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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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8
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