14217786 Project on Claims Management in Life Insurance

7/30/2019 14217786 Project on Claims Management in Life Insurance

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ABSTRACT

The field of insurance has taken a giant leap at the threshold of

twentieth century. Insurance have become an integral part of life of man

all over the globe. The proverb Need is the mother of invention is

proving equally correct in case of insurance Insurance have already had a

considerable impact on many aspects of our society.Claims management

is another important aspect on insurance. It is complex in nature that is

true but it is a driving force to plant confidence in the hearts of people.

Claims Management is one of the most challenging business

processes in the insurance industry. With the number of stakeholders

involved, the dependencies and the logistics, there is a need is to

eliminate manual interventions. For many organizations, claim

management and administration is viewed solely as a service operation.Claim management is expected to run the claim process efficiently and

keep expenses low, but little attention is given to leveraging high-impact

opportunities afforded through effective data management. In fact, the

data captured in the claim process, which all too often are underutilized,

are rich in valuable information for those who know how to extract and

analyze it.

Claims management is an expert system which generates the rules

and regulations for the assessment of general damages using the key

information contained in medical reports, surveyor report, loss assessors

reports, claimants petition and the procedures or conditions and

warrenties contained in the policy document. The claims management


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regulates the payment of general damages and also payment of the loss of

future earnings.

This project is just a gist about how the insurance companies settle

the claims, the procedure that is followed, the intermediaries that are

involved in the process and so on. This project throws light on various

aspects on claims management and the problems faced by them.

INTRODUCTION TO INSURANCE IN INDIA

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

open competitive market to nationalisation and back to a liberalised

market again. Tracing the developments in the Indian insurance sector

reveals the 360-degree turn witnessed over a period of almost two

centuries.

Today Insurance Companies in India have grown manifold. The

insurance sector in India has shown immense growth potential. Even

today a giant share of Indian population nearly 80% is not under life

insurance coverage, let alone health and non-life insurance policies. This

clearly indicates the potential for insurance companies to grow their

market in India.


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

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

into contract the Insurance company agrees to pay the Policy holder or his

family members a predetermined sum of money in case of any

unfortunate event for a predetermined fixed sum payable which is in

normal term called Insurance Premiums.

Insurance is basically a protection

against a financial loss which can arise on

the happening of an unexpected event.

Insurance companies collect premiums to

provide for this protection. By paying a

very small sum of money a person can

safeguard himself and his family

financially from an unfortunate event.

BRIEF HISTORY OF THE

INSURANCE SECTOR

The business of life insurance in India in

its existing form started in India in the

year 1818 with the establishment of the Oriental Life Insurance Company

in Calcutta.

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

are:

Definition of Insurance:

Insurance in itsbasic form isdefined as A

contract between

two parties wherebyone party called

insurer undertakes

in exchange for a

fixed sum called

premiums, to paythe other party

called insured a

fixed amount of

money on the

happening of acertain event."


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1912: The Indian Life Assurance Companies Act enacted as thefirst statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable thegovernment to collect statistical information about both life and

non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by theInsurance Act with the objective of protecting the interests of the

insuring public.

1956: 245 Indian and foreign insurers and provident societies takenover by the central government and nationalised. LIC formed by an

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

of Rs. 5 crore from the Government of India.

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

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

company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in

India are:

1907: The Indian Mercantile Insurance Ltd. set up, the firstcompany to transact all classes of general insurance business.

1957: General Insurance Council, a wing of the InsuranceAssociation of India, frames a code of conduct for ensuring fair

conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and setminimum solvency margins and the Tariff Advisory Committee set

up.


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1972: The General Insurance Business (Nationalisation) Act, 1972nationalised the general insurance business in India with effect

from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz.the National Insurance Company Ltd., the New India Assurance

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

United India Insurance Company Ltd. GIC incorporated as a

company.

In 1993, Malhotra Committee headed by former Finance

Secretary and RBI Governor R.N. Malhotra was formed to evaluate

the Indian insurance industry and recommend its future direction.The

Malhotra committee was set up with the objective of complementing

the reforms initiated in the financial sector. The reforms were aimed at

"creating a more efficient and competitive financial system suitable

for the requirements of the economy keeping in mind the structural

changes currently underway and recognizing that insurance is an

important part of the overall financial system where it was necessary

to address the need for similar reforms.

Thereafter many changes have taken place in the insurance sector.

Insurance sector in India was liberalized in March 2000 with the

passage of the Insurance Regulatory and Development Authority(IRDA) Bill, lifting all entry restrictions for private players and

allowing foreign players to enter the market with some limits on direct

foreign ownership. There is a 26% equity cap for foreign partners in

an insurance company. There is a proposal to increase this limit to

49%. The opening up of the insurance sector has led to rapid growth

of the sector. Presently, there are 16 life insurance companies and 15non-life insurance companies in the market. The potential for growth


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of insurance industry in India is immense as nearly 80% of Indian

population is without life insurance cover while health insurance and

non-life insurance continues to be well below international standards.

Furthermore, over the medium and long term, Indias insurance

market will continue to experience major changes as its operating

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

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

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

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

market share from the more established public sector entities.

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 income to the household.

