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Unit 3 Nature of the Industry
arbitration. Arbitration is the process of bringing the dispute in front
of a professional mediator. A mediator looks at both sides of the
case, favoring neither side, and then makes a judgment. The result of
this process is binding to both parties, whether they agree with the
outcome or not.
It is important for the policyholder to use the insurance when it is
needed. But, before filing a claim, policyholders need to consider the
possible impact to their insurance coverage. Someone who has several
claims against an automobile policy in one year, for example, may find
the insurance carrier will not renew the policy for the next year. Or,
the carrier may renew the policy, but raise the premium. If the damage
is something the policyholder can afford to handle without insurance,
that option should be considered.
Real World Case
The insurance carrier that sold a homeowner’s policy
to Jacob’s older brother, Silas, recently canceled it. Silas filed
several claims for damages throughout his first year of
coverage. For example, he filed for storm damage when he
had to replace shingles on his roof. Then he filed to replace
his gutters when another storm ripped them from his house.
How could Silas have done things differently to maintain his
coverage? He could have replaced the shingles himself after the first storm.
The cost of fixing the roof was $750, and Silas’ deductible was $500. It was
not worth filing the claim to only receive $250 for the repair.
If Silas had contacted the agent who sold him the policy, he could have
been advised on the impact his claims might have on his coverage status.
Checkpoint 10.3
1. What is the process of documenting a loss against a policy?
2. What insurance professional is responsible for arriving at a final
settlement with the policyholder after a claim has been made?
3. The result of what dispute-resolution process is binding on both sides?
4. When are the services of a mediator needed?
5. What should a policyholder carefully consider before filing a claim?
Build Your Vocabulary
As you progress through this course, develop a personal glossary of
insurance terms. This will help you build your vocabulary and prepare you
for a career in insurance. Write out a definition for each of the following
terms, and add it to your personal insurance glossary.
claim
loss adjuster
arbitration
mediator