Claims Mangement In Life Insurance

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certain amount of money as premium to make good the loss of life arising out of akes in exchange for a fixed sum called premiums, to pay the other party called insthe amount secured under the policy of insurance contract promised by Insurer.

Claims Management in Life Insurance

CHAPTER:-1

Introduction to Insurance

IntroductionHuman life is subject to risks of death and disability due to natural and

accidental causes. When human life is lost or a person is disabled permanently or

temporarily, there is a loss of income to the household. The family is put to

hardship. Sometimes, survival itself is at stake for the dependants. Risks are

unpredictable. Death/disability may occur when one least expects it. An

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individual can protect himself or herself against such contingencies through life

insurance.

Though Human life cannot be valued, a monetary sum could be

determined which is based on loss of income in future years.Hence in life insurance, the Sum Assured (or the amountguaranteed to be paid in the event of a loss) is by way of abenefit in the case of life insurance.

It is the uncertainty that is risk, which gives rise to the necessity for some

form of protection against the financial loss arising from death. Insurance

substitutes this uncertainty by certainty. The primary purpose of life insurance is

the protection of the family. Insurance in its various forms protects against such

misfortunes by having the losses of the unfortunate few paid by the contribution

of the many that are exposed to the same risk. This is the essence of insurance

the sharing of losses and substitution of certainty for uncertainty.

There are a variety of life insurance products to suit to the needs of various

categories of peoplechildren, youth, women, middle-aged persons, old people;

and also rural people, etc. Life insurance products could be purchased from

registered life insurers notified by the IRDA. Insurers appoint insurance agents to

sell their products. Public who are interested to buy life insurance products should

receive proper advice from insurance agents/insurer so that a right product could

be chosen to suit particular financial needs.

History of Insurance sector

The business of life insurance in India in its existing form started in India in

the year 1818 with the establishment of the Oriental Life Insurance Company in

Calcutta.

Some of the important milestones in the life insurance business in India are:

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1912: The Indian Life Assurance Companies Act enacted as the first

statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and non-life

insurance businesses.

1938: Earlier legislation consolidated and amended to by the

Insurance Act with the objective of protecting the interests of the

insuring public.

1956: 245 Indian and foreign insurers and provident societies taken

over by the central government and nationalized. LIC formed by an Act

of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5

crore from the Government of India.

The General insurance business in India, on the other hand, can trace its

roots to the Triton Insurance Company Ltd., the first general insurance company

established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first

company to transact all classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance

Association of India, frames a code of conduct for ensuring fair conduct

and sound business practices.

1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India with effect from 1st

January 1973.

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107 insurers amalgamated and grouped into four companies viz.

the National Insurance Company Ltd., the New India Assurance

Company Ltd., the Oriental Insurance Company Ltd. and the United

India Insurance Company Ltd. GIC incorporated as a company.

In 1993, Malhotra Committee headed by former Finance Secretary

and RBI Governor R.N. Malhotra was formed to evaluate the Indian

insurance industry and recommend its future direction The Malhotra

committee was set up with the objective of complementing the reforms

initiated in the financial sector. The reforms were aimed at "creating a

more efficient and competitive financial system suitable for the

requirements of the economy keeping in mind the structural changes

currently underway and recognizing that insurance is an important part of

the overall financial system where it was necessary to address the need

for similar reforms.

Thereafter many changes have taken place in the insurance sector.

Insurance sector in India was liberalized in March 2000 with the passage

of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting

all entry restrictions for private players and allowing foreign players to

enter the market with some limits on direct foreign ownership. There is a

26% equity cap for foreign partners in an insurance company. There is a

proposal to increase this limit to 49%. The opening up of the insurancesector has led to rapid growth of the sector. Presently, there are 16 life

insurance companies and 15 non-life insurance companies in the market.

The potential for growth of insurance industry in India is immense as

nearly 80% of Indian population is without life insurance cover while

health insurance and non-life insurance continues to be well below

international standards.

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Furthermore, over the medium and long term, Indias insurance

market will continue to experience major changes as its operating

environment increasingly deregulates. On the one hand, a mix of new

products, new delivery systems and a greater awareness of risk will

generate growth. On the other hand, competition will remain intense as

private sector insurers and those about to enter India seek to win market

share from the more established public sector entities.

Insurance in India

The insurance sector in India has become a full circle from being an open

competitive market to nationalization and back to a liberalized market

again. Tracing the developments in the Indian insurance sector reveals the

360-degree turn witnessed over a period of almost two centuries.

Today Insurance Companies in India have grown manifold. The insurance

sector in India has shown immense growth potential. Even today a giant share of

Indian population nearly 80% is not under life insurance coverage, let alone

health and non-life insurance policies. This clearly indicates the potential for

insurance companies to grow their market in India.

In simple terms it is a contract between the person who buys

Insurance and an Insurance company who sold the Policy. By entering

into contract the Insurance Company agrees to pay the Policy holder or

his family members a predetermined sum of money in case of any

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unfortunate event for a predetermined fixed sum payable which is in

normal term called Insurance Premiums.

Insurance is basically a protection against a financial loss which can

arise on the happening of an unexpected event. Insurance companies

collect premiums to provide for this protection. By paying a very small

sum of money a person can safeguard himself and his family financially

from an unfortunate event.

CHAPTER:-2

Claims Management

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Claims Management

Many insurers have recognized the need to improve the efficiency of

their claims management process. They have streamlined processes,

eliminated paper-based forms and redistributed work to match the

demands to skills. The objective of their efforts is to lower costs, while

also increasing overall throughput. Efficiency improvements make tasks

quicker and less costly to execute. However, to realize even greater

improvements in the claims handling process, insurers must also focus on

the effectiveness of their claims decisions.

Claims handling costs typically represent 10% to 15% of net earned

premium; in contrast, claims payouts represent 40% to 65%. Insurers

that expand their focus to include effective as well as efficient claims

processing will find a far larger pool of savings opportunities. Technology

can play a significant role by providing integrated channels for

communication and collaboration. This would help the insurance company

increase employee productivity by reducing cycle time and defect rate and

also increase employeeparticipation and compliance.

Claims Processing sometimes involves collating and sharing large

amounts of information among multiple parties involved in a claim, from

body shops to adjusters to investigators to lawyers and doctors to

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claimants and regulators. And it involves the knowledge of experienced

adjusters to determine the fair and appropriate outcome of a claim. In

fact, losses and loss expenses absorb 80% of premium collected by

carriers.

Service representatives and claims adjusters need to access data

from multiple sources when processing or assessing a claim, which delays

settlement time and increases costs. Manual steps reduce transparency of

the claims process and raise the risk of fraud, manipulation or simply

human error. Customer retention is also a challenge experts say that 75

percent of customers leave their insurer due to claims issues.

System of claims management

Basis of claims management:

Claims management means and includes all the managerial decisions andprocesses concerning the settlement and payment of claims in accordance with

the terms of insurance contract. It includes carrying out the entire claims process

with a particular emphasis on monitoring and lowering the claims costs. The

important elements of claims management are claims preparation, claims

philosophy, claims processing and claims settlement.

