Insurance-Claims by 74m5iQ


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    Type               Category                  Risk

Claims       Systems               Risk that the systems in use in the
                                  claims area are not adequate to
                                  support quality claims handling

             Performance           Risk that fraudulent claims are
 Risk that claims staff generate
fraudulent claims payments for the
benefit of themselves or associates
                   Risk that third party suppliers are
                  submitting fraudulent or inflated
                  invoices. Examples of third party
                  suppliers include garage repair
                  shops, carpet fitters, doctors etc.

Claims             Risk that claims policy does not
                  comply with statutory requirements
                  for claims handling and reserving

         Policy    Risk that Claims reserving policy is
                  wrong, resulting either in reserves
                  being too low to cover the potential
                  cost of claims, or too high resulting
                  in under-utilization of resources
Performance    Risk that inflated, fraudulent or
              invalid claims are being settled. An
              invalid claim is a claim that is not
              covered by or is specifically
              excluded from the policy, such as a
              pre-existing condition.
                                                                                   Documentation W/P    Test
    Description of control                      Audit Procedure                          Ref.          W/P Ref

 Segregation of duties enforced Test that the system enforces segregation
by the system                   of duties. In particular ensure that one
                                handler cannot enter and pay the same

 Accurate and regular MI         Test that if the system allows default
System defaults cannot be over- values to be over-ridden, these require
ridden by one member of staff management authorization. Over-rides
but require authorization       could include reserve adjustments or
                                payment of claims not covered by the

 Original documentation is held Test that the original documentation has
for each claim paid             been scanned into the system, and cross-
                                check this to the paper file where the
                                originals should be available.

 The system prevents payment Test that the system prevents the entry
of duplicate claims          and payment of duplicate claims by
                             flagging up potential duplicates.

                                    Test that if the system is restored from a
                                   backup, procedures are in place to prevent
                                   the re-entry and payment of claims already
                                   paid. (ie claims paid between the backup
                                   being taken and the restore).

                                    These procedures may include manual
                                   identification of such claims.

 Software identifies potentially    Test that pattern-identification software is
fraudulent claims                  in use to identify odd or unusual patterns
                                   in claims data

                                    Test that the IT systems in use identify
                                   potentially fraudulent claims and prevent
                                   these being paid until investigation is
 Specialist team investigates all Test that all claims identified as potentially
potentially fraudulent claims     fraudulent are investigated prior to
                                  payment. Ideally there should be a
                                  specialist team of fraud investigators to
                                  whom all such claims are passed.

 Claims handlers are trained to Test a sample of claims identified as
identify potentially fraudulent potentially fraudulent and verify that they
claims and in the appropriate   were not paid until the appropriate
actions to take.                investigation had been undertaken.

                                   Test that all claims handlers are trained in
                                  fraud identification and in the appropriate
                                  actions to take.

 Claims Fraud Trends are           Test that procedures are in place to
monitored and new trends          monitor trends in claims fraud both
identified both at a company      internally and across the industry
and an industry level

Active participation in industry- Test that claims management are active
wide fraud initiatives            in industry-wide initiatives to identify and
                                  prevent fraudulent claims

 Staff are regularly advised on    Test that staff are regularly updated on
new trends in claims fraud        recent trends in claims frauds through
                                  notice boards, email and communications
                                  at staff meetings.

Vetting of new claims staff        Test a sample of new starts since the last
                                  audit. Ensure references were taken up
                                  prior to hire.

 Segregation of duties             Test that claims handlers cannot both
preventing staff both entering    enter and pay a claim.
and paying a claim

                                   Test that training ids cannot be used by
                                  staff to access live data, as these ids may
                                  allow both input and authorization of
                                  claims payments.

                                   Verify that all reopened claims are notified
                                  to and counter-signed by a senior

                                   Pay particular attention to re-opened third
                                  party claims where the payee name differs
                                  from the original claimant.
                                   Test that changes in authority for claims
                                  handlers are signed off at a senior level.

