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CLAIMS
CHAPTER 8
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INSURANCE CLAIMSDefinition of Insurance Contract :
Life Insurance is a contract providing for payment of asum of money to the person assured or, failing him, tothe person entitled to receive the same, on thehappening of certain event dependent on the duration ofhuman life in consideration of smaller payment (premium)
Definition of Insurance Claim :
A claim is the demand that the Insurer should redeem thepromise made in the contract.
Insurers Role :
Satisfying himself that all conditions are fulfilled andrequirements have been complied.
Settle the claim.
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FACTS TO BE CHECKED BY
INSURER Occurrence of insured event (eg: expiry of term,survival up to a date, death, accident, etc.)
Obligations assumed under the contract (payment ofSum Assured, Bonus, Sum Assured in instalments,
waiver of premium, etc) Policyholders performance of his role (i.e., policy statusregarding premium position, age admission,outstanding loan & interest, submission of policy bond,discharge voucher, legal requirements, police reports,
investigation report, if necessary). Confirmation of identity of the person entitled to theclaim (eg: nomination, assignment, prohibitory ordersissued by the Court or other Judiciary Authority,Income Tax attachment, etc.)
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TYPES OF CLAIMS
a) Maturity Claims : Payable on date of completion ofthe term of the policy.
b) Survival Benefit Claims : Payable on survival of theLife Assured up to a particular date, during the
currency of the policy.c) Death claims : Payable on death of the Life Assured.
d) Accident & Disability Claims :
- Accident claim is payable on death of life assureddue to accident.
-Disability claim is payable when total andpermanent disability occurs as a result of anaccident.
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MATURITY CLAIMS (Contd..)
Insurer has to satisfy himself about following facts:- No assignment exists,
- Identity of policyholder,
- Age admission,
- Premium position,
- Receipt of original Policy and discharge voucher.
Precautions must be taken if original policy isreported to be lost (eg: ask for Indemnity Bond,
Newspaper advertisement).
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MATURITY CLAIMS (Contd..)
Special Considerations :1. If policy is issued under Married Womans
Property Act then the claim is paid to the
official trustees only. However, if there is notrustee then claim may be paid directly to the
beneficiaries provided the beneficiaries are
competent to contract. Policy monies under
such policies cannot be attached by the
creditors of the policyholder.
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MATURITY CLAIMS
(Contd..)
2. Assignment can be of two types:
a) Absolute assignment - Claim paid toassignee
b) Conditional assignment Payment as perconditions given at the time of assignment.
3. Some claims are payable later than the maturitydate or in instalments. Eg: Under LICsEducational Annuity/Marriage Endowment Plan,
the sum assured is payable at the end ofselected term either in lumpsum or in 10 half-
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MATURITY CLAIM CALCULATIONPlan and Term : 14-10 Sum Assured : Rs.10,000/-
Date of commencement : 14.01.1994 (assume all premiums are paid)
Calculation of net claim payable on 14.01.2004 :
Rs. Rs.
Sum Assured 10,000
+Bonus 5,500 15,500
+/- Difference of premium on account
of over/under statement of age
--
- Outstanding loan 2000
- Outstanding loan interest -- 200013,500
- X charge, if any -- --
Net claim amount 13,500
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SURVIVAL BENEFIT CLAIMS
Paid during currency of the policy, normally after
fixed periods of time.
Procedures for settlement of claim are similar tomaturity claim settlement
If original policy is lost, a duplicate must be issued
and endorsements of Survival Benefit settlement
made thereon.
Survival benefit is not paid to the nominee. Only
death claim will be paid to the nominee.
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SURVIVAL BENEFIT CLAIMS
(Contd)Ex : Under LICs Money Back Plan (93-25) for asum assured of Rs.1,00,000/- survival benefits
will be payable as follows :
1) Rs.15,000/- on survival to the end of 5 years.
