finalClaims Management in Life Insurance

8/7/2019 finalClaims Management in Life Insurance

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CHAPTER-1

INTRODUCTION TO INSURANCE

1.1 THE MEANING OF INSURANCE1.2 DEFINITION OF INSURANCE

1.3 BASICS OF INSURANCE1.4 SCOPE OF INSURANCE1.5 NATURE AND CHARACTERISTICS OF INSURANCE


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Introduction to Insurance in India

1.1 THE MEANING OF INSURANCE:-

The meaning of insurance is importantto understand foranybody that isconsideringbuying

an insurance policy or simply understanding thebasics of finance. Insurance is a hedging

instrumentusedasa precautionary measureagainst futurecontingent losses.This instrument is

used formanagingthe possiblerisks ofthe future.

Insuranceisboughtin orderto hedgethe possiblerisks ofthe future which may or maynottake

place.Thisisa mode of financiallyinsuringthatifsuchaincidenthappensthenthe lossdoesnot

affect the present well-being of the person or the property insured. Thus, through insurance, a

personbuyssecurityand protection.

A simple example will make the meaning of insurance easy to understand. A biker is always

subjectedto therisk ofhead injury. But it isnotcertainthattheaccidentcausinghim thehead

injury would definitely occur. Still, people ridingbikes cover their heads with helmets. This

helmetinsuchcasesactsasinsuranceby protectinghim/herfrom any possibledanger.The price

paid was the possible inconvenience or act of wearing the helmet; this ie equivalent to the

insurance premiums paid.

Though loss of life orinjuriesincurredcannotbe measuredin financial terms,insuranceattempts

to quantify such losses financially. Insurance canbe defined as the process of reimbursing or

protecting a person from contingent risk of losses through financial means, in return for

relativelysmall,regularpaymentsto theinsuringbody orinsurancecompany.


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1.2 DEFINITION OF INSURANCE:

The act of insuring, or assuring, against loss or damage by a contingent event; a contract

whereby, for a stipulated consideration, called premium, one party undertakes to indemnify or

guaranteeanotheragainst lossbycertainspecifiedrisks. Cf. Assurance,

The otherdefinition oftheinsuranceisthe premium paid forinsuring property orlifeandthe

sum forwhich life orpropertyisinsured.

Insurance can range from life to medical to general (residential, commercial property,

natural incidents, burglary, etc).

LifeinsuranceIt insures the life of the person buying the Life Insurance Certificate. Once a Life

Insurance is sold by a company then the company remains legally entitled to make

paymentto thebeneficiaryafterthedeath ofthe policyholder.

MedicalInsuranceThisisalso knownas medicaim. Here,the policyholderisentitledto receivetheamount

spent forhishealth purposes from theinsurancecompany.

GeneralInsuranceThis insurance type involves insuring the risks associated with the general life such as

automobiles,business related, natural incidents, commercial and residential properties,

etc.


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1.3 BASICS OF INSURANCE:-

Insurance provides financial protection against a loss arising out of happening of an

uncertainevent. A personcanavail this protectionby paying premium to aninsurancecompany.

A pool is created through contributions madeby persons seeking to protect themselves fromcommonrisk. Premium iscollectedbyinsurancecompanies whichalso actastrusteeto the pool.

Any loss to the insured in case of happening of an uncertain event is paid out of this pool.

Insurance works onthebasic principle ofrisk-sharing. A greatadvantage ofinsurance isthat it

spreadstheriskofa few people overa largegroup of peopleexposedto riskofsimilartype.

Insurance is a contractbetween two parties whereby one party agrees to undertake therisk of

another in exchange for consideration known as premium and promises to pay a fixed sum of

money to the other party on happening of an uncertain event (death) or after the expiry of a

certain period in case of life insurance or to indemnify the other party on happening of an

uncertaineventincase ofgeneral insurance.

The partybearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is

coveredisknownasthe 'insured' or 'assured'.

1.4 Scope of Insurance

Thescope ofinsuranceisas follows:

Every individual is exposed to innumerable risks connected with life, business and his/her

vocation. Since insurance is a means to avoid the consequences ofrisks, the scope extends to

manyareas.Thesubject matterandscope ofinsurancecovers lossesdueto fire, life, marineand

accident. People are inventing new plans to face financial loss. The financial loss results from

uncertainevents. Insurance providesthenecessarydefense orwaysto save from these losses. We

cantaketheexample ofthe life ofa factory worker.The workers in factoriescome from far of

villages.Theyhavesmall incomeand littlesavings. Ifthe worker fallssick,he loseshisincome

andalso needs more money for medical treatment. Employees State Insurancetakescare ofthe

workerinsuchacaseby providingcompensationand meetingthe medical expenses.Thereare

manycases likethis. Inagriculture,the farmers face frequentcrop failures. Crop failurereduces


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the income of the farmer. The insurance company may insure against the risk of crop loss. In

India, The General Insurance Corporation issues policies against crop failure and loss of

livestock.

1.5 Nature and Characteristics of Insurance

Thecharacteristics ofinsuranceareasunder:

(1)A co-operative device: All for one and one for all is atbasis for a co-operativedevice. The insurance is a method wherein large number of persons exposed to a

similar risk is covered and risk is spread over among the larger insurable public.

Therefore, Insurance is a social or co-operative method wherein losses of one are

bornebythesociety.

(2)Insurance is a contract: Insuranceisa validcontractbetweentheinsured onthe oneside and the insurer on the other side. It has all the essential elements of a valid

contractandisenforceableinthecourt of law.

(3)Consideration: Like othercontracts,there mustbe lawful considerationininsurancealso.Thisconsiderationisinthe form of premium, whichtheinsuredagreedto payto

theinsurer.

(4)P

rotection against the risk: The insurer agrees to indemnify the insured upon thehappening ofa particularevent.Thus,insuranceisa protectionagainsttherisk.

(5)A device to spread the risk: Insuranceisadeviceto spreadtheriskamongthe largenumbers ofinsuring public.Thus,the losses of few areto besharedby many.

(6)Based upon certain principles:Theinsuranceisbaseduponcertain principles.Theyareinsurableinterest,utmostgood faith,indemnity,subrogation,contributionetc.


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CHAPTER -2

INTRODUCTION TO LIFE INSURANCE

2.1 ORGANIZATIONAL STRUCTURE OF LIC

2.2 BASIC STRUCTURE OF LIC


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Introduction to Life Insurance

Human 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

incometo thehousehold.The familyis putto hardship. Sometimes,survival itselfisatstake for

the dependants. Risks are unpredictable. Death/disability may occur when one least expects it.

An individual can protect himself orherselfagainst such contingencies through life insurance.

Though Human lifecannotbe valued,a monetary sum couldbedetermined which isbased on

loss of income in future years. Hence in life insurance, the Sum Assured (or the amount

guaranteedto be paidintheevent ofa loss)isby way ofa benefitinthecase of lifeinsurance.

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

againstthe financial lossarising from death. Insurancesubstitutes thisuncertaintybycertainty.The primary purpose of life insurance is the protection of the family. Insurance in its various

forms protectsagainstsuch misfortunesbyhavingthe losses oftheunfortunate few paidbythe

contribution ofthe manythatareexposedto thesamerisk.Thisistheessence ofinsurance the

sharing of losses and substitution of certainty for uncertainty. There are a variety of life

insurance productsto suitto theneeds of variouscategories of peoplechildren,youth, women,

middle-aged persons, old people; and also rural people, etc. Life insurance products couldbe

purchased from registered life insurersnotifiedbythe IRDA. Insurersappoint insuranceagents

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 couldbe chosen to suit

particularfinancial needs.