The family is put to hardship. Sometimes, survival itself is at stake for the

dependants. Risks are unpredictable. Death/disability may occur when

one least expects it. An individual can protect himself or herself against

such contingencies through life insurance.


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

determined which is based on loss of income in future years. Hence in life

insurance, the Sum Assured (or the amount guaranteed to be paid in the

event of a loss) is by way of a benefit in the case of life insurance.

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

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

Insurance substitutes this uncertainty by certainty. The primary purpose

of life insurance is the protection of the family. Insurance in its various

forms protects against such misfortunes by having the losses of the

unfortunate few paid by the contribution of the many that are exposed to

the same risk. This is the essence of

insurancethe sharing of losses and

substitution of certainty for

uncertainty.

There are a variety of life insurance

products to suit to the needs of

various categories of people

children, youth, women, middle-

aged persons, old people; and also

rural people,etc. Life insurance

products could be purchased from

registered life insurers notified by

the IRDA. Insurers appoint insurance agents to sell their products.Public

who are interested to buy life insurance products should receive proper

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

chosen to suit particular financial needs.

Definition of lifeInsurance:

Life insurance isa contract between two

parties whereby one

party agrees to pay to

the other party, a

certain amount of

money as premium to

make good the loss of

life arising out of an

uncertain event of

death in which the

insured has interest.


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CLAIMS IN INSURANCE

An insurance claim is the actual

application for benefits provided by an

insurance company. Policy holders must

first file an insurance claim before any

money can be disbursed to the hospital or

repair shop or other contracted service.

The insurance company may or may not

approve the claim, based on their own assessment of the circumstances.

Individuals who take out home, life, health, or automobile insurance

policies must maintain regular payments called premiums to the insurers.

Most of the time these premiums are used to settle another person's

insurance claim or to build up the available assets of the insurancecompany.

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

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

by undertaking appropriate steps for speedy disposal of claims. It is true

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

plant confidence in the hearts of people, in general and beneficiaries in

specific. Insurance claim is a right of insured under a contract of

insurance. Insurance contract is a contract by which one party called the

insurer promises to save the other party, the insured on payment of

consideration known as the premium. The insurer promises to save the

insured are nominees/assignees of the insured on happening of event or

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

Definition of claims:

Claim is a right of

insured to receivethe amount secured

under the policy of

insurance contract

promised by Insurer.
http://www.wisegeek.com/what-are-available-assets.htmhttp://www.wisegeek.com/what-are-available-assets.htm


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

way. Claims settlement is an integral part of the insurance business which

is a service industry and its growth is interwoven with the people, the

customers and consumers of service. It is inevitable for the insurance

company to protect and guard the interests of the policyholders. An

insurance claim is the only way to officially apply for benefits under an

insurance policy, but until the insurance company has assessed the

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


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CLAIMS MANAGEMENT

Many insurers have recognized the need to improve the efficiency

of their claims management process. They have streamlined processes,

eliminated paper-based forms and redistributed work to match the

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

also increasing overall throughput. Efficiency improvements make tasks

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

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

the effectiveness of their claims decisions.

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

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

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

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

Technology can play a significant role by providing integrated channels

for communication and collaboration. This would help the insurance

company increase employee productivity by reducing cycle time and

defect rate and also increase employeeparticipation and compliance.

Claims Processing sometimes involves collating and sharing large

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

body shops to adjusters to investigators to lawyers and doctors to

claimants and regulators. And it involves the knowledge of experienced

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

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

carriers.

Service representatives and claims adjusters need to access data

from multiple sources when processing or assessing a claim, which


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delays settlement time and increases costs. Manual steps reduce

transparency of the claims process and raise the risk of fraud,

manipulation or simply human error. Customer retention is also a

challenge experts say that 75 percent of customers leave their insurer

due to claims issues.

System of claims management

Basis of claims management:Claims management means and includes all the managerial

decisions and processes concerning the settlement and payment of claims

in accordance with the terms of insurance contract. It includes carrying

out the entire claims process with a particular emphasis on monitoring

and lowering the claims costs. The important elements of claims

management are claims preparation, claims philosophy, claimsprocessing and claims settlement.

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 the insurers or claimants, analysis of the claims,

consideration of the possible decision on the particular issues and

disputes, evaluating the impact of the claims cost and expenses, relation

of claims to the consumer satisfaction, monitoring the claim payment and

improving the efficiency of the claims settlement and payment systems

and avoiding unnecessary disputes of claims.


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The claims process includes the basic claims procedure and

handling of claims. The handling of claims includes the monitoring of

situation or events, which cause the loss to the insured subject matter and

give a cause to the insured to make a claim. The claims process contains

two fold procedures to be followed by the insurer and insured. From the

point of view of the insured, it includes the suffering of loss or the

damage, understanding and identifying the cause of action, information or

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

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

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

immediate precautions such as verifying the claims, reviewing the claim

application, respond to the claimant, carry out claims investigation,

claims negotiation, claim settlement and claim payment.

Stages in claims system:

The claims handling is the integrated part of the claims management

and executes the decisions made by the claims management machinery of

an insurance company. Though claims management and claims handling

are generally the same externally, they are different in nature.

