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13

Claims Management

By Richard S. Bakka *

     To understand the importance of reinsurance claims management, one must know the three functions that precede it -- marketing, underwriting, and contract drafting. As the payment of the claim is the conclusion of the reinsurance transaction, mastery of claims management is possible only with a thorough knowledge of the reinsured's past and its relationship with the reinsurer, as treated in earlier chapters. The function of marketing is to secure and service clients of the reinsurer. Next is underwriting, which structures and prices the reinsurance coverages chosen by those clients. Finally (before claims, that is), the contract drafters reduce to writing the agreement of the parties. In the total process, the claims officer has the last opportunity and perhaps the greatest responsibility to see that the true purpose of reinsurance is realized: the proper assessment and prompt payment for the reinsured's insurance losses.

     This chapter can be thought of as a training document. In its preparation, the author has cited noted books, periodicals and articles by recognized industry authorities. Key legal cases have been cited and footnoted, but there is a recognition that changing legal environments and legislation can limit their value. The author has also relied on practical insights from experienced practitioners, always a valuable resource. Their so-called war stories have been particularly rewarding, especially in the perspectives revealed. The following recounts the historical and chronological perception of a wise and venerable claims executive, stressing the changes occurring in the claims world. In the 1950's and 60's the claims executive reported to his CEO that, by dint of shrewd and skillful negotiation, he had successfully settled a claim for well below the policy limit. In the 1970's, he advised the CEO that a claim was settled for the policy limit, and a nominal amount


* Administrative Officer of AMRECO Operations under the Illinois Office of the Special Deputy, 222 Merchandise Mart Plaza, Suite 1450, Chicago IL 60654. A curriculum vitae follows this chapter.

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