PGI Claims Management 2

Question 1

What is 'alternative dispute resolution' (ADR) and when is it preferred in commercial insurance?

Accepted Answer

Methods such as mediation, negotiation, and arbitration that resolve disputes without formal court proceedings, preferred for speed, cost, and confidentiality

Answer

A method of resolving disputes through armed conflict

Answer

An alternative form of insurance coverage

Answer

A government-mandated process for all insurance disputes

Question 2

What is 'claims frequency' versus 'claims severity' in portfolio monitoring?

Accepted Answer

Frequency is the number of claims per policy or exposure unit; severity is the average cost per claim — both must be monitored to manage portfolio profitability

Answer

Frequency measures how fast claims are paid; severity measures how slow they are paid

Answer

Frequency applies to property claims; severity to liability claims

Answer

Severity is always more important to monitor than frequency

Question 3

What is 'ex gratia' payment and when might an insurer use it in claims management?

Accepted Answer

Payment made as a goodwill gesture without admission of liability under the policy, often to maintain customer relationships or resolve borderline cases

Answer

Payment made as a legal obligation under the policy

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Payment made only after court order

Answer

Payment of the full sum insured automatically

Question 4

What is 'reservation of rights' and why is it important in commercial claims management?

Accepted Answer

A letter allowing the insurer to investigate and potentially defend a claim while preserving the right to deny coverage if a coverage issue is confirmed

Answer

The insurer's right to reserve premium income

Answer

The insured's right to reserve specific claims handlers

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A reservation of future reinsurance capacity

Question 5

What is 'loss development factor' in actuarial claims reserving?

Accepted Answer

A multiplier applied to immature claims data to project ultimate losses, accounting for the fact that claims are not fully reported or paid at the time of assessment

Answer

The factor by which premiums develop over the policy period

Answer

The factor adjusting for inflation in claims costs

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A discount factor applied to future claim payments

Question 6

What is the Singapore Financial Disputes Resolution process hierarchy for large commercial insurance claims?

Accepted Answer

Internal dispute resolution first, then Singapore International Arbitration Centre (SIAC) or Singapore Mediation Centre (SMC) for commercial disputes, and ultimately the courts

Answer

All commercial claims must go directly to MAS

Answer

Commercial disputes bypass FIDReC and go directly to court

Answer

All commercial insurance disputes must be resolved within 30 days