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Life Insurance Corporation of India

The Life Insurance Corporation (LIC) wasestablishedabout 44yearsago witha view to provide

an insurance cover against various risks in life. A monolith then, the corporation, enjoyed a

monopolystatusandbecamesynonymous with life insurance. Its mainassetis itsstaffstrengthof 1.24 lakhemployeesand 2,048 branchesand oversix lakhagency force.Training facilitiesat

all levels. Attheapex is the Management Development Institute, seven Zonal Training Centers

and 35 Sale straining 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 stockbroking to mutual funds to life insurance to investmentbanking, the group

caters to the financials needs of individuals and corporate. The LIC has a net of overs. 1,800

crore. Witha presencein 82citiesin Indiaanditservicesacustomerbase of over 20,00,000.At

the industry level,along withthe Governmentandthe GIC,ithashelpedestablishthe National

Insurance Academy. It presently transacts individual life insurancebusinesses,group insurance

businesses, social security schemes and pensions, grants housing loans through its subsidiary;

and marketssavingsandinvestment productsthroughits mutual fund. It pays offabout Rs 6,000

croreannually to 5.6 million policyholders. Ithasbeenstarted with the objectives ofspreading

Life Insurance widelyand in particularto therural areas, meetthe various life insurance Needs

ofthecommunitythat wouldariseinthechangingsocial andeconomicenvironment.


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2.1 Organizational Structure of LIC

The organization is the form having independent or co-ordinate parts for unit action for the

accomplishment ofcommon objectives. Assuchthe organizationrelatingto insurancebusiness

isa form havingdifferent functional divisional units withtheultimateaim of providingeffectiveservices to the customers of the insurance products. An effective organization is essential to

shareinformationandeffectivelyexecutethe managerial decisions.The organizational structure

differs for different types ofbusiness. The organization structure isbased on the objectives

omission of thebusiness organization. The organization shouldbe 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,andalso payment ofclaims.Theclaimsdepartment isassociated with the

receipt ofclaimsandarrangement ofclaims investigations. After it isdecided whetherto make

paymentto theassured orto deferit,theinsurancecompany mayseekguidance from the panel

ofadvocates.Theinsurancecompanyneedsto protectthecompany from theclaims litigations of

theclientsbydefendingtheclaimsintheinsurance organizationisassociated withthe marketing

of policies, underwriting of policies, claims payment, claims defending and stffmatters. The

delegation of duties to each unit with well-defined limitations, responsibilities and decision

makingareall relatedto the

Organizational structureand management.


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2.2 Basic structure of LIC

Today, most of functions,nearly 90%,relatedto the marketingand otherrelatedactivities ofthe

insurance consumers are dealt and handled at thebranch level. Thebranch office, depending

upon its business, is headed by a manager and each function of insurance business like

marketing,underwriting of policies,accounts,claims payments,staffandadministration matters

are identified as departments of the branch office with responsible officials such as

Administration and Accounts Officers. The managerial decisions arebased on the information

suppliedby will besettledatthebranch level.The AAO of lifeinsurancebusiness will deal with

maturityanddeathclaims. Ifthebranch is smaller,all the types ofclaims will bedealtby one

AAO and ifthebranch isbigger withgoodnumber ofclaims, they will besettledby, separate

officials. Atbranch level,these officialshaveto maintaincordial relationsandestablishasystem

ofsharinginformation withthe otherdepartments,relatingto the policydocuments, payment of

premium and using the staffer the agents for the settlement of claims disputes. Thebranches

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

reportsto the Zonal Officer, who inturn will forwarditto the Head Office or Corporate Office.

Thebranchesreportto theirrespectivedivisional office. Ifanybranchgetsaclaim andthereisa

problem in identifyingthecorrectclaimantamongtheclaimants, or otherwise,adispute ofrisk

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 seeksadvice from skilled personsandtriesto solvethe problems.Thedivisional office isresponsible

to settle the claims referredby thebranch 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

otherwiseunderany law to thegovernment.Thegovernment will putthesame fortheapproval

oftheboththehouses.

At the division office level, the claims department generally deals with the claims, which are

pending with thebranchesbecause ofsome disputes, or someclaims which are ofhigh 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


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office.Thusthe organizational structure ofthe insurancebusiness is most flexibleanddecided,

based ontheabovesaid factors.


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CHAPTER -3

CLAIMS IN INSURANCE

3.1 CLAIMS IN INSURANCE

3.2 CLAIMS MANAGEMENT

3.3 SYSTEM OF CLAIMS MANAGEMENT

3.4 STAGES IN CLAIMS SYSTEM

3.5 TYPES OF CLAIMS

3.6 GUIDELINES FOR CLAIMS SETTLEMENT BY

IRDA


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3.1Claims in Insurance

An insurance claim is the actual application forbenefits providedby an insurance company.

Policyholders must first fileinsuranceclaim beforeany moneycanbedisbursedto thehospitalorrepairshop or othercontractedservice.The insurancecompany may or maynotapprovethe

claim,based ontheir ownassessment ofthecircumstances. Individuals who take outhome, life,

health, orautomobileinsurance policies must maintainregular paymentscalled premiumsto the

insurers. Most ofthetimethese premiumsareusedto settleanother personsinsuranceclaim or

to buildup theavailableassets oftheinsurancecompany. Whenclaimsare filed,theinsuredhas

to observe thesettled rules and procedures and the insurer has also to reciprocate in a similar

mannerby 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 andbeneficiaries in specific. Insurance claim is a right of insured under a

contract of insurance. Insurance contract is a contractby which one party called the insurer

promisesto savethe otherparty,theinsured on payment ofconsiderationknownasthe premium.

Theinsurerpromisesto savetheinsuredarenominees/assignees oftheinsured onhappening of

event orriskinsured. Disputescrop up inthe payment ofclaim whentheinsurerandtheinsured

understandthe process ofclaims paymentinadifferent way. Claimssettlementisanintegral part

of the insurancebusiness 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 forbenefits under an insurance policy,but until the insurance company has

assessedthesituationit will remain onlyaclaim,nota pay-out.


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3.2 Claims Management

Many insurers haverecognized the need to improve theefficiency oftheirclaims management

process.Theyhavestreamlined processes,eliminated paper-based formsandredistributed 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 realizeevengreaterimprovementsintheclaimshandling process,insurers

mustalso 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 Technology can

play a significant roleby providing integrated channels for communication and collaboration.

This wouldhelp the insurancecompany increaseemployee productivitybyreducingcycletime

and defect rate and also increase employee participation and compliance. Claims Processing

sometimes involvescollatingandsharing largeamounts ofinformation among multiple parties

involved in a claim, from body shops to adjusters to investigators to lawyers and doctors to

claimants and regulators. And it involves the knowledge ofexperiencedadjusters to determine

the fair and appropriate outcome of a claim. Incarriers.Service representatives and claims

adjustersneedto accessdata from multiplesources when processing orassessingaclaim, which

delays settlement time and increases costs. Manual steps reduce Transparency of the claimsprocessandraise therisk of fraud, manipulation orsimply humanerror. Customerretention is

also challenge expertssaythat 75 percent ofcustomers leavetheirinsurerdueto claimsissues.


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3.3 System of claims management

Basis of claims management:Claims management meansand includesall the managerial decisionsand processesconcerning

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 andloweringtheclaimscosts.Theimportantelements ofclaims

Managementareclaims preparation,claims philosophy,claims processingandclaimssettlement.

