Overview of reserves in ClaimCenter
An exposure is an object associated with a claim which is used to track a potential payment or a set of related potential payments. Every exposure is linked to one coverage (where the money is metaphorically "coming from") and one claimant (where the money is metaphorically "going to").
To ensure solvency, government regulations often require insurers to set aside money when a claim is initially filed, even if all of the details have not yet been gathered. A reserve transaction is a transaction that marks money as being set aside for the purpose. Reserve transactions are typically referred to simply as reserves.
For example, suppose that there is a claim with an exposure associated with collision coverage for a damaged car. The exposure requires an inspection and then some auto repair work. For this exposure, there might be two reserve transactions: a $500 transaction to set aside money for the inspection, and a $3000 transaction to set aside money for the auto repair work.
To help organize these reserve transactions, every exposure has one or more reserve lines. From a data model perspective, a reserve line is a category that can be applied to a financial transaction. Every reserve line is categorized by two primary values: cost type and cost category.
- Cost type identifies if the money is for indemnity or expense.
- Expense reserves are used to cover costs incurred by the insurer as a result of processing this portion of the claim. From the previous example, the $500 transaction for the auto inspection would be associated with an expense reserve.
- Indemnity reserves are used to indemnify claimants (in other words, "to restore them to the original state prior to the loss"). From the previous example, the $3000 transaction for the auto repair work would be associated with an indemnity reserve.
- Cost category classifies cost types at a more granular level.
- For example, reserve lines for a personal auto claim could have cost categories of "Auto body (repair)" or "vehicle inspection".
- Cost categories are used for financial and business tracking purposes.
Reserves can be created automatically by business rules based on the nature of a claim. For example, a business rule might create a reserve of $500 for any auto claim where the only loss is windshield damage.
Reserves can be created through the user interface.
Reserves can also be created through integration points, such as through Cloud API.
Reserve sets and approval
When a financial transaction is created, insufficient authority limits or transaction approval rules may cause the transaction to require approval. If so, the transaction must be approved by another user. Otherwise, the transaction is automatically approved.
For a given claim, multiple reserve transactions may be created at the same time and ought to be approved as a unit. (Either all transactions are approved or none of them are approved.) To facilitate this behavior, reserve transactions are grouped into reserve sets. A reserve set is a set of one or more reserve transactions submitted for approval as a unit.
Approval is executed through the use of approval activities. For more information on the business functionality of approval, see the Application Guide. For more information on activities and Cloud API, see Activities. (When the reserve set is submitted through Cloud API, the user whose authority limits are checked is the session user. For more information on how the session user is determined, refer to the Cloud API Authentication Guide.)
Reserve transactions and acknowledgment
ClaimCenter is typically integrated with several downstream systems, including a general ledger system. When ClaimCenter executes financial activity, it typically informs the general ledger. At some later point, the general ledger may acknowledge that the information about the activity has been received.When a reserve transaction is created and approved, its status is initially set to "submitting". Once the transaction has been acknowledged, its status is changed to "submitted".