ClaimsManagement

Claims

Handling


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CLAIMS MANAGEMENT:Claims management is a managerial function in which the

insurer has a definite role to play in analysis of data, processing of

application, decision-making, budget planning, and business control

and fund management. It is a subjective concept. In claims

management, the attention is on making principles and guidelines for

smooth and profitable settlement of claims in the hands of the insurer.

Claims management includes the entire process of claims

handling and claims payment. This includes review of the claims

performance, monitoring of claims expenses, legal costs, settlement

costs, compromises and planning for future payments and avoiding the

delay and disputes in payment of claims. It is a control system that has

an important place in the claims management. It also includes risk

management techniques, loss assessment, and business forecasting and

planning.

CLAIMS HANDLING:Claims handling is the procedural way of processing a claims

application. Claims handling involves utilization of the laid down

principles as yardsticks and the measuring methods in settling the

issues before it occurs. Claims handling is a traditional form of

managing the claims settlements. It includes handling of various

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

review, investigation and understanding the negotiating process. It

does not include any managerial outlook such as risk management,

policy making and decision making.


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Thus, it is concerned with the procedural methods and also

interpretations of the claims philosophy. Claims handling may change

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

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

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

systematic way of receiving the claims and following other procedures

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

has a standardized way of claims handling which will improve quality

and customer service. The insurers commitment to the service of the

customer is a part of the claims management.


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The Life Insurance Corporation (LIC) was established about 44

years ago with a view to provide an insurance cover against various risks

in life. A monolith then, the corporation, enjoyed a monopoly status and

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

of 1.24 lakh employees and 2,048 branches and over six lakh agencyforce.

LIC has hundred divisional offices and has established extensive

training facilities at all levels. At the apex, is the Management

Development Institute, seven Zonal Training Centers and 35 Sales

Training Centers. LIC of India is one of Indias leading financial

institutions, offering complete financial solutions that encompass every

sphere of life. From commercial banking to stock broking to mutual funds

to life insurance to investment banking, the group caters to the financials

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

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

of over 20, 00,000.

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

has helped establish the National Insurance Academy. It presently

transacts individual life insurance businesses, group insurance businesses,

social security schemes and pensions, grants housing loans through its

subsidiary; and markets savings and investment products through its

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

policyholders.


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It has been started with the objectives of spreading Life Insurance

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

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

economic environment.

Organizational Structure of LIC

The organization is the form having independent or co-ordinated

parts for unit action for the accomplishment of common objectives. Assuch the organization relating to insurance business is a form having

different functional divisional units with the ultimate aim of providing

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

organization is essential to share information and effectively execute the

managerial decisions. The organizational structure differs for different

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

mission of the business organization. The organization should be

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

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

other persons directly or indirectly interested in it.

The insurance business is concerned with the functions of

marketing of insurance products and its related functions like premium

collections and premium fixings, accepting the insurance proposals,

issuing policy documents, maintain records relating t the policies issued

everyday in chronological order, and also payment of claims. The claims

department is associated with the receipt of claims and arrangement of

claims investigations. After it is decided whether to make payment to the

assured or to defer it, the insurance company may seek guidance from the


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

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

courts and supervise other alternative dispute resolutions. Thus the

insurance organization is associated with the marketing of policies,

underwriting of policies, claims payment, claims defending and stff

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

limitations, responsibilities and decision making are all related to the

organizational structure and management.

BASIC STRUCTURE OF LIC

Central office Mumbai

8 Zonal offices

Bhopal,Chennai,Hyderabad,Kanpur,Kolkata,Mumbai, New Delhi, Patna

105 DIVISIONALOFFICES

2048 BRANCHOFFICES

SATELLITEOFFICES

FOREIGNOFFICES

United Kingdom,

Mauritius, Fiji


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

other related activities of the insurance consumers are dealt and handled

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

headed by a manager and each function of insurance business like

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

administration matters are identified as departments of the branch office

with responsible officials such as Administration and Accounts Officers.

The managerial decisions are based on the information supplied by

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

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

will deal with maturity and death claims. If the branch is smaller, all the

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

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

branch level, these officials have to maintain cordial relations and

establish a system of sharing information with the other departments,

relating to the policy documents, payment of premium and using the staff

or the agents for the settlement of claims disputes. The branches maintain

records relating to the claims payment and claims rejections. They wiill

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

Head Office or Corporate Office.

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

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

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

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

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

solve the problems. The divisional office is responsible to settle theclaims referred by the branch office and also report the same to the zonal


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office, which in turn will consolidate the data and submit the same as

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

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

At the division office level, the claims department generally deals

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

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

portfolio and establishment and maintenance of reserves for the purpose

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

function of the central office. Thus the organizational structure of the

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

factors.

Claims Management Department

The claims department is one of the key departments in an

insurance company. The claims department has the following functions to

perform:

To provide the customers of insurance and reinsurance companieswith high quality of service. This role gives a long-term edge to the

company and hence is referred to as the strategic role.

To monitor the claims and see that whether the benefits ofinsurance exceed the costs of claims. This role is referred to as the

cost-monitoring role of the claims department.