The claims philosophy is defined as procedure or specified approach tosettle the claims. It contains the claims management principles and also claims

handling methods and procedures. The claims philosophy includes the

preparation of guidelines regarding the receipt of claims from the insurers or

claimants, analysis of the claims, consideration of the possible decision on the

particular issues and disputes, evaluating the impact of the claims cost and

expenses, relation of claims to the consumer satisfaction, monitoring the claim

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payment and improving the efficiency of the claims settlement and payment

systems and avoiding unnecessary disputes of claims.

The claims process includes the basic claims procedure and handling of

claims. The handling of claims includes the monitoring of situation or events,

which cause the loss to the insured subject matter and give a cause to the insured

to make a claim. The claims process contains two fold procedures to be followed

by the insurer and insured. From the point of view of the insured, it includes the

suffering of loss or the damage, understanding and identifying the cause of action,

information or giving notice of claim or loss to the insurer, providing sufficient

proof of loss to the insurer or his agent or the loss assessor and surveyors. The

insurer, on the receipt of the claim from the insured, has to take certain immediate

precautions such as verifying the claims, reviewing the claim application, respond

to the claimant, carry out claims investigation, claims negotiation, claim

settlement and claim payment.

Stages in claims system:

The claims handling is the integrated part of the claims management and

executes the decisions made by the claims management machinery of an

insurance company. Though claims management and claims handling are

generally the same externally, they are different in nature.

Claims management:

Claims management is a managerial function in which the insurer has a

definite role to play in analysis of data, processing of application, decision-

making, budget planning, and business control and fund management. It is a

subjective concept. In claims management, the attention is on making principles

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and guidelines for smooth and profitable settlement of claims in the hands of the

insurer.

Claims management includes the entire process of claims handling and

claims payment. This includes review of the claims performance, monitoring of

claims expenses, legal costs, settlement costs, compromises and planning for

future payments and avoiding the delay and disputes in payment of claims. It is a

control system that has an important place in the claims management. It also

includes risk management techniques, loss assessment, and business forecasting

and planning.

Claims handling:

Claims handling is the procedural way of processing a claims application.

Claims handling involves utilization of the laid down principles as yardsticks and

the measuring methods in settling the issues before it occurs. Claims handling is a

traditional form of managing the claims settlements. It includes handling of

various stages of the insurance claims. It is functional in nature such as claims

review, investigation and understanding the negotiating process. It does not

include any managerial outlook such as risk management, policy making and

decision making.

Thus, it is concerned with the procedural methods and also

interpretations of the claims philosophy. Claims handling may change from

case to case depending on the merits of the claim, but it will not

drastically change every moment. It is a flexible as well as a rigid way of

handling the issues having interest of the insurer in mind. It is a

systematic way of receiving the claims and following other procedures

required for quicker and efficient payment of the claims. Every insurer has

a standardized way of claims handling which will improve quality and

customer service. The insurers commitment to the service of the

customer is a part of the claims management.

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Claims in Insurance

An insurance claim is the actual application for benefits providedby an insurance company. Policy holders must first file aninsurance claim before any money can be disbursed to the hospitalor repair shop or other contracted service. The insurance companymay or may not approve the claim, based on their ownassessment of the circumstances.Individuals who take out home,life, health, or automobile insurance policies must maintain regularpayments called premiums to the insurers. Most of the time thesepremiums are used to settle another person's insurance claim or tobuild up the available assets of the insurance company.

When claims are filed, the insured has to observe the settled rules

and procedures and the insurer has also to reciprocate in a similar

manner by undertaking appropriate steps for speedy disposal of claims. It

is true that claims settlement is complex in nature, but it is the driving

force to plant confidence in the hearts of people, in general and

beneficiaries in specific. Insurance claim is a right of insured under a

contract of insurance. Insurance contract is a contract by which one party

called the insurer promises to save the other party, the insured on

payment of consideration known as the premium. The insurer promises to

save the insured are nominees/assignees of the insured on happening of

event or risk insured. Disputes crop up in the payment of claim when the

insurer and the insured understand the process of claims payment in a

different way. Claims settlement is an integral part of the insurance

business which is a service industry and its growth is interwoven with the

people, the customers and consumers of service. It is inevitable for the

insurance company to protect and guard the interests of the

policyholders. An insurance claim is the only way to officially apply for

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benefits under an insurance policy, but until the insurance company has

assessed the situation it will remain only a claim, not a pay-out.

CHAPTER:-3

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Study on LIC

Life Insurance Corporation of

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The Life Insurance Corporation (LIC) was established about 44 years

ago with a view to provide an insurance cover against various risks in life.

A monolith then, the corporation, enjoyed a monopoly status and became

synonymous with life insurance. Its main asset is its staff strength of 1.24

lakh employees and 2,048 branches and over six lakh agency force.

LIC has hundred divisional offices and has established extensive training

facilities at all levels. At the apex, is the Management Development Institute,

seven Zonal Training Centers and 35 Sales Training Centers.LIC of India is one

of Indias leading financial institutions, offering complete financial solutions that

encompass every sphere of life. From commercial banking to stock broking to

mutual funds to life insurance to investment banking, the group caters to the

financials needs of individuals and corporate. The LIC has a net of over Rs. 1,800

crore. With a presence in 82cities in India and it services a customer base of over

20, 00,000.

At the industry level, along with the Government and the GIC, it has

helped establish the National Insurance Academy. It presently transacts

individual life insurance businesses, group insurance businesses, social

security schemes and pensions, grants housing loans through its

subsidiary; and markets savings and investment products through its

mutual fund. It pays off about Rs 6,000 crore annually to 5.6 million

policyholders.

It has been started with the objectives of spreading Life Insurance

widely and in particular to the rural areas, meet the various life insurance

needs of the community that would arise in the changing social and

economic environment.

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Organizational Structure of LIC

The organization is the form having independent or co-ordinated

parts for unit action for the accomplishment of common objectives. As

such the organization relating to insurance business is a form having

different functional divisional units with the ultimate aim of providing

effective services to the customers of the insurance products. An effective

organization is essential to share information and effectively execute the

managerial decisions. The organizational structure differs for different

types of business. The organization structure is based on the objectives or

mission of the business organization. The organization should be

structured with an aim to coordinate, not only with internal managers or

groups, but also with the external world, the customers, authorities and

other persons directly or indirectly interested in it.

The insurance business is concerned with the functions of marketing

of insurance products and its related functions like premium collections

and premium fixings, accepting the insurance proposals, issuing policy

documents, maintain records relating t the policies issued everyday in

chronological order, and also payment of claims. The claims department is

associated with the receipt of claims and arrangement of claims

investigations. After it is decided whether to make payment to theassured or to defer it, the insurance company may seek guidance from

the panel of advocates. The insurance company needs to protect the

company from the claims litigations of the clients by defending the claims

in the courts and supervise other alternative dispute resolutions. Thus the

insurance organization is associated with the marketing of policies,

underwriting of policies, claims payment, claims defending and stff

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matters. The delegation of duties to each unit with well-defined

limitations, responsibilities and decision making are all related to the

organizational structure and management.

