Open Claim – Active and Unresolved Loss
In plain language: An open claim, in insurance terms, is simply an insurance claim that has been made but hasn’t been resolved or settled yet.
Technical definition: An open claim is a loss case that has been reported to the insurance carrier but remains under investigation, under negotiation, or otherwise pending from the insurer’s perspective. This term is most associated with Property & Casualty insurance, including commercial auto, medical claims, and liability coverage lines. The status of the claim frequently appears in the claims data portion of the policyholder’s account.
Imagine an injury claim reported to your insurance provider but it’s been weeks and the claim is yet to be settled, this is what’s known as an open claim. It is often a source of frustration for policyholders and insurance agencies alike.
TL;DR
- An open claim is an unresolved insurance loss event.
- It’s key to effective practice management within insurance agencies.
- A common pitfall is miscommunication during the claim process.
- Prompt and effective claims communication is a best practice for agencies.
What Is Open Claim in Insurance?
When an insured party makes a claim, the process doesn’t always wrap up quickly. In fact, sometimes it takes weeks or months for the matter to be resolved. While that claim is in process, it’s referred to as an “open claim”. The open claim remains in this status until the insurance carrier has finished their investigation, decided on the payout, and the claim money has been accepted by the insured or their representative.
Open claims are a key part of any insurance carrier’s work, they appear on insurance policy details, contributing to the pool of open claims data that agencies must manage. They also exist in all lines of insurance, inclusive among these is general liability and the pending claim is an integral part that aids insurance agencies in the longitudinal analysis of claims from the customer’s first notification of loss throughout their healthcare journey or other loss types.
Agencies dealing with open claims have to be aware of certain issues. If an open claim stays unresolved for too long, it can become an aging claim. These can raise red flags for both the insured and the insurer, since typically a fast resolution is ideal for all parties.
Key Related Terms to Know
- Pending Claim — A claim that has been filed but the decision about coverage is still on hold.
- Closed Claim — A claim where all payments have been made and nothing further is expected.
- Aging Claim — An older open claim that has not been resolved in a timely manner.
- Claims Data — Statistical data collected about claims, used for various analyses by insurance agencies.
Common Questions About Open Claim
What differentiates open claims from closed claims?
Open claims are active, meaning the insurance provider is still in the process of investigating or negotiating the claim. On the other hand, closed claims have been resolved in some way, either with a payout or a decision to deny the claim. The claims data will reflect the status of the claim as either open or closed.
Does the length of time a claim remains open affect anything?
The length of time a claim remains open can be important. Prolonged open claims often signal complications and can lead to higher reserves and possibly a rate increase.
How are open claims data used in insurance?
Open claims data is a critical resource for insurance agencies. It’s used for modeling, forecasting, and to discover trends in losses and claims handling. For example, high volumes of open claims in commercial auto could signify the need for enhanced underwriting or changes in rates.
What happens if an open claim is being disputed?
When an open claim is disputed, it remains open until the dispute is resolved. This may require additional investigation, negotiation, or legal action. It’s important for agencies to maintain clear claims communication to manage expectations and reduce frustration.
Open Claim vs. Closed Claim
Open claims and closed claims differentiate two common states of an insurance claim’s lifecycle.
Comparison Area | Open Claim | Closed Claim
|
Primary use case | Under investigation or negotiation | All payments made and nothing pending |
Coverage / concept type | In-process coverage issue | Resolved coverage event |
Typical exclusions | N/A | N/A |
Who is most affected by errors | Policyholders, Claim Handlers | Audit teams |
Common mistakes | Unresponsive claimants, missing info | Improper claim closure |
Real Claim Examples Involving Open Claim
Scenario 1: A business files a general liability claim after a customer tripped and injured herself leaving their store. The medical claims remain as an open claim on their insurance policy while the insurance provider investigates and the customer’s medical treatments are still ongoing.
Scenario 2: An insured homeowner reports a break-in where valuable jewelry was stolen. The open claim remains in that state for several weeks while the insurer arranges for a reputable jewelry specialist to price the cost of replacement.
Scenario 3: A commercial auto claim is made for a delivery truck that was involved in a multi-car accident. The claim remains open during multiple rounds of negotiation to determine who was at fault, how much the insurer will pay, and whether the truck can be repaired or must be replaced.
Limitations and Common Mistake
- Mistakenly thinking an open claim is the same as an approved claim.
- Failure to follow up on open claims, resulting in an aging claims problem.
- Losing track of claims status, leading to incorrect open claims data.
- Not understanding the impact of open claims on potential rate increases.
- Inadequate claims communication leading to misunderstandings and frustration for policyholders.
How to Explain Open Claim to Clients
Personal Lines client “Think of an open claim like a repair shop working on your car. It’s not ready yet. They’re still investigating what happened, negotiating costs, or waiting for parts or processes to complete. When all that’s done, and repairs are finished, then the ‘work order’ (or in this case, the claim) gets closed.”
Small Business owner “An open claim in your general liability or commercial auto policy means we’re still working on your case. It’s like a customer order you’re still processing, once we’re settled on the amount and paid out, we will move it to completed or ‘closed’ in our system.”
CFO or Risk Manager “An open claim is the financial equivalent of an ‘accounts pending.’ The final amount isn’t yet known or paid until the issue is resolved. You need to know that while a claim is open, it could still impact your premiums and reserves as it’s considered an unclosed financial obligation of the insurer.”