2) Rs.15,000/- on survival to the end of 10 years
3) Rs.15,000/- on survival to the end of 15 years
4) Rs.15,000/- on survival to the end of 20 years
5) Rs.40,000/- +Bonus on survival to the end of
25 years.
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DEATH CLAIMS
More complex procedure of settlement as factsrelating to death and identities of claimants to beestablished by the insurer.
Intimation of death may be sent to insurer by thenominee, assignee, relatives, employer or agent.Insurer himself can begin action by taking notice ofobituary columns or newspaper reports providedidentity of deceased is established.
Additional requirements from claimants (deathcertificate, certificate of burial or cremation, legalevidence of title, etc).
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EARLY DEATH CLAIMS
Death claim within 3 years from date of commencementor revival of the policy.
Additional requirements called by the insurer to satisfy
that there was no suppression of material facts:
1. Statement from last medical attendant
2. Statement from hospital, if admitted(These statements reveal whether Life Assured had anyold illness which was not disclosed in the proposal).
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EARLY DEATH CLAIMS
(Contd..)6. If no valid nomination or assignment exists,
claimant will have to prove his title. This requirement
may be waived for small claim amounts and claim
settled on basis of affidavits and indemnity bonds.
7. Revival decision is taken on the basis of evidence
of good health. Therefore, if claim is within 3 years of
revival, insurer should check for suppression ofmaterial facts in personal statement of Good Health
submitted by the life assured.
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EARLY DEATH CLAIMS (Contd..)
If claim is repudiated, claimants may appeal toConsumer Forum, Office of InsuranceOmbudsman or Court of Law. In such casesInsurer must prove beyond any doubt that :
1. Suppression is of material facts (the facts
suppressed should affect underwriting decision)2. Proposer had knowledge of the facts at thetime of proposal
3. Suppression was deliberate on the part of the
proposer(Section 45 of Insurance Act quoted in nextslide).
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SECTION 45
Section 45 of the Insurance Act, 1938 provides thatno policy can be called in question after a period oftwo years from the date of its issue on the groundthat any statement in the proposal or a related
document was false or inaccurate (making the policyindisputable).
This provision is not applicable if the Corporationcan prove that misrepresentation or non-disclosure
was on a material fact and was fraudulently madeand that the policyholder knew at the time that thestatement he made was false.
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CLAIM INVESTIGATIONS
Are necessary in early claim cases to preventfraudulent claims as such payments amount toundue advantage to the claimant at the cost of otherpolicyholders.
Provide sustainable evidence to repudiate a claim.Suspicion, however strong, is not enough.
Provide data to tighten underwriting standards.
Highlight agents & regions prone to early claims.
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DEATH CLAIM CALCULATION
Plan & Term : 14-10 Sum Assured : Rs.10,000/-
Risk date : 14.01.94 First unpaid premium : 14.01.99
Terms of acceptance : OR+DAB Date of death : 01.02.99
Cause of death : Road accident
Calculation of claim amount :
Rs. Rs.
Sum Assured 10,000+ Bonus 3,900 13,900
- Unpaid premium 1,100 12,800
- Late fee on unpaid premium (not charged as Life Assured
has died within grace period)
--
+/- Difference of premium on account of age --
- Loan and interest thereon --
- x-charge, if any --
+ Accident benefit 10,000
Net claim amount payable 22,800
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ACCIDENT & DISABILITY CLAIMS
These are conditional benefits or riders allowed onpayment of additional premium. In order to claim thesebenefits, all eligibility conditions should be satisfiedand exclusions should not apply.
Eligibility Conditions :
a) Accident caused by outward, violent and visiblemeans.
b) Death/disability is result of injuries caused by
accident.c) Occurrence of death/disability should be within 180
days of accident.
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ACCIDENT & DISABILITY CLAIMS
(Contd..)Exclusions :
Intentional self-injury, attempted suicide, insanity,immortality, intoxication.
Accident while on duty in civil aviation or aeronautics
Injuries from riots, civil commotion, etc.