Basic structure of LIC

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Today, most of functions, nearly 90%, related to the marketing and

other related activities of the insurance consumers are dealt and handled

at the branch level. The branch office, depending upon its business, is

headed by a manager and each function of insurance business like

marketing, underwriting of policies, accounts, claims payments, staff and

administration matters are identified as departments of the branch office

with responsible officials such as Administration and Accounts Officers.

The managerial decisions are based on the information supplied by

the AAO, the functional head at root level. All the functions of claims will

be settled at the branch level. The AAO of life insurance business will deal

with maturity and death claims. If the branch is smaller, all the types of

claims will be dealt by one AAO and if the branch is bigger with good

number of claims, they will be settled by, separate officials. At branch

level, these officials have to maintain cordial relations and establish a

system of sharing information with the other departments, relating to the

policy documents, payment of premium and using the staff or the agents

for the settlement of claims disputes. The branches maintain records

relating to the claims payment and claims rejections. They will submit the

reports to the Zonal Officer, who in turn will forward it to the Head Office

or Corporate Office.

The branches report to their respective divisional office. If anybranch gets a claim and there is a problem in identifying the correct

claimant among the claimants, or otherwise, a dispute of risk crops up,

which will be forwarded to the divisional office with its comments. The

divisional office after receiving the papers, verifies them, applies legal

knowledge and skills, or seeks advice from skilled persons and tries to

solve the problems. The divisional office is responsible to settle the claims

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referred by the branch office and also report the same to the zonal office,

which in turn will consolidate the data and submit the same as required

by the statute or otherwise under any law to the government. The

government will put the same for the approval of the both the houses.

At the division office level, the claims department generally deals

with the claims, which are pending with the branches because of some

disputes, or some claims which are of high value. The investment portfolio

and establishment and maintenance of reserves for the purpose of claims

payment or otherwise required under the law is the important function of

the central office. Thus the organizational structure of the insurance

business is most flexible and decided, based on the above said factors.

Claims Management Department

The claims department is one of the key departments in an

insurance company. The claims department has the following functions to

perform:

To provide the customers of insurance and reinsurance

companies with high quality of service. This role gives a long-term

edge to the company and hence is referred to as the strategic role.

To monitor the claims and see that whether the benefits of

insurance exceed the costs of claims. This role is referred to as the

cost-monitoring role of the claims department.

To see that the expectations of the customers are met with

regard to speed, manner and efficiency of the service. This is

called the customer service role of the claims department.

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To meet the standard of service, to keep up to the customers

expectations and still operate within the budget. This is the

managerial role of the claims department.

Both the quality of the service and cost of claims is the responsibility

of the claims department. The department has to look after the proper

mix of the two. The cost of claims must not exceed a given level in trying

to render a very good service to the customer. So the claims department

should work with due diligence to balance the two parameters. The

estimation of future liabilities is just as important as control over the claim

payments. As the claims department is in direct touch with the customer,

it has to ensure the quality of service.

The claims department has the sole responsibility of managing

claims. Claims management by far is the most complex issue in an

insurance company. The people in the claim department should have

good interpersonal skills. If they are not able to irk in harmony the

customers will not receive quality service. There should be sufficient

number of people as managers so as to simplify job and proper human

resource systems in place so that such persons are recruited whose

philosophy goes with the mission and vision of the organization. It has

become imperative for the claims department to provide quality service to

the customers so that the corporate goals are achieved. The claimsdepartment, in effect, acts as an interface between the customer service

quality and insurance companys objectives. It has to be given the proper

weight age and motivation so that the business as a whole functions well.

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Types of claims

Understanding the requirements for various life insurance benefits (claims)

is important for the customers. The overriding condition on claims is the payment

of premiums i.e. claims are only payable if premiums are paid up to date. There

are various types of claims under life policies. The most common claims include:

The general requirements for each of these claims are briefly explained

below.

Death Claims:

This is a claim paid when then the person insured dies. For a death claim to

be paid the following basic conditions must be fulfilled.

The policy document, original death certificate, burial permit copy

of the ID of the deceased must be provided to the insurance company

A report from the doctor who treated the deceased must be

presented to the insurance company

Claim forms must be completed

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A report from the doctor who last treated the deceased person may

be required

A police abstract report may be required where death occurs

through an accident

The documentation required for payment of death claims are easily

available and claimants need to immediately inform the insurance company

where problems are encountered in securing the documents. The documents are

usually required so as to reduce on the possibility of paying fraudulent claims or

paying the wrong claimants. Many insurance companies will frequently waive

certain requirements under certain special circumstances.

Maturity Claims:

A maturity claim is paid out mostly on endowment and education insurance

policies whose duration has expired. For example in an insurance policy with

duration of 15 years, the maturity value will be paid on the 15 th anniversary after

affecting the policy. Payment of a maturity claim is a straightforward affair where

the customer returns the original policy document and signs a discharge form.

The claim cheque is usually released in a period of about two weeks once all

required conditions are fulfilled.

Partial Maturity Claims:

Most endowment and education policies provide for payment of partial

maturities after a given duration. The partial maturity is normally paid on set

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dates in the policy document. A typical education policy of 10 years provides for

payment of 20% of the sum insured after four years and every year thereafter

until the expiry of the policy. The life insurance company usually prepares partial

maturity cheques in an automated manner and the customer does not have to

claim. The cheque is either sent directly to the customer or the nearest branch

office for ease of collection.

Surrender Value Claims:

When a customer is unable to continue with the payment of premiums due

to unplanned events like retrenchment or dismissal he has the option of encashing

the policy to receive the surrender value so long as the policy has been in force

for more than 3 years. The procedure for lodging this type of claim is very simple

and is similar to the maturity claim whereby the customer returns the policy

document and signs a discharge form. The claim cheque is then paid to the

customer within two weeks.

Policy Loans:

This is strictly not a claim but a benefit given out by life companies for life

policies that have been in force for at least three years. To receive a policy loan

directly from a life company entails assigning the policy to the life company and

receiving a loan cheque. The insurance policy can also be assigned to a bank and

the loan is then granted by the banks and the policy document utilized as security

for the loan.

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Disability Claims:

This will arise in life policies where the customer purchases a personal

accident policy rider as an additional benefit. Disability claims are payable

subject to sufficient medical evidence being provided as proof of disablement.

CHAPTER:-4

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Guidelines by IRDA

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Guidelines for claims settlement by

IRDA

Proposal for insurance:

1) Except in cases of a marine insurance cover, where current market

practices do not insist on a written proposal form, in all cases, a proposal for grant

of a cover, either for life business or for general business, must be evidenced by a

written document. It is the duties of an insurer to furnish to the insured free of

charge, within 30 days of the acceptance of a proposal, a copy of the proposal

form.

2) Forms and documents used in the grant of cover may, depending

upon the circumstances of each case, be made available in languages recognized

under the Constitution of India.

3) In filling the form of proposal, the prospect is to be guided by the

provisions of Section 45 of the Act. Any proposal form seeking information for

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grant of life cover may prominently state therein the requirements of Section 45

of the Act.

4) Where a proposal form is not used, the insurer shall record the

information obtained orally or in writing, and confirm it within a period of 15

days thereof with the proposer and incorporate the information in its cover note or

policy. The onus of proof shall rest with the insurer in respect of any information

not so recorded, where the insurer claims that the proposer suppressed any

material information or provided misleading or false information on any matter

material to the grant of a cover.