To see that the expectations of the customers are met with regard tospeed, manner and efficiency of the service. This is called the

customer service role of the claims department.


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To meet the standard of service, to keep up to the customersexpectations and still operate within the budget. This is the

managerial role of the claims department.

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

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

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

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

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

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

claim payments. As the claims department is in direct touch with the

customer, it has to ensure the quality of service.

The claims department has the sole responsibility of managing claims.

Claims management by far is the most complex issue in an insurance

company. The people in the claim department should have good

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

will not receive quality service. There should be sufficient number of

people as managers so as to simplify job and proper human resource

systems in place so that such persons are recruited whose philosophy

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

imperative for the claims department to provide quality service to the

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

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

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


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Types of claims

Understanding the requirements for various life insurance benefits(claims) is important for the customers. The overriding condition on

claims is the payment of premiums i.e. claims are only payable if

premiums are paid up to date. There are various types of claims under life

policies. The most common claims include:

The general requirements for each of these claims are briefly explained

below.

Death Claims:

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

to be paid the following basic conditions must be fulfilled.

Death

Maturity

Surrender value

Partial maturity

Policy loans

Disability


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The policy document, original death certificate, burial permit copyof the ID of the deceased must be provided to the insurance

company.

A report from the doctor who treated the deceased must bepresented to the insurance company.

Claim forms must be completed

A report from the doctor who last treated the deceased person maybe required.

A police abstract report may be required where death occursthrough an accident.

The documentation required for payment of death claims are easilyavailable and claimants need to immediately inform the insurance

company where problems are encountered in securing the documents.

The documents are usually required so as to reduce on the possibility of

paying fraudulent claims or paying the wrong claimants. Many insurance

companies will frequently waive certain requirements under certain

special circumstances.

Maturity Claims:

A maturity claim is paid out mostly on endowment and education

insurance policies whose duration has expired. For example in an

insurance policy with duration of 15 years, the maturity value will be paid

on the 15th

anniversary after affecting the policy. Payment of a maturity


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claim is a straightforward affair where the customer returns the original

policy document and signs a discharge form. The claim cheque is usually

released in a period of about two weeks once all required conditions are

fulfilled.

Partial Maturity Claims:

Most endowment and education policies provide for payment of

partial maturities after a given duration. The partial maturity is normally

paid on set dates in the policy document. A typical education policy of 10

years provides for payment of 20% of the sum insured after four years

and every year thereafter until the expiry of the policy. The life insurance

company usually prepares partial maturity cheques in an automated

manner and the customer does not have to claim. The cheque is either

sent directly to the customer or the nearest branch office for ease ofcollection.

Surrender Value Claims:

When a customer is unable to continue with the payment ofpremiums due to unplanned events like retrenchment or dismissal he has

the option of encashing the policy to receive the surrender value so long

as the policy has been in force for more than 3 years. The procedure for

lodging this type of claim is very simple and is similar to the maturity

claim whereby the customer returns the policy document and signs a

discharge form. The claim cheque is then paid to the customer within two

weeks.


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Policy Loans:

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

for life policies that have been in force for at least three years. To receive

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

the life company and receiving a loan cheque. The insurance policy can

also be assigned to a bank and the loan is then granted by the banks and

the policy document utilized as security for the loan.

Disability Claims:

This will arise in life policies where the customer purchases a

personal accident policy rider as an additional benefit. Disability claims

are payable subject to sufficient medical evidence being provided as

proof of disablement.


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GUIDELINES FOR CLAIMS SETTLEMENT

BY IRDA

Proposal for insurance:

1) Except in cases of a marine insurance cover, where current marketpractices do not insist on a written proposal form, in all cases, a

proposal for grant of a cover, either for life business or for general

business, must be evidenced by a written document. It is the duty

of an insurer to furnish to the insured free of charge, within 30 days

of the acceptance of a proposal, a copy of the proposal form.

2) Forms and documents used in the grant of cover may, dependingupon the circumstances of each case, be made available in

languages recognized under the Constitution of India.

3) In filling the form of proposal, the prospect is to be guided by theprovisions of Section 45 of the Act. Any proposal form seeking

information for grant of life cover may prominently state therein

the requirements of Section 45 of the Act.

4) Where a proposal form is not used, the insurer shall record theinformation obtained orally or in writing, and confirm it within a

period of 15 days thereof with the proposer and incorporate the

information in its cover note or policy. The onus of proof shall rest

with the insurer in respect of any information not so recorded,

where the insurer claims that the proposer suppressed any material


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information or provided misleading or false information on any

matter material to the grant of a cover.

5) Wherever the benefit of nomination is available to the proposer, interms of the Act or the conditions of policy, the insurer shall draw

the attention of the proposer to it and encourage the prospect to

avail the facility.

6) Proposals shall be processed by the insurer with speed andefficiency and all decisions thereof shall be communicated by it in

writing within a reasonable period not exceeding 15 days from

receipt of proposals by the insurer.