The claims philosophy is defined as procedure or specified approach to settle 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 theinsurers orclaimants,analysis oftheclaims,

consideration ofthe possibledecision onthe particularissuesanddisputes,evaluatingtheimpact

oftheclaimscostandexpenses,relation ofclaimsto theconsumersatisfaction, monitoringthe

claim paymentand improvingtheefficiency oftheclaimssettlementand paymentsystemsand

avoidingunnecessarydisputes ofclaims.Theclaims processincludesthebasicclaims procedure

and handling ofclaims. The handling ofclaims includes the monitoring ofsituation 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 followedby the insurer and

insured. From the point of view ofthe insured, it includes thesuffering of loss or thedamage,

understandingandidentifyingthecause ofaction,information orgivingnotice ofclaim orlossto

theinsurer, providingsufficient proof of lossto theinsurerorhisagent orthe lossassessorand

surveyors.The

insurer, on thereceipt oftheclaim from the insured,has to takecertain immediate precautions

suchas verifyingtheclaims,reviewingtheclaim application,respondto theclaimant,carry out

claimsinvestigation,claimsnegotiation,claim settlementandclaim payment.


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3.4Stages in claims system:

Theclaimshandlingistheintegrated part oftheclaims managementandexecutesthedecisions

made by the claims management machinery of an insurance company. Though claims

managementandclaimshandlingaregenerallythesameexternally,theyaredifferentinnature.

Claims management isa managerial function in which the insurerhasadefiniterole to play in

analysis of data, processing of application, decision-making, budget planning, and business

control and fund management. Itisasubjectiveconcept. Inclaims management,theattentionis

on making principlesandguidelines forsmoothand profitablesettlement ofclaimsinthehands

of the insurer. Claims management includes the entire process of claims handling and claims

payment.Thisincludesreview oftheclaims performance, monitoring ofclaimsexpenses, legal

costs, settlement costs, compromises and planning for future payments and avoiding the delay

anddisputesin payment ofclaims. Itisacontrol system thathasanimportant placeintheclaims

management. It also includes risk management techniques, loss assessment, and business

forecastingand 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

settlingtheissuesbeforeit occurs. Claimshandlingisatraditional form of

Managingtheclaimssettlements. Itincludeshandling of variousstages oftheinsuranceclaims.

Itis functional innaturesuchasclaimsreview, investigationandunderstandingthenegotiating

process. Itdoesnotincludeany managerial outlooksuchasrisk management, policy makingand

decision making.Thus, it is concerned with the procedural methodsand also interpretations of

theclaims philosophy. Claimshandling maychange from caseto casedepending onthe merits

oftheclaim,but it will notdrasticallychangeevery moment. It isa flexibleas well asarigid

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

receivingtheclaimsand following other proceduresrequired forquickerandefficient payment

of the claims. Every insurer has a standardized way of claims handling which will improve

qualityand


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customerservice.Theinsurerscommitmentto theservice ofthecustomerisa part oftheclaims

management.

Claims procedure in respect of a life insurance policy:

1) A lifeinsurance policyshall statethe primarydocuments whicharenormallyrequiredtobesubmittedbyaclaimantinsupport ofacclaim.

2)A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to the extent

possible, shall beraisedall at onceandnotina piece-meal manner, withina period of 15

days ofthereceipt oftheclaim.

3) A claim undera life policy shall be paid orbedisputedgivingall therelevantreasons,within 30days from thedate ofreceipt ofall relevant papersandclarificationsrequired.

However, wherethecircumstances ofaclaim warrantan investigation inthe opinion of

the insurance company, it shall initiate and complete such investigation at the earliest.

Where inthe opinion ofthe insurancecompanythecircumstances ofaclaim warrantan

investigation, itshall initiateandcompletesuch investigationattheearliest,inanycase

not laterthan 6 months from thetime of lodgingtheclaim.

4) Subjectto the provisions ofsection 47 ofthe Act, whereaclaim isready forpaymentbutthe paymentcannotbe madedue to anyreasons ofa proper identification ofthe payee,

the life insurer shall hold the amount for thebenefit of the payee and such an amount

shall earninterestattherateapplicableto asavingsbankaccount withascheduledbank

(effective from 30days followingthesubmission ofall papersandinformation).


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5) Wherethereisadelay onthe part oftheinsurerin processingacclaim forareaso

otherthanthe onecoveredbysub-regulation

(4),the lifeinsurancecompanyshall payinterest ontheclaim amountatarate whichis

2%abovethebankrate prevalentatthebeginning ofthe financial yearin whichtheclaim

isreviewedbyit.

Procedure for settlement of claims

Settlement of maturity claims:

Under LIC,claimscanarise on maturity of policy ofthe policyholder.The processing ofclaimsby maturity is normally undertakenby Divisional Office of LIC about two monthsbefore the

date of maturity..The LIC sendsintimationbeforethe maturitydate. Ifthe

Notice of maturityisnotreceivedandthedate of maturityisknownto the Policyholder,thenthe

policyholdercantakethenecessarystepsto getthedue Maturityamount.The Corporationsends

Maturity Intimationalong withthedischarge formsto the policyholderinforminghim aboutthe

requirements forthesettlement ofclaim.

1) Incase the maturity intimation isnotreceivedby the policyholder till around 2 monthsbeforethedate on whichthe policy matures,heshouldcontacttheconcerned Divisional

Officeand obtainacopy ofthe maturityintimation.

2) Policy Document (if not in the custody of LIC as security for loan): On receipt of thematurity intimation, the policyholder should send the original policy document along

with the last receipt of insurance premium paid. The policy document needs to be

submittedin original unlessitisincustody of LIC assecurity for loan.


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3) Age proofdocument (ifagehasnotbeenadmittedearlier):The policyholdershould also

submit his age proofto the Corporation incase it has not alreadybeen submitted. In case, the

policyholderhasalreadysubmittedhisage proofto LIC,the formed Discharge (Form No. 3825)

to beexecutedbythe policyholder,

Isalso sentalong withthe Maturity Intimation.

4) L.I.C.accepts followingdocumentsas validage proofs:

a. Horoscope oftheassured

b. Certificaterelatingto thebaptism ceremonyamong Christians

c. Birthcertificate from the Municipal Corporation

d. High School Certificate

e. Servicebook.

5) Discharge Form No. 3825 duly stamped & signed, attested by a witness: The form of

Discharge (Form 3825)shouldthenbe properlyfilled,signedandsentto the Office of LIC from

whichit wasissued.Thesignature mustbe onarevenuestamp and mustbe

Attestedbya witness.

5) Assignment / Reassignment Deed,ifany: Incasethe policy orany Deed of Assignmentor Reassignments lostby the policyholder, he has to submit an indemnitybond along

withareliablesurety ofsound financial particularformat (Form 3815). Insuchacasethe

claim issettledintheabsence ofthe policydocument.

6) Existence certificates in case of childrens Deferred Assurance &Pure EndowmentPolicies.

7) Induecourse, LIC sendsacheque to the policyholder forthe moneydue to him as pertheterms ofthe policy.


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

manner:

LIC will sendanacknowledgementto theeffectthattheclaim form hasbeenreceivedandthe

aforesaiddocument will also statethattheinsurerisinthe process ofcheckingall thenecessaryitemsand will getbackto theclaimantshortly.

Thenthe insurer will ask fornecessarydocumentsthatarerequired forsettlement ofclaims.

Theclaimanthasto provideall thenecessarydocumentsthatarebeingaskedbytheinsurer.

Afterverification,theinsurerarrivesatthe final amountthathasto be paidto theclaimantand

then prepares a cheque or such mode of payment as hasbeen agreed upon in the policy or

betweentheclaimantandtheinsured.

