An insurance claim is a formal request by a user to an insurance product for coverage or compensation for a covered loss or policy event. If a claim is approved, the insurance contract will issue payment to the insured or an authorized interested party on behalf of the insured. Over-collateralization (OC) provides collateral worth more than the value of potential losses in default cases. Thereby reducing the impact of the risk. Under collateralization is where a policy is not fully collateralized, increasing the impact of potential risks.