Matters to be stated in life insurance policy:

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

conditions;

b) whether it is participating in profits or not;c) the basis of participation in profits such as cash bonus,

deferred bonus, simple or compound reversionary bonus;d) the benefits payable and the contingencies upon which these

are payable and the other terms and conditions of the

insurance contract;

e) the details of the riders attaching to the main policy;f) the date of commencement of risk and the date of maturity or

date(s) on which the benefits are payable;


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g) the premiums payable, periodicity of payment, grace periodallowed for payment of the premium, the date the last

instalment of premium, the implication of discontinuing the

payment of an instalment(s) of premium and also the

provisions of a guaranteed surrender value.

h) the age at entry and whether the same has been admitted;i) the policy requirements for (a) conversion of the policy into

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

revival of lapsed policies;

j) contingencies excluded from the scope of the cover, both inrespect of the main policy and the riders;

k) the provisions for nomination, assignment, and loans onsecurity of the policy and a statement that the rate of interest

payable on such loan amount shall be as prescribed by the

insurer at the time of taking the loan;

l) any special clauses or conditions, such as, first pregnancyclause, suicide clause etc.; and

m)the address of the insurer to which all communications inrespect of the policy shall be sent.

n) the documents that are normally required to be submitted bya claimant in support of a claim under the policy.

2. While acting under regulation 6(1) in forwarding the policy to theinsured, the insurer shall inform by the letter forwarding the policy

that he has a period of 15 days from the date of receipt of the

policy document to review the terms and conditions of the policy

and where the insured disagrees to any of those terms or

conditions, he has the option to return the policy stating the reasons

for his objection, when he shall be entitled to a refund of the


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premium paid, subject only to a deduction of a proportionate risk

premium for the period on cover and the expenses incurred by the

insurer on medical examination of the proposer and stamp duty

charges.

3. In respect of a unit linked policy, in addition to the deductionsunder sub-regulation (2) of this regulation, the insurer shall also be

entitled to repurchase the unit at the price of the units on the date of

cancellation.

4. In respect of a cover, where premium charged is dependent on age,the insurer shall ensure that the age is admitted as far as possible

before issuance of the policy document. In case where age has not

been admitted by the time the policy is issued, the insurer shall

make efforts to obtain proof of age and admit the same as soon as

possible.

Claims procedure in respect of a life insurance policy:

1) A life insurance policy shall state the primary documents which arenormally required to be submitted by a claimant in support of aclaim.

2) A life insurance company, upon receiving a claim, shall process theclaim without delay. Any queries or requirement of additional

documents, to the extent possible, shall be raised all at once and

not in a piece-meal manner, within a period of 15 days of the

receipt of the claim.


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

relevant papers and clarifications required. However, where the

circumstances of a claim warrant an investigation in the opinion of

the insurance company, it shall initiate and complete such

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

company the circumstances of a claim warrant an investigation, it

shall initiate and complete such investigation at the earliest, in any

case not later than 6 months from the time of lodging the claim.

4) Subject to the provisions of section 47 of the Act, where a claim isready for payment but the payment cannot be made due to any

reasons of a proper identification of the payee, the life insurer shall

hold the amount for the benefit of the payee and such an amount

shall earn interest at the rate applicable to a savings bank account

with a scheduled bank (effective from 30 days following the

submission of all papers and information).5) Where there is a delay on the part of the insurer in processing a

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

the life insurance company shall pay interest on the claim amount

at a rate which is 2% above the bank rate prevalent at the beginning

of the financial year in which the claim is reviewed by it.


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Procedure for settlement of claims

Settlement of maturity claims:

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

policyholder. The processing of claims by maturity is normally

undertaken by Divisional Office of LIC about two months before the date

of maturity. . The LIC sends intimation before the maturity date. If the

notice of maturity is not received and the date of maturity is known to the

policyholder, then the policyholder can take the necessary steps to get the

due Maturity amount. The Corporation sends Maturity Intimation along

with the discharge forms to the policyholder informing him about the

requirements for the settlement of claim.

1) In case the maturity intimation is not received by the policyholdertill around 2 months before the date on which the policy matures,

he should contact the concerned Divisional Office and obtain a

copy of the maturity intimation.

2) Policy Document (if not in the custody of LIC as security for loan):On receipt of the maturity intimation, the policyholder

should send the original policy document along with the last

receipt of insurance premium paid. The policy document needs to

be submitted in original unless it is in custody of LIC as security

for loan.

3) Age proof document (if age has not been admitted earlier):The policyholder should also submit his age proof to the

Corporation in case it has not already been submitted. In case, the

policyholder has already submitted his age proof to LIC, the form


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of Discharge (Form No. 3825) to be executed by the policyholder,

is also sent along with the Maturity Intimation.

4) L.I.C. accepts following documents as valid age proofs:a. Horoscope of the assuredb. Certificate relating to the baptism ceremony among Christiansc. Birth certificate from the Municipal Corporationd. High School Certificatee. Service book.5) Discharge Form No. 3825 duly stamped & signed, attested by a

witness:

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

filled, signed and sent to the Office of LIC from which it was

issued. The signature must be on a revenue stamp and must be

attested by a witness.

6) Assignment / Reassignment Deed, if any:In case the policy or any Deed of Assignment or Re-

assignment is lost by the policyholder, he has to submit an

indemnity bond along with a reliable surety of sound financial

standing acceptable to LIC. The indemnity bond has to be in aparticular format (Form 3815). In such a case the claim is settled in

the absence of the policy document.