Settlement of Death claims:

The death claim amount is payable in case of policies where premiums are paidup-to-date or

where thedeath occurs within thedays ofgrace. The following is the process ofsettlement of

claimsincase ofdeathclaims:

1) Intimation of death:The firstrequirement ofthe Corporation in thecase ofdeathclaim is

thatan "intimation ofdeath"shouldbesentto thebranch office ofthe

LIC from where the policy was issued. The intimation needs to be sentby the person who is

entitledto getthe proceeds ofthe policy. It maybe:

i.thenominee or

ii.theassignee ofthe policy or

iii.thedeceased policyholdersnearestrelative.

The letter of intimation of death should contain the following

information:

i.name ofthe lifeassured

ii. A statementthatthe lifeassuredisdead;

iii.Thedate ofdeath;

iv.Thecause ofdeath;

v.The place ofdeath;and


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vi. Policynumber/ s

vii.claimantsrelationship withtheassured orhisstatus (nominee,assignee,etc.).Soonafterthe

receipt of the intimation of the death, thebranch offices end the necessary claim forms along

withinstructionsregardingthe procedureto be followedbytheclaimant.

2) Submission ofProof of Death

The proof ofdeathrequiredto besubmittedisacertificateby Municipal Death Registry orbya

Public Record Office which maintains the records ofbirths and deaths in the locality. Besides

thissome other

Statements orcertificatesarealso requiredto begiveninthe prescribed Claim forms:

Statement from thedoctorwho attendedthedeceased policyholders lastillness.

Certificate of treatment in the hospital where the policyholder diedor was treated by the

hospital authorities.

Certificate ofburial or cremation to be givenby an independent person who attended the

funeral andhasseenthedeadbody.

Certificate from theemployerifthe policyholderwasinemploymentatthetime ofdeath.

3) Submission ofProof ofAge

Theclaimantshouldsubmitage proof ofthe policyholderto LIC incaseithasnotalreadybeen

submitted.

L.I.C.accepts followingdocumentsas validage proofs:

(i) Horoscope oftheassured

(ii) Certificaterelatingto thebaptism ceremonyamong Christians

(iii) Birthcertificate from the Municipal Corporation

(iv) High School Certificate

(v) Servicebook.

4)Certificate of Ownership.

Whenthe policy is validlyassigned, oranomineehasbeendesignated inthe policy,no further

proof oftitleisnecessary. Inany othercase,thecertificate oftitleisnecessary. Insuchacasethe

corporation would require legal evidence of title such as Succession Certificate or Letters of

Administration orLetters of Probate ora Will.


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5) Payment and Discharge After completing all the above formalities, the insurance company

issuesadischarge form forcompletion, which is to besignedby the personentitled to receive

policy money.Thatis,itshouldbesignedby:

thenominee,incasenomination was madeunderthe policy;

theassignee,incasethe policy was validityandunconditionallyassigned;

the legal representative orsuccessor.

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

same.

5) Early death claims: Ifdeath occursin lessthanthreeyears from thedate ofthe policy,

Following requirements must be complied with:

i. Policy Document

ii. Discharge Form 3801

iii. Assignment / Re-assignment Deed,ifany

iv. Age Proof Document (ifagehasnotbeenadmittedearlier)

v. Certificate oftreatmentissuedbythehospital authorities wherethe

Deceased policyholderwastreated last, on Claim Form B1 (F No.3816)

vi. Certificatebytheemployerifthedeceased wasanemployee, on

The Claim Form E (F No. 3787 revised)

Vii.Certificate of Death

Viii.Legal Evidence ofTitle (if policyisnotassigned / nominated)

ix. Claim Form A (F No. 3783)

x. Statement from the Doctor who attended lastthedeceased policyholder, on Claim Form B

(Form No. 3784 revised)

xi. Certificate of Identityandburial bya person who attendedthe funeral on Claim Form C (F

No. 3785 revised)

6) Non early claims: Ifdeath occursexactly orafter3 years from thedate ofthe policythe


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Following requirements must be complied with:

i. Policy Document

ii. Discharge Form 3801

iii. Legal Evidence ofTitle

iv. Death Certificate

v. Claim Form No. 3783A

vi. Assignment / Re-assignment Deed,ifany (if policynotassigned/nominated)

vii.Age Proof Document (ifagehasnotbeenadmittedearlier)

8) Ex-gratia Settlement of Death Claims

Ex-gratia Settlement of Death Claimsarenotarightclaim but ongrounds ofhumanity presently

LIC isgivingsuchclaim amount forthe policies whicharenotin forcebut

If Death occurredaftertheexpiry ofgrace period of premium duedatethen Full Sum Assured

along withthebonus will be payables Ex-gratiasettlement

If Death occurredafter three monthsbut less than six months after theexpiry of firstunpaid

premium date half of the Sum Assured withoutbonus will be paid as Ex-gratiaIf the death

occurredbetweensix monthsand oneyear from theduedate ofthe firstunpaid premium date,

claim maybeconsideredto theextent ofthe proportionatenotional paid-up value onthebasis of

actual premium paid.


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Claims Management Department

The claims department is one of the key departments in an insurance company. The claims

departmenthasthe following functionsto perform:

y To provide the customers of insurance and reinsurancecompanies with high quality ofservice.Thisrolegivesa long-term edgeto thecompanyandhence isreferredto asthe

strategicrole.

y To monitortheclaimsandseethat whetherthebenefits ofinsuranceexceedthecosts ofclaims.Thisroleisreferredto asthecost-monitoringrole oftheclaimsdepartment.

y To seethattheexpectations ofthecustomersare met withregardto speed, mannerandefficiency of the service. This is called the customer service role of the claims

department.

y To meet the standard of service, to keep up to the customers expectations and stilloperate withinthebudget.Thisisthe managerial role oftheclaimsdepartment. Boththe

quality of the service and cost ofclaims is the responsibility of theclaims department.

Thedepartmenthasto lookafterthe proper mix ofthetwo.Thecost ofclaims mustnot

exceedagiven level intryingto rendera verygoodserviceto thecustomer. So theclaims

department estimation of future liabilities isjust as important ascontrol over the claim

payments. Astheclaimsdepartmentisindirecttouch withthecustomer,ithasto ensure

the quality of service. The claims department has the sole responsibility of managing

claims.

y Claims managementby far is the most complex issue in an insurance company. Thepeopleintheclaim departmentshouldhavegoodinterpersonal skills. Iftheyarenotable

to irk in harmony the customers will not receive quality service. There should be

sufficientnumberof peopleas managersso asto simplifyjoband properhumanresource


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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 claims department, in effect, acts as an interfacebetween the customer

servicequalityandinsurancecompanys objectives. Ithasto begiventhe proper weight

ageand motivationso thatthebusinessasa whole functions well.

3.5 Types of claims

Understanding therequirements for various life insurancebenefits (claims) is important forthe

customers.The overridingcondition onclaims is the payment of premiums i.e.claimsare only

payable if premiums are paid up to date.There are various types ofclaims under life policies.

The mostcommonclaimsinclude:Thegeneral requirements foreach oftheseclaimsarebriefly

explainedbelow.

Death Claims:

Thisisaclaim paid whenthenthe personinsureddies. Foradeathclaim to be paidthe following

basicconditions mustbe fulfilled.

The policy document, original death certificate, burial permit copy of the ID of thedeceased mustbe providedto theinsurancecompany.

A report from thedoctor who treatedthedeceased mustbe presented to the insurance

company.

Claim forms mustbecompleted

A report from thedoctorwho lasttreatedthedeceased person mayberequired.

A policeabstractreport mayberequired wheredeath occursthroughanaccident.

Thedocumentationrequired forpayment ofdeathclaimsareeasilyavailable and

claimantsneedto immediatelyinform theinsurance

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

usuallyrequiredso asto reduce onthe possibility of paying fraudulentclaims orpaying

the wrong claimants. Many insurance companies will frequently waive certain requirements

undercertainspecial circumstances.