 Regular review of third party     Test that trend data is being received to
suppliers                         identify third party suppliers who are more
                                  expensive or submit more invoices than

 Customer questionnaires /         Test that random feedback on suppliers is
feedback                          received from clients who can verify the
                                  cost and the quality of the service provided

 The Board and senior           Test that Board minutes document the
management are aware of all Board's understanding of compliance
compliance requirements in the requirements in the claims area
claims area

 A senior manager reporting to Test that there is a senior manager with
a Board member is responsible overall responsibility for compliance,
for the company's compliance reporting into the Board
with claims requirements

 Regular reviews undertaken of Test that regular compliance reviews are
compliance with requirements carried out of claims handling and
for claims handling and        reserving

                                   Test that the Board is made aware of the
                                  findings of compliance reviews and the
                                  actions taken as a result

 Findings from compliance         Test that the agreed actions from
reviews are reported at a senior compliance reviews are acted upon
level and acted upon             immediately

 The company's reserving           Test that Board minutes contain a copy of
policy is set and signed off at   the current reserving policy, and
Board level.                      confirmation that it has been agreed

 Any changes in reserving          Test that any changes in reserving policy
policy are agreed and signed      are signed off in the Board minutes.
off by the Board.
                                    Changes in reserving policy may indicate
                                   other issues (eg liquidity issues,
                                   inadequate reserves) so establish why
                                   changes have been made, and that the
                                   reasons are understood at Board level.

 Systems and procedures             Test that any changes in reserves against
ensure that the reserving policy   individual claims are approved by a more
is followed by setting the         senior member of staff, and that
correct reserve against each       justification for a reduction in reserves in
claim                              particular is recorded and reviewed by

                                    Test that the claim entry system
                                   calculates and stores the correct reserve
                                   against each claim entered.

 The reserves are reviewed and Test that there is regular MI sent to the
agreed as adequate by the      senior actuary for each class of business
senior actuary on a regular    and that it is approved by that actuary
basis (monthly)

 Reserves are adequate to        Test that management reports indicate
comply with legal and statutory the adequacy of current reserves in terms
requirements                    of legal and statutory requirements.

                                    Test that the Board receives regular
                                   updates on the adequacy of current

                                    Test that any significant fluctuations in
                                   reserves are identified and actioned
                                   immediately at a senior level.

 Fraud detection procedures
are in place - see section on
claims fraud

Third party suppliers are           Test that there is a rigorous selection
monitored on a regular basis       process for new third party suppliers
                                  Test that monitoring is in place to obtain
                                 value-for-money from third party suppliers
                                 such as garage repair shops and other
                                 suppliers of goods and services

                                  Test that no new third party suppliers can
                                 be added to the system and approved by
                                 one individual.

 Management information           Test that regular MI is seen by senior
identifies unusual patterns in   management identifying unusual or
claims payments                  different patterns in claims payments - eg,
                                 a rise in the cost of certain claims

                                  Test that management have investigated
                                 any unusual or unexpected changes in the
                                 pattern of claims costs and taken remedial

 System ensures that invalid     Test that items specifically excluded from
claims cannot be processed to the policy cannot be processed to
payment. An invalid claim is    payment.
one which is not covered by the
                                 For MI purposes all claims should be
                                entered on the system, and then excluded
                                from payment if appropriate.

 Staff are trained in identifying  Test that procedure manuals clearly
invalid claims and the            outline when a claim is valid and what to
appropriate actions to take. An do if an invalid claim is received.
invalid claim is one which is not
covered by the policy.

                                  Test that staff are trained in the terms of
                                 all policy types for which they handle

 Underwriting review of claims    Test that any action points identified by
payments made to ensure they     the underwriting review are implemented
comply with the terms of the     as soon as possible and incorporated into
policy                           standard procedures.

                                  Test that there are regular reviews of
                                 claims paid by the underwriters in each
                                 class of business. These reviews should
                                 confirm that all claims paid are valid under
                                 the terms of the policy
 Regular communication    Test that the claims department passes
between claims and       queries about policy terms to underwriting
underwriting             for resolution. Also test that underwriting
                         respond quickly and definitively on each

                          Test that underwriting and claims
                         management have regular communication
                         sessions to discuss the performance of
                         the class of business and to resolve any
                         issues or misunderstandings.
  noted?     Resolution / remediation/ comments
  Yes/No                    W/P Ref
                              Client Name
                      Internal Control Framework

          Date Completed:
          Completed By:
          Reviewed By:

          Question                                                  Yes No* Comments /Description

              To the best of my knowledge, the answers and comments noted above are accu

          Name and Title of Person Completing Form (please print)                            Name and Title of Department Dire

* For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
or is to be performed.                            Questionnaire
                   Signature of Person Completing Form                                                Signature of Department

                          Date Form Completed                                                     Date of Department Directo

* For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
or is to be performed.                            Questionnaire
                           Employee Responsible for Task

s noted above are accurate and reflect the current

Name and Title of Department Director (please print)

            * For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
            or is to be performed.                            Questionnaire
   Signature of Department Director

Date of Department Director's Signature

      * For a “No” answer, cross-reference to either a compensating control or to audit work which has been performed
      or is to be performed.                            Questionnaire
Finding Ref #   Control Testing   Finding
Management Response & Treatment

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