If all steps in the claims adjustment process are taken in sequence, which step should occur after investigation but before resolution?
The correct answer and explanation is:
Correct Answer: Negotiation
Explanation (300 words):
The claims adjustment process is a series of steps insurance companies follow to evaluate and settle insurance claims. These steps help ensure that each claim is processed fairly and efficiently. The typical sequence includes:
- Notice of Loss – The policyholder reports the loss or damage to the insurance company.
- Acknowledgment of Claim – The insurer acknowledges receipt and assigns a claims adjuster.
- Investigation – The adjuster gathers facts, examines evidence, interviews witnesses, and reviews policy details.
- Negotiation – After the investigation, the adjuster and claimant may negotiate the amount to be paid.
- Resolution (Settlement) – Once an agreement is reached, the claim is settled.
- Closing the Claim – Final paperwork is completed, and the case is closed.
After the investigation, the adjuster has all the facts needed to evaluate the claim’s validity and value. At this point, the process moves into the negotiation phase. This step involves discussion between the insurer and the claimant (or their representative) to determine an acceptable amount to settle the claim. The adjuster may make an offer based on the policy terms, the extent of the loss, and the evidence collected. The claimant can accept, reject, or counter the offer.
Negotiation is crucial because it ensures both parties are satisfied with the outcome before any money changes hands. Skipping this step could lead to disputes, dissatisfaction, or legal challenges later.
Only after a mutual agreement is reached in negotiation does the claim move to the resolution or settlement phase, where payment is issued. Thus, negotiation logically and procedurally follows investigation and comes before resolution in the claims adjustment process.