honest insurer, and every other policyholder whose premiums sit in the same pool. Learn the steps and the duties, and nothing in a claim will surprise you.

Lesson Evaluation

Congratulations on completing the lesson on Insurance Claims. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.

You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.

Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.

  1. Which of the following is the FIRST step in the claims procedure? A. Completion of the claim form B. Notification of the loss to the insurer C. Appointment of a loss adjuster D. Signing of the discharge voucher Answer: B
  2. A loss adjuster is appointed and paid by the: A. Insured B. Insurer C. Government D. Loss assessor Answer: B
  3. The document signed by the insured to accept a settlement and release the insurer from further liability is the: A. Claim form B. Cover note C. Discharge voucher D. Proposal form Answer: C
  4. An insurer's assessed loss is 4,000,000 naira on a fully insured property with an excess of 250,000 naira. How much will the insurer pay? A. 4,000,000 naira B. 4,250,000 naira C. 3,750,000 naira D. 250,000 naira Answer: C
  5. An insurer may rightly repudiate a claim where the: A. Insured notified the loss promptly B. Loss was caused by a peril the policy excludes C. Property was fully insured D. Insured completed the claim form truthfully Answer: B

Recommended Books

Principles of Risk Management and Insurance
Principles of Risk Management and Insurance
Subtitle: Thirteenth edition
Publisher: Pearson
Year: 2016
ISBN: 978-0-13-408257-8
Description: The standard introduction to risk and insurance, covering risk management, insurer operations and the main lines of life, health, property and liability cover.
Fundamentals of Risk and Insurance
Fundamentals of Risk and Insurance
Subtitle: Tenth edition
Publisher: Wiley
Year: 2008
ISBN: 978-0-470-08753-4
Description: A clear account of the nature of risk and the economics of insurance, written for beginning students across life, health, property and liability insurance.
Fundamentals of Insurance
Fundamentals of Insurance
Subtitle: Second edition
Publisher: Himalaya Publishing House
Year: 2017
ISBN: 978-93-5097-079-9
Description: An accessible treatment of insurance in four parts: the basics of risk, insurance management, life insurance and non-life insurance.

Revision Questions

Wondering what past questions for this topic looks like? Here are a number of questions about Insurance Claims from previous years

WAEC SSCE - Insurance - 2016

Question 1 Report

PETER CITUKWU'S MOTOR INSURANCE CLAIM Mr. Peter Chukwu owns a Peugeot 406 saloon car which he insured for a value of #2,000,000.00 with Integrity Insurance Plc on comprehensive basis. He uses this vehicle for social, domestic, pleasure purposes and in connection with his business but not for hire and reward. One day, as he was going to the beach with his two children, Emeka and Pauline, he got involved in an accident with another car, a Honda Accord belonging to Mr. Bayo Samuel. Mr. Bayo Samuel was descending a hill at a high speed and consequently hit the back side of Mr. Peter Chukwu's cat damaging the rear bumper, two rear lights and the booth. An argument ensued between Mr. Peter Chukwu and Mr. Bayo Samuel as to how to settle the issue. It was however discovered that Mr. Bayo Samuel had a third party motor insurance cover with Adequate Insurance Company Limited. The accident was reported to Integrity Insurance Plc by Mr. Peter Chukwu who subsequently submitted estimate of repairs, in the sum of two hundred and fifth thousand naira (N250,000.00). The insurer of Mr. Peter Chukwu admitted liability and paid the sum of one hundred and eighty thousand naira (#180,000.00) after adjustment and wrote to Adequate Insurance Company Limited for recovery of its outlay. Mr. Peter Chukwu took delivery of the damaged bumper and rear lights from his mechanic after fixing his car and took them home with the intention of repairing them for sale.

Required:

(a) Identify the principle involved in the case and why?

(b) Explain the principle identified.

(c) Who should take the delivery of the damaged parts of the Peugeot 406 car?

(d) Explain two covers available under the insurance policy held by Mr. Peter Chukwu 
 

Answer Details

(a) Principle involved and why

The principle involved is subrogation. It arises because after Integrity Insurance Plc indemnified Mr. Peter Chukwu by paying N180,000, it then wrote to Adequate Insurance Company Limited (the insurer of the party at fault, Mr. Bayo Samuel) to recover the amount it had paid out. Stepping into the insured's shoes to recover the loss from the third party who caused the accident is the essence of subrogation.

(b) Explanation of the principle

Subrogation is the right of an insurer, having fully indemnified the insured, to take over the insured's legal rights and remedies against any third party responsible for the loss. Its purpose is to support the principle of indemnity by ensuring the insured does not profit twice, once from the insurer and again from the wrongdoer. Any sum recovered belongs to the insurer up to the amount it paid, and any excess is returned to the insured.

(c) Who should take delivery of the damaged parts

The insurer, Integrity Insurance Plc, should take delivery of the damaged bumper and rear lights. Under the principle of salvage, which flows from indemnity and subrogation, once the insurer has paid the full cost of repairs the damaged parts (the salvage) belong to it. Mr. Peter Chukwu is not entitled to keep and sell them, because doing so would let him make a profit out of his loss.

(d) Two covers available under his policy (comprehensive)

  1. Own damage cover: Indemnifies Mr. Chukwu for accidental or collision damage to his own Peugeot 406, meeting the cost of repairing the rear bumper, lights and booth up to the insured value.
  2. Third party liability cover: Protects him against legal liability for death or bodily injury to other persons and damage to their property caused by his vehicle.
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