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Maturity Claims:

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

durationhasexpired. Forexampleinaninsurance policy withduration of 15 years,the maturity

value will be paid onthe 15thanniversaryafteraffectingthe policy. Payment ofa maturityclaim

isastraightforwardaffair where thecustomerreturns the original policydocumentand signs a

discharge form. The claim cheque is usually released ina period ofabout two weeks once all

requiredconditionsare fulfilled.

Partial Maturity Claims:

Mostendowmentandeducation policies provide for payment of partial maturitiesafteragiven

duration. The partial maturity is normally paid on set dates in the policy document. A typical

education policy of 10years provides forpayment of 20% ofthesum insuredafter fouryearsand

everyyearthereafteruntil theexpiry ofthe policy.The lifeinsurancecompanyusually prepares

partial maturitycheques inanautomated mannerandthecustomerdoesnothaveto claim.The

chequeiseithersentdirectlyto thecustomerorthenearestbranch office forease ofcollection.

Surrender Value Claims:

Whenacustomer isunableto continue withthe payment of premiumsdueto unplannedevents

likeretrenchment ordismissal hehasthe option ofencashingthe policyto receivethesurrender

valueso longas the policyhasbeen 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 policydocumentand signs a discharge form. The claim cheque is then paid to the

customerwithintwo weeks.

Policy Loans:

This isstrictly notaclaim butabenefitgiven outby life companies for life policies thathave

beenin force forat leastthreeyears.To receive policy loandirectly from a life

company entails assigning the policy toothed Life Company and receiving a loan cheque. The

insurance policycanalso beassignedto abankandthe loanisthengrantedbythebanksandthe

policydocumentutilizedassecurity forthe loan.


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Disability Claims:

This will arise in life policies wherethecustomer purchasesa personal accident policyrideras

anadditional benefit. Disabilityclaimsare payablesubjectto sufficient medical evidencebeing

providedas proof ofdisablement.

3.6Guidelines for claims settlement by IRDA

Proposal for insurance:

1) Exceptincases ofa marineinsurancecover, wherecurrent market practicesdo notinsist ona

written proposal form, inall cases, proposal forgrant ofacover,either for lifebusiness or for

general business, mustbeevidencedbya writtendocument. Itistheduty ofaninsurerto furnish

to the insured frees of charge, within 30 days of the acceptance of a proposal, a copy of the

proposal form.

2) Formsanddocumentsused in thegrant ofcover may,dependingupon thecircumstances of

eachcase,be madeavailablein languagesrecognizedunderthe Constitution of India.

3) In fillingthe form of proposal,the prospectisto beguidedbythe provisions of Section 45 of

the Act. Any proposal from seeking information for grant of life cover may prominently state

thereintherequirements of Section 45 ofthe Act.

4) Wherea proposal form isnotused,theinsurershall recordtheinformation obtained orally or

in writing,andconfirm it within a period of 15 days thereof with the proposerand incorporate

theinformationinitscovernote orpolicy.The onus of proofshall rest withtheinsurerinrespect

ofany information not so recorded, where the insurer claims that the proposersuppressed any

material information or provided misleading or false information onany matter material to the

grant ofacover.

5) Wherever thebenefit of nomination is available to the proposer, in terms of the Act or the

conditions of policy,the insurershall draw theattention ofthe proposerto itandencouragethe

prospectto avail the facility.

6) Proposalsshall be processedbytheinsurerwithspeedandefficiencyandall decisionsthereof

shall becommunicatedby it in writing withinareasonable period notexceeding 15 days from

receipt of proposalsbytheinsurer.

Matters to be stated in life insurance policy:

1. A life insurance policy shall clearly state:


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a)Thename ofthe plangoverningthe policy,itstermsandconditions;

b) Whetheritis participatingin profits ornot;

c)Thebasis of participation in profitssuchascashbonusdeferredbonus,simple orcompound

reversionarybonus;

d)Thebenefits payableandthecontingenciesupon whichtheseare payableandthe otherterms

andconditions oftheinsurancecontract;

e)Thedetails oftheridersattachingto the main policy;

f)Thedate ofcommencement ofriskand thedate of maturity ordate(s) on which thebenefits

are payable;

g) The premiums payable, periodicity of payment, grace period allowed for payment of the

premium,thedatethe lastinstallment of premium,theimplication ofdiscontinuingthe payment

ofaninstallment(s) of premium andalso the provisions ofaguaranteedsurrendervalue.

h)Theageatentryand whetherthesamehasbeenadmitted;

i)The policyrequirements for

(a) Conversion ofthe policyinto paidup policy,

(b) Surrender

(c) Non-forfeitureand

(d)revival of lapsed policies;

j) Contingenciesexcluded from thescope ofthecover,bothinrespect ofthe main policyandthe

riders;

k)the provisions fornomination,assignment,and loans onsecurity ofthe policyandastatement

thattherate ofinterest payable onsuch loanamountshall beas prescribedbytheinsureratthe

time oftakingthe loan;

l) Anyspecial clauses orconditions,suchas, first pregnancyclause,suicideclauseetc.;and

m)Theaddress oftheinsurerto whichall communicationsinrespect ofthe policyshall besent.

n)Thedocumentsthatarenormallyrequiredto besubmittedbyclaimant insupport ofaclaim

underthe policy.

2. While acting under regulation 6(1) in forwarding the policy to the Insured, the insurer shall

inform bythe letterforwardingthe policythathehasa period of 15 days from thedate ofreceipt

ofthe policydocumentto review the termsandconditions ofthe policyand where the insured


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disagreesto any ofthoseterms or Conditions,hehasthe optionto returnthe policystatingthe

reasons forhis objection, whenheshall beentitledto arefund ofthe premium paid,subject only

to adeduction ofa proportionateriskpremium forthe period oncoverandtheexpensesincurred

bytheinsurer on medical examination ofthe proposerandstamp dutycharges.

3. Inrespect ofaunit linked policy, inaddition to thedeductionsundersub-regulation ofthis

regulation,theinsurershall also beentitledto repurchasetheunitatthe price oftheunits onthe

date of Cancellation.

4. Inrespect ofa cover, where premium charged is dependent on age, the insurer shall ensure

thattheageisadmittedas faras possiblebeforeissuance ofthe policydocument. Incase where

agehasnotbeenadmittedbythetimethe policyisissued,theinsurershall makeeffortsto obtain

proof ofageandadmitthesameassoonas possible.


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CHAPTER -4

IMPORTANT TERMSIN CLAIMS

4.1 MATURITY CLAIMS

4.2 DISPUTE IN PAYMENT OF MATURITY CLAIMS:

4.3 THE FACTORS THAT AFFECT THE CLAIMS

SETTLEMENT

4.4 DELAY IN CLAIMS SETTLEMENT

4.5 ROLE OF AGENTS IN CLAIMS SETTLEMENT

4.6 ROLE OF SURVEYORS AND ASSESSOR IN

CLAIMS SETTLEMENT

4.7 FRAUDS IN CLAIMS SETTLEMENT


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4.1 Maturity claims

Beneficiaries in claims:

Theclaimantin lifeinsurance policiesatthetime of payment of maturityclaims of lifeinsurance

policiescanbethe policyholderortheassigneeto whom theholderofthe policyhastransferredthe policy.The personsentitledto claim underthese policiescanbe:

Theassuredhimself.

The payee, whosenameappearsinthebenefitschedule ofthe policyasa partyinterested.

The creditor who hasbeen properly assigned and nominated to receive the payment under the

policy.