5) Wherever the benefit of nomination is available to the proposer, in

terms of the Act or the conditions of policy, the insurer shall draw the attention of

the proposer to it and encourage the prospect to avail the facility.

6) Proposals shall be processed by the insurer with speed and

efficiency and all decisions thereof shall be communicated by it in writing within

a reasonable period not exceeding 15 days from receipt of proposals by the

insurer.

Matters to be stated in life insurance policy:

1. A life insurance policy shall clearly state:a) the name of the plan governing the policy, its terms and

conditions;

b) whether it is participating in profits or not;

c) the basis of participation in profits such as cash bonus, deferred

bonus, simple or compound reversionary bonus;

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d) the benefits payable and the contingencies upon which these are

payable and the other terms and conditions of the insurance contract;

e) the details of the riders attaching to the main policy;

f) the date of commencement of risk and the date of maturity or

date(s) on which the benefits are payable;

g) The premiums payable, periodicity of payment, grace period

allowed for payment of the premium, the date the last installment of

premium, the implication of discontinuing the payment of an

installment(s) of premium and also the provisions of a guaranteed

surrender value.

h) the age at entry and whether the same has been admitted;

i) the policy requirements for (a) conversion of the policy into

paid up policy, (b) surrender (c) non-forfeiture and (d) revival of lapsed

policies;

j) contingencies excluded from the scope of the cover, both in

respect of the main policy and the riders;

k) the provisions for nomination, assignment, and loans on

security of the policy and a statement that the rate of interest payable on

such loan amount shall be as prescribed by the insurer at the time of

taking the loan;

l) Any special clauses or conditions, such as, first pregnancy

clause, suicide clause etc.; andm) The address of the insurer to which all communications in

respect of the policy shall be sent.

n) The documents that are normally required to be submitted by a

claimant in support of a claim under the policy.

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2. While acting under regulation 6(1) in forwarding the policy to the

insured, the insurer shall inform by the letter forwarding the policy that he has a

period of 15 days from the date of receipt of the policy document to review the

terms and conditions of the policy and where the insured disagrees to any of those

terms or conditions, he has the option to return the policy stating the reasons for

his objection, when he shall be entitled to a refund of the premium paid, subject

only to a deduction of a proportionate risk premium for the period on cover and

the expenses incurred by the insurer on medical examination of the proposer and

stamp duty charges.

3. In respect of a unit linked policy, in addition to the deductions

under sub-regulation (2) of this regulation, the insurer shall also be entitled to

repurchase the unit at the price of the units on the date of cancellation.

4. In respect of a cover, where premium charged is dependent on age,

the insurer shall ensure that the age is admitted as far as possible before issuance

of the policy document. In case where age has not been admitted by the time the

policy is issued, the insurer shall make efforts to obtain proof of age and admit

the same as soon as possible.

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Claims procedure in respect of a life insurance policy:

1) A life insurance policy shall state the primary documents which are

normally required to be submitted by a claimant in support of a claim.

2) A life insurance company, upon receiving a claim, shall process the

claim without delay. Any queries or requirement of additional documents, to the

extent possible, shall be raised all at once and not in a piece-meal manner, within

a period of 15 days of the receipt of the claim.

3) A claim under a life policy shall be paid or be disputed giving allthe relevant reasons, within 30 days from the date of receipt of all relevant papers

and clarifications required. However, where the circumstances of a claim warrant

an investigation in the opinion of the insurance company, it shall initiate and

complete such investigation at the earliest. Where in the opinion of the insurance

company the circumstances of a claim warrant an investigation, it shall initiate

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and complete such investigation at the earliest, in any case not later than 6 months

from the time of lodging the claim.

4) Subject to the provisions of section 47 of the Act, where a claim is

ready for payment but the payment cannot be made due to any reasons of a proper

identification of the payee, the life insurer shall hold the amount for the benefit of

the payee and such an amount shall earn interest at the rate applicable to a savings

bank account with a scheduled bank (effective from 30 days following the

submission of all papers and information).

5) Where there is a delay on the part of the insurer in processing a

claim for a reason other than the one covered by sub-regulation (4), the life

insurance company shall pay interest on the claim amount at a rate which is 2%

above the bank rate prevalent at the beginning of the financial year in which the

claim is reviewed by it.

Procedure for settlement of claims

Settlement of maturity claims:

Under LIC, claims can arise on maturity of policy of the policyholder.

The processing of claims by maturity is normally undertaken by Divisional

Office of LIC about two months before the date of maturity. . The LIC

sends intimation before the maturity date. If the notice of maturity is not

received and the date of maturity is known to the policyholder, then the

policyholder can take the necessary steps to get the due Maturity amount.

The Corporation sends Maturity Intimation along with the discharge forms

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to the policyholder informing him about the requirements for the

settlement of claim.

1) In case the maturity intimation is not received by the policyholder

till around 2 months before the date on which the policy matures, he should

contact the concerned Divisional Office and obtain a copy of the maturity

intimation.

2) Policy Document (if not in the custody of LIC as security for loan):

On receipt of the maturity intimation, the policyholder should send the

original policy document along with the last receipt of insurance premium paid.

The policy document needs to be submitted in original unless it is in custody of

LIC as security for loan.

3) Age proof document (if age has not been admitted earlier):

The policyholder should also submit his age proof to the Corporation in

case it has not already been submitted. In case, the policyholder has already

submitted his age proof to LIC, the form of Discharge (Form No. 3825) to be

executed by the policyholder, is also sent along with the Maturity Intimation.

4) L.I.C. accepts following documents as valid age proofs:

a. Horoscope of the assured

b. Certificate relating to the baptism ceremony among Christians

c. Birth certificate from the Municipal Corporation

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d. High School Certificate

e. Service book.

5) Discharge Form No. 3825 duly stamped & signed, attested by a

witness:

The form of Discharge (Form 3825) should then be properly filled, signed

and sent to the Office of LIC from which it was issued. The signature must be on

a revenue stamp and must be attested by a witness.

6) Assignment / Reassignment Deed, if any:

In case the policy or any Deed of Assignment or Re-assignment is lost by

the policyholder, he has to submit an indemnity bond along with a reliable surety

of sound financial standing acceptable to LIC. The indemnity bond has to be in a

particular format (Form 3815). In such a case the claim is settled in the absence of

the policy document.

7) Existence certificates in case of childrens Deferred Assurance &

Pure Endowment Policies.

8) In due course, LIC sends a cheque to the policyholder for the

money due to him as per the terms of the policy.

LIC upon the receipt of the claim form will act in the following manner:

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LIC will send an acknowledgement to the effect that the claim

form has been received and the aforesaid document will also state that the insurer

is in the process of checking all the necessary items and will get back to the

claimant shortly.

Then the insurer will ask for necessary documents that are required

for settlement of claims. The claimant has to provide all the necessary documents

that are being asked by the insurer.

After verification, the insurer arrives at the final amount that has to

be paid to the claimant and then prepares a cheque or such mode of payment as

has been agreed upon in the policy or between the claimant and the insured.