7) Existence certificates in case of childrens Deferred Assurance &Pure Endowment Policies.


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8) In due course, LIC sends a cheque to the policyholder for themoney due to him as per the terms of the policy.

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

manner:

LIC will send an acknowledgement to the effect that the claimform has been received and the aforesaid document will also state

that the insurer is in the process of checking all the necessary items

and will get back to the claimant shortly.

Then the insurer will ask for necessary documents that are requiredfor settlement of claims. The claimant has to provide all the

necessary documents that are being asked by the insurer.

After verification, the insurer arrives at the final amount that has tobe paid to the claimant and then prepares a cheque or such mode of

payment as has been agreed upon in the policy or between the

claimant and the insured.


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Settlement of Death claims:

The death claim amount is payable in case of policies where

premiums are paid up-to-date or where the death occurs within the days

of grace. The following is the process of settlement of claims in case of

death claims:

1) Intimation of death:The first requirement of the Corporation in the case of death claim is

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

LIC from where the policy was issued.

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

proceeds of the policy. It may be:

i. the nominee orii. the assignee of the policy or

iii. the deceased policyholders nearest relative.The letter of intimation of death should contain the following

information:

i. name of the life assuredii. a statement that the life assured is dead;

iii. the date of death;iv. the cause of death;v. the place of death; and

vi. policy number / svii. claimants relationship with the assured or his status (nominee,

assignee, etc.).


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

sends the necessary claim forms along with instructions regarding the

procedure to be followed by the claimant.

2) Submission of Proof of DeathThe proof of death required to be submitted is a certificate by

Municipal Death Registry or by a Public Record Office which maintains

the records of births and deaths in the locality. Besides this some other

statements or certificates are also required to be given in the prescribed

Claim forms:

Statement from the doctor who attended the deceasedpolicyholders last illness.

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

Certificate of burial or cremation to be given by an independentperson who attended the funeral and has seen the dead body.

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

3) Submission of Proof of AgeThe claimant should submit age proof of the policyholder to LIC in

case it has not already been submitted.

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

(i) Horoscope of the assured


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(ii) Certificate relating to the baptism ceremony among Christians

(iii) Birth certificate from the Municipal Corporation

(iv) High School Certificate

(v) Service book.

4) Certificate of Ownership.When the policy is validly assigned, or a nominee has been designated

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

certificate of title is necessary. In such a case the corporation would

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

Administration or Letters of Probate or a Will.

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

issues a discharge form for completion, which is to be signed by the

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

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

the assignee, in case the policy was validity and unconditionallyassigned;

the legal representative or successor.


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

entitled to receive the same.

6)Early death claims:

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

following requirements must be complied with:

i. Policy Documentii. Discharge Form 3801

iii.

Assignment / Re-assignment Deed, if anyiv. Age Proof Document (if age has not been admitted earlier)v. Certificate of treatment issued by the hospital authorities where the

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

3816)

vi. Certificate by the employer if the deceased was an employee, onthe Claim Form E (F No. 3787 revised)

vii. Certificate of Deathviii. Legal Evidence of Title (if policy is not assigned / nominated)

ix. Claim Form A (F No. 3783)x. Statement from the Doctor who attended last the deceased

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

xi. Certificate of Identity and burial by a person who attended thefuneral on Claim Form C (F No. 3785 revised)

7) Non early claims:If death occurs exactly or after 3 years from the date of the policy the

following requirements must be complied with:


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i. Policy Documentii. Discharge Form 3801

iii. Legal Evidence of Titleiv. Death Certificatev. Claim Form No. 3783A

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

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

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

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

policies which are not in force but

If Death occurred after the expiry of grace period of premium duedate then Full Sum Assured along with the bonus will be payable

as Ex-gratia settlement

If Death occurred after three months but less than six months afterthe expiry of first unpaid premium date half of the Sum Assured

without bonus will be paid as Ex-gratia

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

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

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

paid.


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Important terms in claims

Maturity claims

Beneficiaries in claims:

The claimant in life insurance policies at the time of payment of maturity

claims of life insurance policies can be the policyholder or the assignee to

whom the holder of the policy has transferred the policy. The persons

entitled to claim under these policies can be:

The assured himself.

The payee, whose name appears in the benefit schedule of thepolicy as a party interested.

The creditor who has been properly assigned and nominated toreceive the payment under the policy.

Amount payable:

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

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

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

the premium paid and declared are bonuses. The payment of profits is a

condition inserted as a clause in the policy itself and it becomes an

obligation on the insurer to pay the amount of such profit as may be

accrued to the insured.


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Dispute in payment of maturity claims:

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

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

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

the insurer shrugging off his liability to make the payment of profits

which are accrued to the insured upon maturity and in case the payment

of profit is as per the contract, the insurer has every right to move to the

court and to claim for such payment. The policy document and scheme of

the policy contains the details of the payment and the payment made

accordingly may not drag the parties into litigations.

Death claims

Beneficiaries:

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

on the happening of the events which is death of the assured, are as

follows:

The legal heirs of the policyholder.