Amount payable:

Theamount payableuponthe maturity ofthe policy,i.e.,non-happening oftheeventisthesum

assured plus profitsandbonusthataccrues withthe policy.The profitsare paid on pro-ratabasis,

i.e., in the proportion ofthe premium paidanddeclaredarebonuses.The payment of profits is

condition insertedasaclause inthe policy itselfand itbecomesan obligation onthe insurerto

paytheamount ofsuch profitas maybeaccruedto theinsured.

4.2 Dispute in payment of maturity claims:

Thedisputesarisinginsuchcasesaregeneral and mayberestrictedto the proof ofage,iftheage

isnotadmittedatthetime ofissuingthe policydocumentandaboutthegoodtitle oftheclaimant

on the policy. In case of the insurer shrugging off his liability to make the payment of profits

which areaccrued to the insuredupon maturityand in case the payment of profit isas per the

contract, the insurer has every right to move to the court and to claim for such payment. The

policydocumentandscheme ofthe policycontainsthedetails ofthe paymentandthe payment

madeaccordingly maynotdragthe partiesinto litigations.


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Death claims

Beneficiaries:

Theclaimants orthebeneficiariesunderthe lifeinsurance policies, paid onthehappening ofthe

events whichisdeath oftheassured,areas follows:

The legal heirs ofthe policyholder.

Thenominees,assigneesandtransferees

The wifeandchildren oftheassuredunderthe Married Womens property Act

Thecreditorin whosenamethe policyhasbeenendorsed Amount payable: Amountsthatcanbe

paidundera lifeinsurance policyareas follows:

Theamountinsured orthe face value ofthe policy

Bonusifdeclaredbythecompany, whichisrecoverableasaninsuranceamount.

Theshare of profitsincase of participation policy.

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

assuredsurrendersthe policy,theinsurancecompany may paya percentage ofthe premium paid

accordingto therules ofthecompany.

Factorsaffectingtheclaimssettlement

4.3The factors that affect the claims settlement are as follows:

The policyshouldbein force onthedate oftheevent. Theriskandcause ofeventshouldbecoveredbythe policy. Thecause of loss ortheeventshouldbedirectlyrelatedto the loss. A remotecausehas

no placeinthesettlement.

The lossshouldnothavebeencaused withanintentionto gain from thesituation. The preconditions or warranties have to be compiled with. When conditions to be

fulfilled before affecting the cover of the policy, are not performed, the cover of

insurance will notcomeinto effecteventhoughthe premium is paidandacceptedbytheinsurancecompany.

Presence of insurable interest, in case of the property insurances,at leastat the time ofhappening ofevent orlosssufferings. Withouthavingtheinsurableinterestinthesubject

matter,no personcangetbenefit orcompensation.


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Theassured should suffer loss,actual or constructive, to getcompensation. The assuredshouldriot makebenefits orgains out oftheinsurancecontractastheinsurancecontract

is ofindemnityinnature. It only makesgoodthe losssufferedbytheassuredandisnota

source ofgains.

Sufficientdocumentaryevidence of loss shouldbe presentedalong with theapplicationform.

Multipleclaimsandreciprocal claims will besettledas per the terms ofthecontract ofinsurance.

Right to appeal or filea petition with the tribunal orthecourtscannotbe withdrawn. Iftheterms ofthe policyinsistuponarbitration,itisnottheend ofjustice fortheinsureror

theassured.Theinsured may opt forthe followingalternatives whilesettlingtheclaims:

Paytheclaimsasreportedbythesurveyorortheclaims madeby theinsurerwhicheveris less. Take help of the agent or some other persons and compromise or to come to an

agreement withtheassuredincase ofadisputedclaim.

Iftheclaim isrejectedthere maybe litigation onthe insurer.The litigation will costtheinsurer 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 humanitariangroundsandto avoidcomplicationsin future.

Arrangeto replacetheasseteitherbyrepairingthesame orby purchasingasimilarassetfrom the market.

Repairtheassetto providethesimilartype ofservicesas providedbeforethehappeningofevent.


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4.4 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 otherwisestated 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, eitherby the policyholder or the claimant orby the

representative oftheclaimant?Thetimeelementis veryimportantintheclaims payment forthe

followingreasons:

y The delay in the claims settlement will have an adverse impact on the goodwill andmarketing oftheinsurance.

y Thecost ofclaims will increase withtheextension oftime.y Theinsurermaybeaskedto paytheinterest ontheunpaidinsuranceamountbecause of

the delay. The court may direct the insurer to pay the costs of the case to the assured,

whichresultsin mountingup ofcosts.

y Thedelayin payment may leadto litigation whichisexpensive.y Unproductive use of manpower to defend, expenses incurred andwaste of time on

litigations will beanextraburden ontheinsurer.

y Litigations will affect on the productive areas of the business particularly in themarketing oftheinsurancebusiness.

y The delay also leads to the increasing number of cases with consumer protectioncouncils.Thusthedelayinthesettlement oftheclaims will haveanimpact onthepresent

and futurebusiness oftheinsurancealong withthecostburden. Assuchitisessential to

havequickerclaim settlements.

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

Late submission of claim form: The claim forms maybe submitted latebecause of the

ignorance or lack ofknowledge oftheexistence oftheinsurance policiesagainstthe lives ofthe

persons who facetheevent orno informationisgivento thebeneficiaries orno nominationsare

madeto the policy. Innocenceandilliteracy oftheassured:Theassured ortheclaimant may fail

to filethe papersdueto lackofknowledge,to filetheinsuranceclaims withinacertain period or

oftheclaims procedure. Notsubmittingtheclaims


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forms in full: Iftheclaim formsarenot properly filled,they will fail to providethesettlethe

claimsandasaresulttheclaim settlement will bedelayed for want ofinformation. Ifsufficient

proof or supporting documents are not submitted along with the claim form to facilitate claim

assessorto know thedate oftheevent orthecause oftheevent,claim settlement maybedelayed.

y Theinsurermaynotgetthecooperation oftheinsured orthey Claimantto finalizetheclaim orarriveatsomecompromise.y Destroyingtheevidences, with or withoutintentionthatcouldhave otherwise facilitated

theestimation ofthe loss payableundertheclaim.

y Not providinginformationaboutthechangesintheconstitution ofthe organization orthechangedaddress oftheinsured ortheclaimant orany otherinformationrequiredto make

aclaim settlement.

y Thedelay onthe part oftheinsurer maybeintentional ordueto the pressure of work.y Lack of motivation, lack of knowledge of importance of the claimssettlement, lack of

awarenessamongthestaff ofthe organizations ordefectivesupervision ororganizational

structure.Thedelayinsubmission ofclaims orsettlementscanbeavoidedby makingthe

assuredaware ofthe factsandimportance oftheinsuranceand procedure ofclaims.The

insurers can take the help oftheagent or local staffto arriveatacompromise with the

claimants whenthecasesare ofcomplexnature.The organizationshouldbeso designed

to avoidholding of papersat one ortwo places.Thestaffshouldbetrainedandthe

y Importance of the claims management shouldbe driven into their minds.Use of latesttechnology to assess the losses and recruitment of able staff will speed up claims

settlement.


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4.5 Role of agents in claims settlement

Anagent isa primary source for procurement of insurancebusinessandas such hisrole is the

corner stone forbuilding a solid edifice of any life insurance organization. To effect a good

quality of life insurance sale, an agent mustbe equipped with technical aspects of insurance

knowledge,he must possessanalytical abilityto analyzehumanneeds,he mustbeabreast with

up to dateknowledge of merits ordemerits of other instruments of investmentavailable in the

financial market,he mustbeendowed withaburningdesire ofsocial serviceand overandabove

all this,he must possessanddevelop anundeterreddetermination to succeedsa Life Insurance

Salesman. Inshorthe mustbeanagent with

Professional approach in life insurance salesmanship. Such an agency force is expected to be

helpful not only in proper field underwritingbut also after sales. Servicing. Concomitant and

essential elements for higher retention ofbusiness. The insurance company,being a corporate

structure,doesnotdeal directly withthecustomersto promotethe insurancebusiness. Itavails

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

middlemen or intermediaries. Section 40 of Insurance Act1938 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 ofinsuranceisageneral practiceamonginsurancecompaniesall overthe world.