Settlement of Death claims:

The death claim amount is payable in case of policies where premiums are

paid up-to-date or where the death occurs within the days of grace. The following

is the process of settlement of claims in case of death claims:

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1) Intimation of death:

The first requirement of the Corporation in the case of death claim is that

an "intimation of death" should be sent to the branch office of the LIC from

where the policy was issued.

The intimation needs to be sent by the person who is entitled to get the

proceeds of the policy. It may be:

i. the nominee or

ii. the assignee of the policy or

iii. the deceased policyholders nearest relative.

The letter of intimation of death should contain the following information:

i. name of the life assured

ii. a statement that the life assured is dead;

iii. the date of death;

iv. the cause of death;

v. the place of death; and

vi. policy number / s

vii. Claimants relationship with the assured or his status (nominee,

assignee, etc.).

Soon after the receipt of the intimation of the death, the branch office sends

the necessary claim forms along with instructions regarding the procedure to be

followed by the claimant.

2) Submission of Proof of Death

The proof of death required to be submitted is a certificate by Municipal

Death Registry or by a Public Record Office which maintains the records of

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births and deaths in the locality. Besides this some other statements or certificates

are also required to be given in the prescribed Claim forms:

Statement from the doctor who attended the deceased

policyholders last illness.

Certificate of treatment in the hospital where the policyholder died

or was treated by the hospital authorities.

Certificate of burial or cremation to be given by an independent

person who attended the funeral and has seen the dead body.

Certificate from the employer if the policyholder was inemployment at the time of death.

3) Submission of Proof of Age

The claimant should submit age proof of the policyholder to LIC in case it

has not already been submitted.

L.I.C. accepts following documents as valid age proofs:

(i) Horoscope of the assured

(ii) Certificate relating to the baptism ceremony among Christians

(iii) Birth certificate from the Municipal Corporation

(iv)High School Certificate

(v) Service book.

4) Certificate of Ownership.

When the policy is validly assigned, or a nominee has been designated in

the policy, no further proof of title is necessary. In any other case, the certificate

of title is necessary. In such a case the corporation would require legal evidence

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of title such as Succession Certificate or Letters of Administration or Letters of

Probate or a Will.

5) Payment and Discharge

After completing all the above formalities, the insurance company issues a

discharge form for completion, which is to be signed by the person entitled to

receive policy money. That is, it should be signed by:

the nominee, in case nomination was made under the policy;

the assignee, in case the policy was validity and unconditionally

assigned;

The legal representative or successor.

In due course, LIC sends the cheque for the amount due to the person

entitled to receive the same.

6) Early death claims:

If death occurs in less than three years from the date of the policy, following

requirements must be complied with:

i. Policy Document

ii. Discharge Form 3801

iii. Assignment / Re-assignment Deed, if any

iv. Age Proof Document (if age has not been admitted earlier)

v. Certificate of treatment issued by the hospital authorities where the

deceased policyholder was treated last, on Claim Form B1 (F No. 3816)

vi. Certificate by the employer if the deceased was an employee, on

the Claim Form E (F No. 3787 revised)

vii. Certificate of Death

viii. Legal Evidence of Title (if policy is not assigned / nominated)

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ix. Claim Form A (F No. 3783)

x. Statement from the Doctor who attended last the deceased

policyholder, on Claim Form B (Form No. 3784 revised)

xi. Certificate of Identity and burial by a person who attended the

funeral on Claim Form C (F No. 3785 revised)

7) Non early claims:

If death occurs exactly or after 3 years from the date of the policy the

following requirements must be complied with:

i. Policy Document

ii. Discharge Form 3801

iii. Legal Evidence of Title

iv. Death Certificate

v. Claim Form No. 3783A

vi. Assignment / Re-assignment Deed, if any (if policy not assigned

/nominated)

vii. Age Proof Document (if age has not been admitted earlier)

8) Ex-gratia Settlement of Death Claims

Ex-gratia Settlement of Death Claims are not a right claim but on

grounds of humanity presently LIC is giving such claim amount for the

policies which are not in force but

If Death occurred after the expiry of grace period of premium due

date then Full Sum Assured along with the bonus will be payable as Ex-gratia

settlement

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If Death occurred after three months but less than six months after

the expiry of first unpaid premium date half of the Sum Assured without bonus

will be paid as Ex-gratia

If the death occurred between six months and one year from the due date of

the first unpaid premium date, claim may be considered to the extent of the

proportionate notional paid-up value on the basis of actual premium paid.

Important terms in claims

Maturity claims

Beneficiaries in claims:

The claimant in life insurance policies at the time of payment of maturityclaims of life insurance policies can be the policyholder or the assignee to whom

the holder of the policy has transferred the policy. The persons entitled to claim

under these policies can be:

The assured himself.

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The payee, whose name appears in the benefit schedule of the

policy as a party interested.

The creditor who has been properly assigned and nominated to

receive the payment under the policy.

Amount payable:

The amount payable upon the maturity of the policy, i.e., non-happening of

the event is the sum assured plus profits and bonus that accrues with the policy.

The profits are paid on pro-rata basis, i.e., in the proportion of the premium paid

and declared are bonuses. The payment of profits is a condition inserted as a

clause in the policy itself and it becomes an obligation on the insurer to pay the

amount of such profit as may be accrued to the insured.

Dispute in payment of maturity claims:

The disputes arising in such cases are general and may be restricted to the

proof of age, if the age is not admitted at the time of issuing the policy document

and about the good title of the claimant on the policy. Incase of the insurer

shrugging off his liability to make the payment of profits which are accrued to the

insured upon maturity and in case the payment of profit is as per the contract, theinsurer has every right to move to the court and to claim for such payment. The

policy document and scheme of the policy contains the details of the payment and

the payment made accordingly may not drag the parties into litigations.

Death claims

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Beneficiaries:

The claimants or the beneficiaries under the life insurance policies, paid on

the happening of the events which is death of the assured, are as follows:

The legal heirs of the policyholder.

The nominees, assignees and transferees

The wife and children of the assured under the Married Womens

property Act

The creditor in whose name the policy has been endorsed

Amount payable:

Amounts that can be paid under a life insurance policy are as follows:

The amount insured or the face value of the policy

Bonus if declared by the company, which is recoverable as an

insurance amount.

The share of profits in case of participation policy.

Surrender value, where the policy lapses due to non-payment of the

premium or where the assured surrenders the policy, the insurance company may

pay a percentage of the premium paid according to the rules of the company.

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Factors affecting the claims settlement

The factors that affect the claims settlement are as follows:

The policy should be in force on the date of the event.

The risk and cause of event should be covered by the policy.

The cause of loss or the event should be directly related to the loss.

A remote cause has no place in the settlement.

The loss should not have been caused with an intention to gain

from the situation.

The preconditions or warranties have to be compiled with. When

conditions to be fulfilled before affecting the cover of the policy, are not

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performed, the cover of insurance will not come into effect even though

the premium is paid and accepted by the insurance company.

Presence of insurable interest, in case of the property insurances, atleast at the time of happening of event or loss sufferings. Without having

the insurable interest in the subject matter, no person can get benefit or

compensation.

The assured should suffer loss, actual or constructive, to get

compensation. The assured should riot make benefits or gains out of the

insurance contract as the insurance contract is of indemnity in nature. It

only makes good the loss suffered by the assured and is not a source of

gains.

