Insurance (Claims Management) Directive, 2014

135 The Malawi Gazette Supplement, dated 15th August, 2014, containing Regulations, Rules, etc. (No. 13A)

GOVERNMENT NOTICE NO. 25

INSURANCE ACT, 2009 (No. 9 of 2010)

INSURANCE (CLAIMS MANAGEMENT) DIRECTIVE, 2014

ARRANGEMENT OF PARAGRAPHS

PARAGRAPH

PART I—PRELIMINARY

1. Citation
2. Application
3. Interpretation

PART II—OBJECTIVES 4. Objectives

PART III—SPECIFIC REQUIREMENTS 5. Claim processing procedures 6. Prioritising policy holders 7. Claim files 8. Claim settlement function 9. Claim payment 10. Complaints resolution function 11. Claim complaint and dispute settlement 12. Obligation of insurance brokers

PART IV—CLAIM SETTLING AGENTS AND PROCEDURES 13. Licensing of a claim settling agent 14. Presentation of claim settlement documents 15. Reporting requirements

PART V—ENFORCEMENT 16. Monetary penalties

IN EXERCISE of the powers conferred by section 79(3) of the Insurance Act, 2010, I, CHARLES S. R. CHUKA, Registrar of Financial Institutions, issue the following Directive—

PART I—PRELIMINARY

1. This Directive may be cited as the Insurance (Claims Management) Citation Directive, 2014.

2. This Directive shall apply to insurers, insurance brokers and claim Application settling agents licensed under the Financial Services Act 2010, and any other Act No. 26 of person providing insurance claims management services. 2010

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Interpretation 3. In this Directive, unless the context otherwise requires— "Claim" means a demand for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation arising from an insurance policy; "Claimant" means a person who has a right to a claim arising from a contract between a policyholder and an insurer; Act No. 26 of "Claim Settling Agent" means any person licensed under the Financial 2010 Services Act whose role is largely to facilitate the settlement of claims; "Claim Settlement Document" means any document used to support claims; "Insurance Claims Management Services" means the provision of advice or other services in relation to the intimation, official lodging, processing and settling of a claim; Cap 3: 04 "Legal Practitioner" means any person licensed as a legal practitioner in terms of the Legal Education and Legal Practitioners Act, and who provides insurance claims management services; "Letter of Appointment" means a letter by which a Claimant authorizes a person providing insurance claims management services to process a claim on his behalf; and Act No. 9 of "Policyholder" bears the same meaning as "owner" in the Insurance Act. 2010

PART II—OBJECTIVES

Objectives 4. The objectives of this Directive are to— (a) ensure that legitimate claims are settled in a fair and timely manner; and (b) improve the insurance industry's public image through prompt settlement of claims.

PART III—SPECIFIC REQUIREMENTS

Claim 5.—(1) An insurer shall within five (5) working days of receipt of processing a notification of a claim from a claimant— procedures (a) provide necessary claim forms, instructions on procedures relating to the claim, and any other assistance to the claimant; (b) issue a written acknowledgement to the claimant identifying a liaison person in relation to the claim, including the liaison person's name, direct or mobile number and the claim number; (2) An insurer shall provide the claimant with an explanation of the rationale for the involvement, if any, of other parties such as loss adjusters, legal practitioners, doctors or consultants unless there is an investigation relating to fraud; (3) An insurer shall within ten (10) working days after the period referred

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to in subparagraph (1) has lapsed, respond to all other subsequent communications from the claimant or his agent; (4) An insurer shall, where it appears that the claim is not covered by the insurance policy, send a notification within five (5) working days after the period referred to in subparagraph (3) has lapsed, to the claimant, explaining why the claim is not covered. (5) An insurer shall ensure that— (a) any method which takes into account specific factors such as depreciation, discounting or negligence on the part of the claimant is clearly explained to the claimant; and (b) any loss valuation methods used are clear and coherent with regard to acceptable standard market practice. (6)—(a) Where claim processing requires the investigation of a claim by an independent body or individual, the insurer shall ensure that such an investigation is concluded within a reasonable period, in any case not later than fourteen (14) days. (b) the policyholder and insurer shall have the right to appoint a loss assessor of their own choice at their own expense, provided the appointed loss assessor has a valid licence issued by the Registrar or is acceptable to the Registrar. (c) where the investigation cannot be concluded within the prescribed period of fourteen (14) calendar days, an insurer shall notify the claimant and extend the period of investigation; provided that any period of investigation extended therefrom shall not exceed sixty (60) working days. (7) An insurer shall process an insurance claim and present the discharge certificate to the claimant within seven (7) working days of receipt of the investigation report or claim settlement documents. (8) Where the claim cannot be processed by reason of the findings of the investigation report, the insurer shall notify the claimant promptly.

6.—(1) Except where an insurance policy is arranged on a co-insurance Prioritising basis, if claim settlement procedures involve several insurers or reinsurers, policyholder policyholder indemnification shall be a priority and the claim shall be compensated in an appropriate time period while potential disputes between insurers and other parties shall be resolved at a later stage. (2) Where all necessary and relevant claim settlement documents are made available to the insurer, the insurer shall not refuse to settle a legitimate third party claim on the basis that the insurer's policyholder has not reported the issue.