The agents are allowed to market the Insurancebusinessbut not allowed to issue the policies.

Theagenthasno rightto concludethe insurancecontractandthe final approval orrejection ofcontract proposal is vested with the insurer, the principal. But, in promoting the insurance

business,theagentbindsthe principal to all activitiessuchasreceipt of premium,enquiriesand

publishing of information ofthe insurance contracts and products. The agent isboundby duty

andresponsibilityto conveythe messageto theinsurer. But,givingtheinformationto theagent

does notbind 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

negotiationsand mediationsto retainthecustomer.


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Role of agents in an Insurance company

1. Full information mustbe providedto the proponentatthe point ofsaleto enablehim to decide

onthebestcoverorplanto minimizeinstances ofcooling offbythe proponents.

2. An agent shouldbe well versed in all the plans, the selling points and also be equipped to

assesstheneeds oftheclients.

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

must,therefore, familiarizethemselves with provisions ofthe 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

verycarefully.

5. Agents must also possess adequate knowledge of policy servicing and claim settlement

proceduresso thatthe policyholderscanbeguiledcorrectly.

6. Submission of proposal formsand proposal depositto thebranch officeimmediatelyto avoid

delaysandto enablethe officeto taketimelydecisions.

7. A leaflet orbrochure containing relevant features of the plan that isbeing sold shouldbe

available withtheagents. Iftheagentsare well conversant withtheclaim settlement procedure

andassisttheclaimantsincompletingthenecessaryrequirements,it wouldnot onlyquickenthe

process ofclaim settlementandenhancetheirprofessional statusbutalso help the organizationto

improve upon their outstanding claim ratio. This, while further boosting the image of theorganization may provide them an overflowing fountain for furtherbusiness in those families.

The performance ofagents will now depend onnothow manyhourshe worksbutthequality of

service, his attitude to business. Thus the agent under the changing economic scenario can

achievetheir objectivesby practicing psycho-marketingstrategies.Their objectivesaresurvival

andgrowth. Maximization ofbusinessisanendto achievethese objectives.


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4.6 Role of surveyors and assessor in claims settlement

Insuranceusers paytheirpremiums,yearafteryear,trustingtheirpoliciesto protecttheirlives 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, hasbeen denied his claim

amount in full orpart.Thishappensbecausetheinsurancecompanyisnotableto estimatethe

total amount oftheclaims. In lifeinsuranceclaimsthe

Insurance company tries to reject theclaims withoutknowing thecause ofthedeath or loss of

the person. Surveyorsand Loss Assessorshavebeenaround fordecades - wehaveall heard of

them andsome ofushavehad occasionto usetheirservices butitisquitesurprisinghow little

isactuallyknownandunderstoodaboutthem theirjob,theirduties & responsibilities,theirrole

vis--vis insurers and insureds, and the insureds rights and duties vis--vis surveyors and

assessors.Thisisbecausetheynevercomeinthe lime light

butthe main workofassessmentandsurvey of lossisdonebythem. Dutiesandresponsibilities

ofsurveyorsand lossassessors:

A surveyor and loss assessor shall, for a major part ofthe 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

integritybystrictlyadheringto thecode ofconductexpected ofsuchsurveyorand lossassessor.

The following are their duties:

i.declaring whetherhehasanyinterestinthesubject-matterinquestion orwhetherit pertainsto

any ofhisrelatives,business partners orthrough material shareholding.

ii. Maintainingconfidentialityandneutrality withoutjeopardizingthe liability oftheinsurerand

claim oftheinsured;

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

circumstances ofthe lossinquestionincludingextent of loss,nature of ownership andinsurableinterest;


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iv. Conducting spot and final surveys, as and when necessary and comment upon franchise,

excess/underinsuranceandany otherrelated matter;

v.surveyingandassessingthe loss onbehalf ofinsurerorinsured;

vi. Assessing liabilityunderthecontract ofinsurance;

vii. Pointing outdiscrepancy,ifany,inthe policy wordings;

viii. Satisfyingqueries of the insured/insurerand of personsconnectedthereto inrespect ofthe

claim/loss;

ix. Givingreasons forrepudiation ofclaim,incasetheclaim isnotcoveredby policytermsand

conditions;

x.takingexpert opinion, whereverrequired;

xi. A surveyoror lossassessorshall submithisreportto theinsurerasexpeditiouslyas possible,

but not later than 30 days of his appointment. Provided that in exceptional cases, the

aforementioned periodcanbeextended withtheconsent oftheinsuredandtheinsurer.

Surveyors and Loss assessors Report:

Thereport ofsurveyorsand lossassessors will be theauthenticreport.Thereportcontains the

investigationsandresults oftheinvestigations,recommendationandassessments ofthesurveyor

andassessor.Thesurveyors will statethecauses ofthe loss whetherremote ordirect,theextent

ofactual total loss,insurance policyamount, value of

salvage and assessment of payment ofclaims. The report of the loss assessors will be a solid

groundto settletheclaims. Ifthe insurer is ofthe opinionthatthe lossassessor orthesurveyor

hasactedundersome personal intereststhenthe insurer maydecideto re-investigatethe matter

and onreceivingthereportcandecidetheclaims payment.


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4.7 Frauds in claims settlement

Insurance fraud is any deliberate deception/dishonesty committed against orby an insurance

company, insurance agent, or consumer for unjustified financial gain. It occurs and maybe

committedatdifferent pointsinthetransactionbydifferent partiessuchas policy owners,third-partyclaimants, intermediariesand professionals who provideservicesto claimants.Thenature

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

completely fabricated orbogusclaim where lossesneverreally occurred. Promises made withno

intentionto perform them canbetreatedasa fraud.

The essential components of an insurance fraud are:-

y Intentto deceivey Desireto induceinsurancecompanyto pay morethanit otherwise would.The fraudulent

claims maybe oftwo categories:

y Thecause ortheclaim itselfis fraudulenty The claim may be genuine but the method of calculation or the evidences, or the

informationsubmitted maybe fraudulentinnature.

Assuchany fraud madebytheinsured ortheinsurerinconcludingtheinsurance

contract ortheclaimssettlement, makestheentirecontractviocableatthe option ofthe person on

whom the fraud is played.Creating forged documents such as wills, legal heir certificates,

assignments ofthe policiesand other papersto supporttheirclaim,deliberatedestruction ofthe

insuredsubject withanintentionto getthe policyamountall constitutedifferenttypes of frauds.

Sometimes the frauds may also result from gross negligence or forbearance to use reasonable

exertionsand meansathand.The fraudulentclaim by theassured will deprivehim therightto

claim astheinsurerhastherightto rejectit.

Examples of insurance fraud:

1) Creatinga fraudulentclaim

2) Overstatingamount of loss3) Misrepresenting factsto receive payment

4) Bogusagents/Sale of forgedcovernotes


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How to protect yourself from a fraud:

1. Be wary of unregistered insurance agents. Before purchasing insurance, contact your

insurancecompanyto ensuretheagentisanauthorizedagent.

2. Avoid paying premiums in cash. Optto pay for premiumsby cheque or money order. Made

payableto theinsurancecompanyinstead oftheagent.