Sufficient documentary evidence of loss should be presented along

with the application form.

Multiple claims and reciprocal claims will be settled as per the

terms of the contract of insurance.

Right to appeal or file a petition with the tribunal or the courts

cannot be withdrawn. If the terms of the policy insist upon arbitration, it

is not the end of justice for the insurer or the assured.

The insured may opt for the following alternatives while settling the claims:

Pay the claims as reported by the surveyor or the claims made by

the insurer whichever is less.

Take help of the agent or some other persons and compromise or to

come to an agreement with the assured in case of a disputed claim.

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If the claim is rejected there may be litigation on the insurer. The

litigation will cost the insurer more, as the insurer has to pay the interest

for the amount due if he losses the litigation.

Pay ex-gratia, if the claim is totally baseless and non-acceptable,

on humanitarian grounds and to avoid complications in future.

Arrange to replace the asset either by repairing the same or by

purchasing a similar asset from the market.

Repair the asset to provide the similar type of services as provided

before the happening of event.

Delay in claims settlement

The time value for the settlement of a claim is of importance. All claim

papers have to be submitted within a limited period mentioned in the policy

document or otherwise stated in the Act. In some cases, the death of a person or

the accident of vehicle has to be intimated immediately either orally or in person,

either by the policyholder or the claimant or by the representative of the claimant.

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The time element is very important in the claims payment for the following

reasons:

The delay in the claims settlement will have an adverse impact on

the goodwill and marketing of the insurance.

The cost of claims will increase with the extension of time.

The insurer may be asked to pay the interest on the unpaid

insurance amount because of the delay. The court may direct the insurer

to pay the costs of the case to the assured, which results in mounting up

of costs.

The delay in payment may lead to litigation which is expensive.

Unproductive use of manpower to defend, expenses incurred and

waste of time on litigations will be an extra burden on the insurer.

Litigations will affect on the productive areas of the business

particularly in the marketing of the insurance business.

The delay also leads to the increasing number of cases with

consumer protection councils.

Thus the delay in the settlement of the claims will have an impact on the

present and future business of the insurance along with the cost burden. As such it

is essential to have quicker claim settlements.

The delay in claims settlement may be due to the following reasons:

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Late submission of claim form: The claim forms may be submitted

late because of the ignorance or lack of knowledge of the existence of

the insurance policies against the lives of the persons who face the event

or no information is given to the beneficiaries or no nominations are

made to the policy.

Innocence and illiteracy of the assured: The assured or the claimant

may fail to file the papers due to lack of knowledge, to file the insurance

claims within a certain period or of the claims procedure.

Not submitting the claims forms in full: If the claim forms are not

properly filled, they will fail to provide the required information to

settle the claims and as a result the claim settlement will be delayed for

want of information.

If sufficient proof or supporting documents are not submitted along with the

claim form to facilitate claim assessor to know the date of the event or the cause

of the event, claim settlement may be delayed.

The insurer may not get the cooperation of the insured or the

claimant to finalize the claim or arrive at some compromise.

Destroying the evidences, with or without intention, that could

have otherwise facilitated the estimation of the loss payable under the

claim.

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Not providing information about the changes in the constitution of

the organization or the changed address of the insured or the claimant or

any other information required to make a claim settlement.

The delay on the part of the insurer may be intentional or due to the

pressure of work.

Lack of motivation, lack of knowledge of importance of the claims

settlement, lack of awareness among the staff of the organizations or

defective supervision or organizational structure.

The delay in submission of claims or settlements can be avoided by making

the assured aware of the facts and importance of the insurance and procedure of

claims. The insurers can take the help of the agent or local staff to arrive at a

compromise with the claimants when the cases are of complex nature. The

organization should be so designed to avoid holding of papers at one or two

places. The staff should be trained and the importance of the claims management

should be driven into their minds. Use of latest technology to assess the losses

and recruitment of able staff will speed up claims settlement.

Role of agents in claims settlement

An agent is a primary source for procurement of insurance business and as

such his role is the corner stone for building a solid edifice of any life insurance

organization. To effect a good quality of life insurance sale, an agent must be

equipped with technical aspects of insurance knowledge, he must possess

analytical ability to analyze human needs, he must be abreast with up to date

knowledge of merits or demerits of other instruments of investment available in

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the financial market, he must be endowed with a burning desire of social service

and over and above all this, he must possess and develop an undeterred

determination to succeed as a Life Insurance Salesman. In short he must be an

agent with professional approach in life insurance salesmanship. Such an agency

force is expected to be helpful not only in proper field underwriting but also after

sales. servicing. concomitant and essential elements for higher retention of

business.

The insurance company, being a corporate structure, does not deal directly

with the customers to promote the insurance business. It avails the help of

middlemen to undertake the promotion such on its behalf and the agents are

middlemen or intermediaries. Section 40 of Insurance Act 1938 authorizes the

payment of the remuneration to the agents for the services. Section 42 of the Act

enumerates the essential qualifications for their appointment and issuing of

licenses. The appointment of agents to procure policies of insurance is a general

practice among insurance companies all over the world. The agents are allowed to

market the insurance business but not allowed to issue the policies. The agent has

no right to conclude the insurance contract and the final approval or rejection of

contract proposal is vested with the insurer, the principal. But, in promoting the

insurance business, the agent binds the principal to all activities such as receipt of

premium, enquiries and publishing of information of the insurance contracts and

products.

The agent is bound by duty and responsibility to convey the message to the

insurer. But, giving the information to the agent does not bind the insurer as the

agent is appointed only to promote the insurance business. In times of disputes,

the agent is under an obligation to settle the issue of claims by way of

negotiations and mediations to retain the customer.

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Role of agents in an Insurancecompany

1. Full information must be provided to the proponent at the point of

sale to enable him to decide on the best cover or plan to minimize

instances of cooling off by the proponents.

2. An agent should be well versed in all the plans, the selling points

and also be equipped to assess the needs of the clients.

3. Adherence to the prescribed Code of Conduct for agents is of

crucial importance. Agents must, therefore, familiarize themselves with

provisions of the Code of Conduct.

4. Agents must provide the office with the accurate information about

the prospect for a fair assessment of the risk involved. The agents

confidential report must, therefore, be completed very carefully.

5. Agents must also possess adequate knowledge of policy servicing

and claim settlement procedures so that the policyholders can be guided

correctly.6. Submission of proposal forms and proposal deposit to the branch

office immediately to avoid delays and to enable the office to take timely

decisions.

7. A leaflet or brochure containing relevant features of the plan that is

being sold should be available with the agents.

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If the agents are well conversant with the claim settlement procedure and

assist the claimants in completing the necessary requirements, it would not only

quicken the process of claim settlement and enhance their professional status but

also help the organization to improve upon their outstanding claim ratio. This,

while further boosting the image of the organization may provide them an

overflowing fountain for further business in those families. The performance of

agents will now depend on not how many hours he works but the quality of

service, his attitude to customers and the image that he will create for the entire

life insurance business. Thus the agent under the changing economic scenario can

achieve their objectives by practicing psycho-marketing strategies. Their

objectives are survival and growth. Maximization of business is an end to achieve

these objectives.

