What does Draft Authority refer to in insurance claims?

Draft Authority in insurance claims typically refers to the limit on amounts a claims representative can personally settle. This concept ensures that claims adjusters and representatives operate within predefined parameters when determining how much compensation can be offered without requiring further approvals. This system helps manage risk for the insurance company by preventing representatives from settling large claims that could significantly impact the insurer’s financial obligations.

By setting limits on draft authority, the insurer maintains a level of control over claims payouts while allowing adjusters to expedite the claims process for smaller amounts. Having this framework in place helps safeguard the insurer's reserves and ensures that claims are settled efficiently within their operational policies. Understanding draft authority is crucial for claims adjusters, as it directly impacts their decision-making capabilities and the claims handling process.