Claims and Your Insurance, how do they work?

Claims are, arguably, the most important aspect of insurance. After all, you typically buy insurance to ensure that you will have financial support should you experience a loss; so, ensuring that you are able to receive the compensation you are entitled to is important.

Making a claim under your insurance can actually be extremely easy with modern plans. All sorts of technology exist to ensure that you have your claim processed as quickly and efficiently as possible. However, at CCW Global we are aware that not everyone is an expert in insurance and as such the concept of claims may be confusing or even intimidating.

So, join us as we take a look at claims and how they function on your insurance.

What is an Insurance Claim?

As ever it is useful to remind ourselves of the definition of insurance: an equitable exchange of risk in return for a predetermined fee. Under this definition claims are the mechanism by which the risk is exchanged.

Insurance, as a concept, is intended to assist you after a loss. In fact, modern insurance has its roots in the 17th century shipping trade. The risk for ship owners is that their cargo would be lost at sea leaving them with a catastrophic financial loss. By purchasing insurance, the ship owners would be compensated by the underwriters should any loss occur.

This is to say, were a 17th century ship owner experience a financial loss, the ship may have washed ashore in a storm, and they were holding a policy of insurance, they would be able to make a “claim” or reimbursement on their policy. After receiving the claim, and assessing whether it was valid, the insurance underwriter would then provide monetary compensation to the policyholder for their loss.

This idea has not changed much in the last 400 odd years. In fact, this is very much the same manner in which claims are processed today, even though the technology and efficiency of managing the insurance claim has improved. It is important, however, to note that not all claims are equal and that even on a single insurance policy a claim can be handled in a multitude of different ways.

Health Insurance Claims

Health Insurance, both in Hong Kong and Internationally, is a great way to look at and understand claims. This is due to the fact that in a Health Insurance plan there are often two claims’ mechanisms operating alongside each other.

Before we get into the exact operations of these mechanisms

Direct Settlement

One of the major selling points of many health insurance products is the claims network offered by the insurer. Within a claims network the insurance company is able to settle the bills relating to your treatment directly with the healthcare provider – which is why this method of claims handling is referred to as “direct settlement.”

Under a direct settlement claim the insurer will simply pay the healthcare provider for your treatment.

While some forms of treatment will require pre-authorization in order to receive direct settlement under a health insurance policy, this method of claims handling is the simplest and most efficient for both the insurer and the policyholder. Additionally, direct settlement ensures that the policyholder does not have to worry about having to pay for their medical treatment at what is likely an extremely stressful time in their life.

Pay and Claim Reimbursement

The second form of claim mechanism typically found on health insurance products is known as “pay and claim.”

As the name suggests, with this second claim type the policyholder first pays for their healthcare and then completes and submits a claim to the insurance company. The insurance company processes the claim and then reimburses the policyholder for their healthcare.

With this type of claim the policyholder needs to have enough money to pay for their medical treatment as they will only be reimbursed for their costs. As such, pay and claim has the potential to cause some financial strain on a policyholder, especially if it is occurring in relation to inpatient healthcare treatment.

For every day doctor’s visits and routine checkups, where the overall cost of treatment is relatively low, pay and claim is the normal method of claims handling.

Issues and Problems with Claims Processing

In the examples we outlined above there is the assumption that the claim will be paid in full. That is to say, the policyholder will receive coverage or reimbursement of the full amount paid for their healthcare treatment. However, it is important to note that there are factors on your policy which may not lead to a true, 100% reimbursement in a claims situation – no matter what type of policy you may hold.

From car insurance to event and contingency insurance, it is important to pay attention to your policy’s terms and conditions, and even the application process.

Deductibles and Excesses

The main reason why a claim would not be paid, or reimbursed in full, is the existence of a deductible or excess on the policy. A deductible is an amount of money you must contribute towards the cost of your own loss.

For example, in Car Insurance each accident will normally have a deductible. In Hong Kong this is usually in the region of $5,000 – 10,000. This means should you suffer an accident for which you are not at fault you would need to first pay the deductible before the insurance covers the balance.

In Health Insurance a deductible is a voluntary contribution. A health insurance policy does not need to include a deductible, but choosing to place one on your policy can mean a significant premium discount. If a health insurance policy contains a deductible, then you would first need to meet the costs of that deductible with the insurance covering any remaining costs.

For example, if an annual US$1,000 deductible exists on a policy then the policyholder would be responsible for covering their first $1,000 in healthcare costs each year, with the insurance covering the remainder.

Because you contribute towards the overall cost of your loss event with a deductible, its existence will prevent you from receiving the full claim amount. In cases where a deductible exists you will be required to contribute, at least partially, to any loss or claim you make.

Exclusions

Exclusions are an area of your insurance which will materially impact your ability to receive a settled claim under the plan. Exclusions exist on every type and form of insurance, but as a policyholder you are unable to claim for something that was specifically excluded from the policy.

A great example of this is pre-existing medical conditions in health insurance.

Unless otherwise specified, pre-existing medical conditions are normally excluded from coverage under a Hong Kong health insurance policy. For perfect clarity, pre-existing medical conditions are defined as any medical condition for which the policyholder required treatment, received medication, displayed symptoms, or was aware of prior to the commencement of the policy.

Claims concerning conditions which meet this definition are typically excluded from coverage; meaning no reimbursement or direct settlement is possible. Unless the pre-existing condition is otherwise specified for inclusion in coverage, or a mechanism like a moratorium period exists, then the claim for the condition will not be settled.

Claims Assistance from CCW Global

Claims are an extremely important part of any insurance policy – they are the primary function of insurance, after all, ensuring that risk is transferred in line with the definition of the product.

However, with so many different types of insurance, and even different types of claim within the same class of policy, it can be difficult to understand how to navigate the claims process. While there are some underwriters providing credit card claims solutions, and taking claims information via WhatsApp, there are other providers who are still relying on old-school pen and paper methods of claim submission and management.

On top of this, you may run into a situation where you think your claim is valid, but the insurance company is denying any coverage. Without understanding the ins-and-outs of the policy completely, or having a high-level understanding of the claims process, dealing with this specific situation can be extremely frustrating, stressful, and costly.

Thankfully CCW Global is able to offer all of our clients with comprehensive claims assistance through our client services team. We are able to walk our clients through the claims process for any policy they hold with us, and assist when they need additional help liaising with the insurance companies to ensure that claims are paid in a timely and efficient manner.

If you have any questions about claims on your Hong Kong or international insurance policies, or if you would like to receive a free quote for any of the policies offered by CCW Global please Contact Us today.

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