Role of surveyors and assessor in

claims settlment

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Insurance users pay their premiums, year after year, trusting their policies to

protect their lives or businesses in the event of a loss. However, there are

innumerable instances where a genuine insurance user with a genuine loss and a

seemingly valid claim, has been denied his claim amount in full or part. This

happens because the insurance company is not able to estimate the total amount

of the claims. In life insurance claims the insurance company tries to reject the

claims without knowing the cause of the death or loss of the person.

Surveyors and Loss Assessors have been around for decades - we have all

heard of them and some of us have had occasion to use their services but it is

quite surprising how little is actually known and understood about them their

job, their duties & responsibilities, their role vis--vis insurers and insureds, and

the insureds rights and duties vis--vis surveyors and assessors. This is because

they never come in the lime light but the main work of assessment and survey of

loss is done by them.

Duties and responsibilities of surveyors and loss assessors:

A surveyor and loss assessor shall, for a major part of the working time,

investigate, manage, quantify, validate and deal with losses (whether insured or

not) arising from any contingency, and report thereon, and carry out the work

with competence, objectivity and professional integrity by strictly adhering to the

code of conduct expected of such surveyor and loss assessor.

The following are their duties:

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i. Declaring whether he has any interest in the subject-matter in

question or whether it pertains to any of his relatives, business partners or

through material shareholding.

ii. maintaining confidentiality and neutrality without jeopardizing the

liability of the insurer and claim of the insured;

iii. examining, inquiring, investigating, verifying and checking upon

the causes and the circumstances of the loss in question including extent

of loss, nature of ownership and insurable interest;

iv. conducting spot and final surveys, as and when necessary and

comment upon franchise, excess/under insurance and any other related

matter;

v. surveying and assessing the loss on behalf of insurer or insured;

vi. assessing liability under the contract of insurance;

vii. pointing out discrepancy, if any, in the policy wordings;

viii. satisfying queries of the insured/insurer and of persons connected

thereto in respect of the claim/loss;

ix. giving reasons for repudiation of claim, in case the claim is not

covered by policy terms and conditions;

x. taking expert opinion, wherever required;

xi. A surveyor or loss assessor shall submit his report to the insurer as

expeditiously as possible, but not later than 30 days of his appointment.

Provided that in exceptional cases, the afore-mentioned period can be

extended with the consent of the insured and the insurer.

Surveyors and Loss assessors Report:

The report of surveyors and loss assessors will be the authentic

report. The report contains the investigations and results of the investigations,

recommendation and assessments of the surveyor and assessor. The surveyors

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will state the causes of the loss whether remote or direct, the extent of actual total

loss, insurance policy amount, value of salvage and assessment of payment of

claims. The report of the loss assessors will be a solid ground to settle the claims.

If the insurer is of the opinion that the loss assessor or the surveyor has acted

under some personal interests then the insurer may decide to re-investigate the

matter and on receiving the report can decide the claims payment.

Impact of claims on underwriting

Insurance underwriting is the process of classification, rating, and

selection of risks. Insimpler terms, it's a risk selection process. It is the

process of selecting and classifying exposures. Underwriting is one of the

aspects of insurance that makes most peoples eyes glaze over. But

underwriting is one of the most important parts of the insurance process.

And knowing what an underwriter does and why its so important is

helpful for people who are shopping for a new policy. Claims settlement

has a direct impact upon underwriting. If the claims of certain insurance

products are frequently received they have an impact upon the claims

reserves and warrant review of the product and take decision either to

modify the terms or continue.

Addition or deletion of the clauses, changing the time span of the

insurance product or other changed, are discussed upon frequency of

claims and quantum of amount paid. Thus the underwriter fixes the

premium of the product considering various factors such as cost of risk,

administration expenses, brokerage or marketing expenditure, claims

settlement expenses and budgeted profit. The premium is the present

value of the future risk. The underwriting department and claims

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management are related in sharing the information of the claim to find

out the current weaknesses, strengths and the possible improvements.

Insurance is based on risk. When you get an insurance policy, the insurance

company is taking on some of your risk. The underwriter's job is to use all the

information gathered from numerous sources to determine whether or not to

accept a particular applicant. Individuals applying for individually-owned life and

health insurance typically receive more underwriting scrutiny than members

holding a group policy. An underwriters job is to make sure that the insurance

charges just the right amount for the coverage it provides. They figure how much

risk is represented, how much coverage the company can offer, and how much

that coverage should cost. The underwriter's primary function is to protect the

insurance company insofar as is possible against adverse selection (very poorrisks) and those parties who may have fraudulent intent.

The underwriter has a number of resources that can be called upon to

provide the necessary information for the risk selection process. These sources

include:

The policy application;

Medical history and examinations;

Inspection reports;

The Medical Information Bureau (MIB); and

The producer or insurance agent.

Life insurance companies each have their own extensive policy and

procedure manuals they are supposed to follow in determining whether or not to

issue an Individual Life insurance policy, and in pricing that policy. The insurer's

underwriters typically use a combination of factors that experience shows equates

with the risk of death (and premature death).

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They include the applicant's answers to a series of questions such as:

(1) age, sex (except in several states that require "uni-sex" rates,

(2) Height, weight, and health history (and often family health history --

parents and siblings),

(3) The purpose of the insurance

(4) Marital status and number of children,

(5) The amount of insurance the applicant already has, and any additional

insurance s/he proposes to buy

(6) Occupation (some are hazardous, and increase the risk of death), and

income (to help determine suitability),

(7) Smoking or tobacco use (, as smokers have shorter lives),

(8) Alcohol (excessive drinking seriously hurts life expectancy),

Thus the claims payment and information relating to the claims

settlement will be directly helpful to the underwriting departments either to

modify the present product or to consider the information for the future.

Fr

auds in claims settlement

Insurance fraud is any deliberate deception/dishonesty

committed against or by an insurance company, insurance agent, or consumer for

unjustified financial gain. It occurs and may be committed at different points in

the transaction by different parties such as policy owners, third-party claimants,

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intermediaries and professionals who provide services to claimants. The nature of

these frauds may vary from an inflated/exaggerated value of a legitimate claim to

a completely fabricated or bogus claim where losses never really occurred.

Promises made with no intention to perform them can be treated as a fraud.

The essential components of an insurance fraud are:-

Intent to deceive

Desire to induce insurance company to pay more than it otherwise

would.

The fraudulent claims may be of two categories:

The cause or the claim itself is fraudulent

The claim may be genuine but the method of calculation or the

evidences, or the information submitted may be fraudulent in nature.

As such any fraud made by the insured or the insurer in concluding the

insurance contract or the claims settlement, makes the entire contract voidable at

the option of the person on whom the fraud is played. Creating forged documents

such as wills, legal heir certificates, assignments of the policies and other papers

to support their claim, deliberate destruction of the insured subject with an

intention to get the policy amount all constitute different types of frauds.

Sometimes the frauds may also result from gross negligence or forbearance to usereasonable exertions and means at hand. The fraudulent claim by the assured will

deprive him the right to claim as the insurer has the right to reject it.