The nominees, assignees and transferees

The wife and children of the assured under the Married Womensproperty Act

The creditor in whose name the policy has been endorsed


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Amount payable:

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

The amount insured or the face value of the policy

Bonus if declared by the company, which is recoverable as aninsurance amount.

The share of profits in case of participation policy.

Surrender value, where the policy lapses due to non-payment of thepremium or where the assured surrenders the policy, the insurance

company may pay a percentage of the premium paid according to

the rules of the company.


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Factors affecting the claims settlement

The factors that affect the claims settlement are as follows:

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

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

The cause of loss or the event should be directly related to the loss.A remote cause has no place in the settlement.

The loss should not have been caused with an intention to gainfrom the situation.

The preconditions or warranties have to be compiled with. Whenconditions to be fulfilled before affecting the cover of the policy,are not performed, the cover of insurance will not come into effect

even though the premium is paid and accepted by the insurance

company.

Presence of insurable interest, in case of the property insurances, atleast at the time of happening of event or loss sufferings. Withouthaving the insurable interest in the subject matter, no person can

get benefit or compensation.

The assured should suffer loss, actual or constructive, to getcompensation. The assured should riot make benefits or gains out

of the insurance contract as the insurance contract is of indemnity


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in nature. It only makes good the loss suffered by the assured and

is not a source of gains.

Sufficient documentary evidence of loss should be presented alongwith the application form.

Multiple claims and reciprocal claims will be settled as per theterms of the contract of insurance.

Right to appeal or file a petition with the tribunal or the courtscannot be withdrawn. If the terms of the policy insist upon

arbitration, it is not the end of justice for the insurer or the assured.

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

Pay the claims as reported by the surveyor or the claims made bythe insurer whichever is less.

Take help of the agent or some other persons and compromise or tocome to an agreement with the assured in case of a disputed claim.

If the claim is rejected there may be litigation on the insurer. Thelitigation will cost the insurer more, as the insurer has to pay the

interest for the amount due if he losses the litigation.


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Pay ex-gratia, if the claim is totally baseless and non-acceptable,on humanitarian grounds and to avoid complications in future.

Arrange to replace the asset either by repairing the same or bypurchasing a similar asset from the market.

Repair the asset to provide the similar type of services as providedbefore the happening of event.

DELAY IN CLAIMS SETTLEMENT

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

claim papers have to be submitted within a limited period mentioned in

the policy document or otherwise stated in the Act. In some cases, the

death of a person or the accident of vehicle has to be intimated

immediately either orally or in person, either by the policyholder or the

claimant or by the representative of the claimant.

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

following reasons:


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The delay in the claims settlement will have an adverse impact onthe goodwill and marketing of the insurance.

The cost of claims will increase with the extension of time.The insurer may be asked to pay the interest on the unpaid

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

insurer to pay the costs of the case to the assured, which results in

mounting up of costs.

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

Unproductive use of manpower to defend, expenses incurred andwaste of time on litigations will be an extra burden on the insurer.

Litigations will affect on the productive areas of the businessparticularly in the marketing of the insurance business.

The delay also leads to the increasing number of cases withconsumer protection councils.

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

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

As such it is essential to have quicker claim settlements.


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

Late submission of claim form: The claim forms may be submittedlate because of the ignorance or lack of knowledge of the existence

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

the event or no information is given to the beneficiaries or no

nominations are made to the policy.

Innocence and illiteracy of the assured: The assured or the claimantmay fail to file the papers due to lack of knowledge, to file the

insurance claims within a certain period or of the claims procedure.

Not submitting the claims forms in full: If the claim forms are notproperly filled, they will fail to provide the required information to

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

for want of information.

If sufficient proof or supporting documents are not submitted along

with the claim form to facilitate claim assessor to know the date of the

event or the cause of the event, claim settlement may be delayed.

The insurer may not get the cooperation of the insured or theclaimant to finalize the claim or arrive at some compromise.


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Destroying the evidences, with or without intention, that couldhave otherwise facilitated the estimation of the loss payable under

the claim.

Not providing information about the changes in the constitution ofthe organization or the changed address of the insured or the

claimant or any other information required to make a claim

settlement.

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

Lack of motivation, lack of knowledge of importance of the claimssettlement, lack of awareness among the staff of the organizations

or defective supervision or organizational structure.

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

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

and procedure of claims. The insurers can take the help of the agent or

local staff to arrive at a compromise with the claimants when the casesare of complex nature. The organization should be so designed to avoid

holding of papers at one or two places. The staff should be trained and the

importance of the claims management should be driven into their minds.

Use of latest technology to assess the losses and recruitment of able staff

will speed up claims settlement.


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ROLE OF AGENTS IN CLAIMS SETTLEMENT

An agent is a primary source for procurement of insurance

business and as such his role is the corner stone for building a solid

edifice of any life insurance organization. To effect a good quality of life

insurance sale, an agent must be equipped with technical aspects of

insurance knowledge, he must possess analytical ability to analyze human

needs, he must be abreast with up to date knowledge of merits or demerits

of other instruments of investment available in the financial market, he

must be endowed with a burning desire of social service and over and

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

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

with professional approach in life insurance salesmanship. Such an

agency force is expected to be helpful not only in proper field

underwriting but also after sales. servicing. concomitant and essential

elements for higher retention of business.