3. Makesureyoureceivea written policyafterpayment ofyourfirst premium.

4. Immediatelyexamineyourinsurance policyto ensurethecoverageis whatyouhaverequested

forandensurethatthe premium amount paidisreflectedinthecovernote/policy. Request fora

receiptasevidence of payment of premium.

5. Do notsignablankinsuranceapplication, orinsuranceclaim form.

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

companies.

7. Ifyou meet withanaccident,becareful ofstrangers who offeryouquickcash orurgeyouto

deal withspecific workshops, medical clinic orlaw firm.Theycouldbe part ofa fraudsyndicate.

8. Insist ondetailedbills forrepairsand medical servicesrenderedandcheckforaccuracy.

9. Discreetlycontact your insurance company or the police ifyouarebeingdefrauded orhave

been/arebeing persuaded to take part ina fraud. Provideas manydetailsas possibleaboutthe

incident -name oftheindividual(s)involved,amount,date(s),andtype of fraud.


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CHAPTER 5.

CASE STUDY


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Case study

(1)

Life Insurance Corporation of India v/s Mrs. Sunanda KanthaleAccording to complainantSunanda Kanthale, her husbandManoharrao Kanthale who worked as a stores superintendent

withtheAmravatibranch of Maharashtra State Corporation, purchasedaninsurance policy forRs

20,000 on November 28, 1992. The policy which was a non-medical one, was scheduled to

mature on November24, 2004,shesaid.Unfortunately Manoharrao passedaway on October 22,

1993, 10 monthsand 25 days from thedate of purchasingtheinstrument. Beingthenomineein

the policy,sheasked forherclaim foranamount of Rs 40,000 (underdoublebenefit provisionin

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, thereason givenby the official for not

settlingtheclaim wasalso abogus one,shealleged. Sunandathen wroteto thearea manager of

LIC, Mumbai,justifying her claim. The Mumbai office too (vide letter datedApril 20, 1995)

refused to settle the claim, Kanthale added. She then lodged a complaint with Akola District

Consumers Grievancesredressal forum. Inthecomplaint,sheappealedto the forum to issuethe

necessary directives to the LIC for paying Rs 40,000 along with 18 percent interest, a

compensation of Rs 50,000 towards mental tension caused Defending the stand takenby the

company, the LIC refuted all the allegations madeby Sunanda. Manoharrao, who held the

policy, had keptthe 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 abouthis health.The form was dulysingedby Dr B R

Jain, the forum said. The LIC officials produced proofs before the forum regarding heart

disorderofthe policyholderandsick leaveavailedbyhim aftertakingthe policy. However,they

could not prove that Manohar was not well on the day of purchasing the policy. The DistrictConsumers Grievances Redressal Forum has directed Senior Divisional Manager of Life

Insurance Corporation (LIC), Amravati, AreaManager, Mumbai,and Branch Manager, Akola,to

pay Rs 20,000to Sunanda Kanthaletowardsinsuranceclaim besidesinterest ontheamount from

October22, 1993,till thedate of paymentatarate of 12 percent.The forum hasalso


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Directed LIC to paycompensation of Rs 10,000to the woman forcausing mental tensionto her

duringthe fouryears,afterherhusbandsdeath,inreleasingtheinsuranceamount.

If the insurance company failed to pay the compensation within two months from the date of

receipt ofcopy ofthejudgment,thecompany will be liableto payinterestatarate of 18 percent

ontheamounttill final paymentbesides 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;thecompanyshould payherRs 10,000towardscompensation.


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Case study (2)

Life Insurance Corporation of India v/s Neelam MehtaThecase arose following therefusal of

LIC to paythe insurance money followingthedeath ofherhusband Mahendrabhai Mehta. LIC

hadrepudiatedthe life policyallegingthathehadhid from itthathe wassuffering from diabetes

at the time of taking the insurance policy indecember 1993. On 6 November 1994 he died

followingaheartattack.Neelam toldtheconsumerforum thatshecameto know thatherhusband

hada life policy with licthree monthsafterhisdeath, whenshestartedreceiving 'forms oneafter

anotherto be filledthrough licagent'. Shethen filledup all therelevant papers. Shealso formally

informed lic about the death of her husband and claimed the insurance money. thereupon, lic

intimatedher that theclaim for her husband's insurance policy wasrepudiatedbecause the life

assured had 'deliberately' withheld information regarding his 'pre-existing illness which was

diabetes' and which, itsaid,had led to hisdeath. italso alleged thatbecause ofthisdisease he

hadbeen hospitalizedbefore his death and that he was a insulin-dependent diabetic. Neelam

representedto boththe Bhavnagarand Ahmadabad offices of licand laterto itszonal office in

Mumbaiurgingthem to recommendherclaim to thereview committee.Thisrequest was made

in September 1996 and till now no decision had been taken and the 'matter is still under

consideration'. Shealso deniedthatherhusband wasadiabetic orthathehadbeenhospitalized

for this. Hehadnotbeen treated foranyailmentduring the five years precedinghisdeath,she

asserted.The forum comprisingits president, misrepresentationabouthishealth. "Theburden of

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

likenedithad failedto proveit,the forum observed. LIC therefore was legallyand morallyduty-

bound to pay the claim, it said. Consumer disputes redressal forum, Ahmadabad, has directed

LIC of Indiato payup Rs. 50,000 plus 12 percentinterest forsevenyears,asinsurance money

due to her after herhusband's death. The forum also ordered payment of Rs. 5000 for causing

mental agony,hardship andinconvenienceto Neelamben. Itgranted Rs. 3000ascost.


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Case study (3)

Life Insurance Corporation of India v/s Lily Rani RoyThe petitioner has purchased a life

insurance policy from theappellateand premiums were paidregularly.The maturity ofthesaid

policy wasin 1978. Because ofsome personal reasonstheclaim wasnot filed.The LIC of India

rejectedthe payment ona pleathatclaim istimebarredclaim andassuchtheclaim will notbe

paid. The petitioner had filed a complaint with Consumer Council with are quest to direct the

LIC forthe payment ofthe maturityclaim as the policyholderhad paid theentire premium till

thedate ofthe maturityandhastherightto receivetheclaim amount. Assuredheld LIC guilty

under Consumer Protection Act, 1986 Section (I) (g) fordeficiency inservice. But,the LIC of

India pleadedthatthe Corporation will be maintainingtherecords fora period of fiveyears only

andthe Corporationhasreceivedtheclaim notice from the petitionerin 1990whichis farbeyond

thetime.The LIC also produceda photo copy ofthe maturityclaims paymentregistershowing

the payment of the complainants money. After examining all the facts, the State forum has

declaredthatthe petitionerscannotclaim the payment of policyas it isalreadytimebarred. On

the decision of the State Commission, the petitioners have filed a petition with the National

Commission.The National Commission,after verifyingtheterms ofthe policy,has opinedthat

thoughthe payment ofclaim istimebarred,theinsurancecompanyshouldhavegivennoticeto

thateffect orshould includeclause inthe policydocumentstatingthatthetimebarred maturity

claims will notbe paid. Asthe Corporationhas filedto bringthisinformationto thenotice ofthe

policyholder or failedto createtheawarenessamongthe policyholders,ithas failedinitsduties

andas such it is liable to pay the claim to the petitioners. Thus, the National Commission has

orderedthe payment oftimebarred maturityclaims.


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BIBLIOGRAPHY

BOOKS:- (1) Environment and Management of

Financial Service

By- P.K. BANDGAR

(2) LIC OF INDIA

By RAJAN VAIDYA

WEBLIOGRAPHY

www.insuremagic.com

www.licindia.com

www.icicprulife.com

www.insurancewatch.com

www.insuranceonline.com

Search engines:

www.google.com

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