7.—(1) An insurer shall maintain a file for each claim processed which Claim files shall include, but not limited to, the following information and documents— (a) claim number; (b) policy number;

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(c) name of the claimant or any other interested party; (d) summary sheet showing development or review of the claim; (e) type of insurance cover; (f) opening date of the file; (g) date of loss; (h) date of receipt of claim report by insurer; (i) description of the claim; (j) information on claimants; (k) assessment date; (l) electronic and paper copy of the loss adjustors' and investigators' reports where applicable; (m) identity of the loss adjuster; (n) estimated cost of damage including monitored revisions; (o) dates and amounts of payments; (p) date of repudiation, if applicable; (q) name of intermediary, if applicable; (r) date of file closure; (s) records of excess deductions; (t) reinsurers (if any); (u) policy period; and (v) premium status. (2) An insurer shall keep files of the information stated in subparagraph (i) electronically and well updated to allow easy verification of timely settlement of claims as well as trends in settlements and expenses.

Claim 8.—(1) An insurer shall have a claim settlement function which shall be settlement independent from the underwriting function. function (2) An insurer's claim settlement function shall have claim settlement procedures that are compiled in a manual for internal use. (3) An insurer shall ensure that the manual is kept up to date. (4) An insurer shall ensure that the claim settlement function staff possess proper qualifications and experience. (5) An insurer shall provide its claims department staff with appropriate training on fraud detection and prevention. (6) An insurer shall implement and update a statistical database tracing the insurer's performance in the timely settlement of claims as well as trends in settlements and expenses.

Claims 9.—(1) Where an insurer is settling an insurance claim through a Claim payment Settling Agent, or any other person providing insurance claims management services, the insurer shall issue cheques in the following manner—

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(a) a cheque in the name of the Claim Settling Agent or any other person who provides insurance claims management services providing for his fees; and (b) a cheque in the name of the claimant, being settlement of the claim. (2) Where a claim is repudiated, an insurer shall state explicitly to the claimant the policy provision, conditions or exclusion on which the repudiation is based subject to the principle of reasonableness and fairness. (3) Where the amount offered is different from the amount claimed, the insurer shall explain the reason for the difference to the claimant.

10.—(1) An insurer shall establish an internal complaints resolution Complaints function. resolution function (2) Where there is a dispute, the insurer shall inform the claimant of the existence of the internal complaints resolution scheme and other available external sources of recourse.

11.—(1) Where the claimant is dissatisfied with the insurer's initial Claim response, the claimant may commence an internal complaints resolution complaint and process. dispute settlement (2) Where the claimant files a complaint, the insurer shall— (a) acknowledge receipt of the complaint within five (5) working days; (b) provide the claimant with explanations and procedures on how the complaint will be handled, including arbitration; (c) process complaints promptly and fairly; (d) keep the claimant regularly informed of how the complaint is progressing; (e) provide a final response in writing within fourteen (14) working days. (3) Where the claimant is still dissatisfied with the outcome of the internal complaints resolution process, the claimant may appeal to the Registrar.

12. An insurance broker shall— Obligation of (a) within five (5) working days of receiving a claim from a insurance claimant notify an insurer; brokers (b) explain the claims settlement process to the claimant; and (c) pass on the claim settlement cheque to the claimant within three (3) working days of receipt of the same from the insurer.

PART IV—CLAIM SETTLING AGENTS AND PROCEDURES

13. Any person, unless such person is a legal practitioner, shall not Licensing of provide insurance claims management services unless licensed as a Claim a claim Settling Agent under the Financial Services Act, 2010. settling agent Act No 26 of 2010

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Presentation of 14. Any person providing insurance claims management services shall claim present to the insurer, at the commencement of the claim settlement process, settlement claim settlement documents which shall include a letter of appointment documents signed by the claimant.

Reporting 15.—(1) A Claim Settling Agent shall provide information on claims requirements handled to the Registrar within fifteen (15) days after the end of each quarter. (2) An insurer shall submit to the Registrar— (a) information on claim complaints handled within fifteen (15) days after the end of each quarter; and (b) a report on all claims handled outside the recommended time frames.

PART V—ENFORCEMENT

Monetary 16. Where an insurer contravenes this Directive, the Registrar, apart penalties Act from the administrative penalties and sanctions in the Financial Services Act, No. 9 of 2010 2010 may impose the following— (a) a fine of ten thousand Kwacha (K10,000) for failure to respond to a claimant within the periods stipulated in this Directive, and one thousand Kwacha (K1,000) for each day of delay; (b) a fine of ten thousand Kwacha (K10,000) for failure by an insurance broker to notify an insurer of a claim within five (5) working days of receiving the claim and one thousand Kwacha (K1,000) for each day of delay; (c) a fine of five thousand Kwacha (K5,000) for each claim file not appropriately maintained per the provisions in paragraph 7 of this Directive; (d) a fine of up to 25% of the claim for failure to settle claims with in fourteen (14) days after signing of a claim discharge certificate; and (e) Interest on the claim amount in subparagraph (d), calculated using the simple interest method at the ruling Reserve Bank rate which shall be payable to the claimant.

Made this 7th day of July, 2014

C. S. R. CHUKA (FILE NO. EAD/FSDU/10/01 Registrar of Financial Institutions