Accident Benefit: If death occurs due to an accident thennormally additional sum assured is payable besides thedeath claim. If claim is payable at a later date, thenfuture premiums may be waived.
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DISABILITY BENEFITDefinition : Disability must be the result of an accident
and must be total & permanent and such that there isneither then nor at any time thereafter any work,occupation or profession that the life assured can eversufficiently do or follow to earn or obtain any wages,
compensation or profit. Accidental injuries whichindependently of all other causes and within 180 daysfrom the happening of such accident, result inirrevocable loss of the entire sight of both eyes or inthe amputation of both hands at or above the wrists, or
in the amputation of both feet at or above ankles, or inthe amputation of one hand at or above the wrist andone foot at or above the ankle, shall be deemed toconstitute such disability.
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DISABILITY BENEFIT (Contd..)Eligibility Conditions :
Disability occurs due to accident within 180 days.
Policy is in full force on date of accident/disability.
Age of life assured is less than 70 years on date ofaccident.
Benefits Payable :
Waiver of future premiums.
Additional amount equal to sum assured paid in
monthly instalments spread over 10 years. If claim arises before expiry of the above said 10 years,then remaining instalments of disability will be paidalongwith the claim amount.
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CLAIMS CONCESSION Claims (not always full amount) are paid on lapsed
policies, if policy has acquired paid up value beforelapsation.
LIC pays full claim after deducting outstanding premiums
with interest in the following cases :
a) At least 3 years premiums are paid and death claimarises within 6 months from the date of first unpaid
premium.b) At least 5 years premiums are paid and death claimarises within 12 months from the date of first unpaidpremium.
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CLAIMS CONCESSION
(Contd..)
The above concessions are guided by the
consideration that had the policyholder not died,he could have revived the policy in the above
situations by just paying arrears of premium with
interest and without proof of good health.
Full claim is paid where arrangements are made
to advance the premiums from surrender value.
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PRESUMPTION OF DEATH
Proof of death is must. Evidence of Death collectedin the form of Death Certificate and certificate ofburial and cremation.
In case of accidents on sea, in air and in naturalcalamities, dead bodies may not be found. Obtainstatement from Competent Authority.
Indian Evidence Act provides for presumption ofdeath, if a person has not been seen or heard of forseven years.
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PRESUMPTION OF DEATH
(Contd..)
Where a person is presumed to be dead, insurer
should insist on decree from Competent Court.
This requirement may waived if reasonably strongevidence exists to show that the life assured could not
have survived a fatal accident or hazard.
Premium to be paid under the policy till Court decrees
presumption of death so that the policy does not lapse
during this period.
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OTHER PRECAUTIONS1. If the Life Assured or claimant is a lunatic, only the
guardian appointed by the Court of Law as per IndianLunacy Act should sign the discharge voucher.
2. If Life Assured or claimant has recovered from mentaldisorder, insist on medical certificate to that effect.
3. Orders received from Court or other judicial authorityare not to be contested by the Insurer. However, iforders are not appropriate, the claimant must get itvacated (Eg: Attachment order in case of policyissued under MWP Act).
4. Claim payments to non-residents are governed by theforeign exchange control regulations.
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OTHER PRECAUTIONS (Contd..)
5. If Life Assured dies even one day before maturity date,treat it as death claim. If Life Assured dies aftermaturity date, but before receiving policy monies, treatit as maturity claim only and pay amount to legal heirs.
6. If Policies are financed through a Hindu UndividedFamily, then claim is payable to the Karta of the HUF.
7. If Death intimation is received 3 years after death, thenundertake thorough investigation to rule out fraud. Pleaof time barred can be taken if reasons for delay inintimation are not satisfactory.
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IRDA REGULATIONS In case of death claim, all requirements to be called at
one time and not in piecemeal.
Decision of claim to be taken within 30 days of receiptof requirements from the claimant.
Investigation to be completed within 6 months.
Interest at 2% over bank rate payable for delay in
settling death claims.
Interest at Savings Bank rate payable, if the delay ison the part of claimant.
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