Examples of insurance fraud:

1) Creating a fraudulent claim

2) Overstating amount of loss

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3) Misrepresenting facts to receive payment

4) Bogus agents/Sale of forged cover notes

How to protect yourself from a fraud:

1. Be wary of unregistered insurance agents. Before purchasing

insurance, contact your insurance company to ensure the agent is an authorized

agent.

2. Avoid paying premiums in cash. Opt to pay for premiums by

cheque or money order. Made payable to the insurance company instead of the

agent.

3. Make sure you receive a written policy after payment of your first

premium.

4. Immediately examine your insurance policy to ensure the coverage

is what you have requested for and ensure that the premium amount paid is

reflected in the cover note/policy. Request for a receipt as evidence of payment of

premium.

5. Do not sign a blank insurance application, or insurance claim form.

6. Be suspicious if the price of insurance seems suspiciously low

from other insurance companies.

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7. If you meet with an accident, be careful of strangers who offer you

quick cash or urge you to deal with specific workshops, medical clinic or law

firm. They could be part of a fraud syndicate.

8. Insist on detailed bills for repairs and medical services rendered

and check for accuracy.

9. Discreetly contact your insurance company or the police if you are

being defrauded or have been/are being persuaded to take part in a fraud. Provide

as many details as possible about the incident - name of the individual(s)

involved, amount, date(s), and type of fraud.

CHAPTER:-5

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Case study

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Life Insurance Corporation of India v/s Mrs. Sunanda Kanthale

According to complainant Sunanda Kanthale, her husband

Manoharrao Kanthale who worked as a stores superintendent with the

Amravati branch of Maharashtra State Corporation, purchased aninsurance policy for Rs 20,000 on November 28, 1992. The policy which

was a non-medical one, was scheduled to mature on November 24, 2004,

she said. Unfortunately Manoharrao passed away on October 22, 1993, 10

months and 25 days from the date of purchasing the instrument.

Being the nominee in the policy, she asked for her claim for an

amount of Rs 40,000 (under double benefit provision in accident cases)

and made an application to the Akola Branch Manager of LIC. The senior

manager of LIC (Amravati Division) however refused to settle the claim

vide his letter dated August 4, 1994. As the policy was a non-medical one,

the reason given by the official for not settling the claim was also a bogus

one, she alleged. Sunanda then wrote to the area manager of LIC,

Mumbai, justifying her claim. The Mumbai office too (vide letter dated

April 20, 1995) refused to settle the claim, Kanthale added.

She then lodged a complaint with Akola District Consumers

Grievances redressal forum. In the complaint, she appealed to the forum

to issue the necessary directives to the LIC for paying Rs 40,000 along

with 18 per cent interest, a compensation of Rs 50,000 towards mental

tension caused and Rs 1,000 towards legal expenses.

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Defending the stand taken by the company, the LIC refuted all the

allegations made by Sunanda. Manoharrao, who held the policy, had kept

the information about his health a secret while purchasing the instrument,

the company alleged.

The forum referred to columns 14 and 26 in the application form

where the policy purchaser had made statements about his health. The

form was duly singed by Dr B R Jain, the forum said. The LIC officials

produced proofs before the forum regarding heart disorder of the policy

holder and sick leave availed by him after taking the policy. However, they

could not prove that Manohar was not well on the day of purchasing the

policy.

The District Consumers Grievances Redressal Forum has directed

Senior Divisional Manager of Life Insurance Corporation (LIC), Amravati,

Area Manager, Mumbai, and Branch Manager, Akola, to pay Rs 20,000 to

Sunanda Kanthale towards insurance claim besides interest on the

amount from October 22, 1993, till the date of payment at a rate of 12

per cent. The forum has also directed LIC to pay compensation of Rs

10,000 to the woman for causing mental tension to her during the four

years, after her husband's death, in releasing the insurance amount.

If the insurance company failed to pay the compensation within two

months from the date of receipt of copy of the judgment, the companywill be liable to pay interest at a rate of 18 per cent on the amount till

final payment besides legal expenses of Rs 250, the forum ruled. The

forum also ruled that though the compensation amount, demanded by the

complainant, appeared exaggerated, considering the troubles she had to

face in the last four years for settlement of claim, the company should

pay her Rs 10,000 towards compensation.

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Life Insurance Corporation of India v/s Neelam Mehta

The case arose following the refusal of LIC to pay the insurance money

following the death of her husband Mahendrabhai Mehta. LIC had repudiated the

life policy alleging that he had hid from it that he was suffering from diabetes at

the time of taking the insurance policy in december 1993. On 6 November 1994

he died following a heart attack. Neelam told the consumer forum that she came

to know that her husband had a life policy with lic three months after his death,

when she started receiving 'forms one after another to be filled through lic agent'.

She then filled up all the relevant papers.

She also formally informed lic about the death of her husband and claimed

the insurance money. thereupon, lic intimated her that the claim for her husband's

insurance policy was repudiated because the life assured had 'deliberately'

withheld information regarding his 'pre-existing illness which was diabetes' and

which, it said, had led to his death. it also alleged that because of this disease he

had been hospitalised before his death and that he was a insulin-dependent

diabetic. Neelam represented to both the bhavnagar and ahmedabad offices of lic

and later to its zonal office in mumbai urging them to recommend her claim to thereview committee.

This request was made in september 1996 and till now no decision had been

taken and the 'matter is still under consideration'. she also denied that her husband

was a diabetic or that he had been hospitalised for this. He had not been treated

for any ailment during the five years preceding his death, she asserted. The forum

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comprising its president, K.D. Desai, members Leena Desai and Malaybhai

Kantharia, found that lic had failed to prove that Mr. Mehta had made false

statement and misrepresentation about his health. "the burden of proving that

there was suppression of material fact and that it was made fraudulently" lied on

lic and it had failed to prove it, the forum observed. LIC therefore was legally and

morally duty-bound to pay the claim, it said.

Consumer disputes redressal forum, Ahmedabad, has directed LIC of India

to pay up Rs. 50,000 plus 12 per cent interest for seven years, as insurance money

due to her after her husband's death. the forum also ordered payment of Rs. 5000

for causing mental agony, hardship and inconvenience to Neelamben. It granted

Rs. 3000 as cost.

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Life Insurance Corporation of India v/s Lily Rani Roy

The petitioner has purchased a life insurance policy from the appellate and

premiums were paid regularly. The maturity of the said policy was in 1978.

Because of some personal reasons the claim was not filed. The petitioner had

filed the claim after 13 years of its maturity. The LIC of India rejected the

payment on a plea that claim is time barred claim and as such the claim will not

be paid.

The petitioner had filed a complaint with Consumer Council with a request

to direct the LIC for the payment of the maturity claim as the policyholder had

paid the entire premium till the date of the maturity and has the right to receivethe claim amount. Assured held LIC guilty under Consumer Protection Act, 1986

Section (I) (g) for deficiency in service.

But, the LIC of India pleaded that the Corporation will be maintaining the

records for a period of five years only and the Corporation has received the claim

notice from the petitioner in 1990 which is far beyond the time. The LIC also

produced a photo copy of the maturity claims payment register showing the

payment of the complainants money.

After examining all the facts, the State forum has declared that the

Claims Mangement In Life Insurance

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