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

directly with the customers to promote the insurance business. It avails

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

the agents are middlemen or intermediaries. Section 40 of Insurance Act

1938 authorizes the payment of the remuneration to the agents for theservices. Section 42 of the Act enumerates the essential qualifications for

their appointment and issuing of licenses. The appointment of agents to

procure policies of insurance is a general practice among insurance

companies all over the world. The agents are allowed to market the

insurance business but not allowed to issue the policies. The agent has no

right to conclude the insurance contract and the final approval or rejection

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


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promoting the insurance business, the agent binds the principal to all

activities such as receipt of premium, enquiries and publishing of

information of the insurance contracts and products.

The agent is bound by duty and responsibility to convey the

message to the insurer. But, giving the information to the agent does not

bind the insurer as the agent is appointed only to promote the insurance

business. In times of disputes, the agent is under an obligation to settle

the issue of claims by way of negotiations and mediations to retain the

customer.

Role of agents in an Insurance company

1. Full information must be provided to the proponent at the point ofsale to enable him to decide on the best cover or plan to minimizeinstances of cooling off by the proponents.

2. An agent should be well versed in all the plans, the selling pointsand also be equipped to assess the needs of the clients.

3. Adherence to the prescribed Code of Conduct for agents is ofcrucial importance. Agents must, therefore, familiarize themselves

with provisions of the Code of Conduct.4. Agents must provide the office with the accurate information about

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

confidential report must, therefore, be completed very carefully.

5. Agents must also possess adequate knowledge of policy servicingand claim settlement procedures so that the policyholders can be

guided correctly.


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6. Submission of proposal forms and proposal deposit to the branchoffice immediately to avoid delays and to enable the office to take

timely decisions.

7. A leaflet or brochure containing relevant features of the plan that isbeing sold should be available with the agents.

If the agents are well conversant with the claim settlement procedure

and assist the claimants in completing the necessary requirements, it

would not only quicken the process of claim settlement and enhance their

professional status but also help the organization to improve upon their

outstanding claim ratio. This, while further boosting the image of the

organization may provide them an overflowing fountain for further

business in those families. The performance of agents will now depend on

not how many hours he works but the quality of service, his attitude to

customers and the image that he will create for the entire life insurancebusiness. Thus the agent under the changing economic scenario can

achieve their objectives by practicing psycho-marketing strategies. Their

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

achieve these objectives.

Role of surveyors and assessor in claims settlment


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

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

are innumerable instances where a genuine insurance user with a genuine

loss and a seemingly valid claim, has been denied his claim amount in

full or part. This happens because the insurance company is not able to

estimate the total amount of the claims. In life insurance claims the

insurance company tries to reject the claims without knowing the cause of

the death or loss of the person.

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

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

but it is quite surprising how little is actually known and understood

about themtheir job, their duties & responsibilities, their role vis--vis

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

surveyors and assessors. This is because they never come in the lime light

but the main work of assessment and survey of loss is done by them.

Duties and responsiblities of surveyors and loss assessors:

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

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

insured or not) arising from any contingency, and report thereon, and

carry out the work with competence, objectivity and professional integrityby strictly adhering to the code of conduct expected of such surveyor and

loss assessor.

The following are their duties:

i. declaring whether he has any interest in the subject-matter inquestion or whether it pertains to any of his relatives, business

partners or through material shareholding.


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ii. maintaining confidentiality and neutrality without jeopardising theliability of the insurer and claim of the insured;

iii. examining, inquiring, investigating, verifying and checking uponthe causes and the circumstances of the loss in question including

extent of loss, nature of ownership and insurable interest;

iv. conducting spot and final surveys, as and when necessary andcomment upon franchise, excess/under insurance and any other

related matter;

v. surveying and assessing the loss on behalf of insurer or insured;vi. assessing liability under the contract of insurance;

vii. pointing out discrepancy, if any, in the policy wordings;viii. satisfying queries of the insured/insurer and of persons connected

thereto in respect of the claim/loss;

ix. giving reasons for repudiation of claim, in case the claim is notcovered by policy terms and conditions;

x. taking expert opinion, wherever required;xi. A surveyor or loss assessor shall submit his report to the insurer as

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

appointment. Provided that in exceptional cases, the afore-

mentioned period can be extended with the consent of the insured

and the insurer.

Surveyors and Loss assessors Report:

The report of surveyors and loss assessors will be the authentic report.

The report contains the investigations and results of the investigations,

recommendation and assessments of the surveyor and assessor. The

surveyors will state the causes of the loss whether remote or direct, the

extent of actual total loss, insurance policy amount, value of salvage and

assassment of payment of claims. The report of the loss assessors will be


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a solid ground to settle the claims. If the insurer is of the opinion that the

loss assessor or the surveyor has acted under some personal interests then

the insurer may decide to re-investigate the matter and on receiving the

report can decidethe claims payment.

IMPACT OF CLAIMS ON UNDERWRITING

Insurance underwriting is the process of classification, rating,

and selection of risks. In simpler terms, it's a risk selection process. It is

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

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

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

And knowing what an underwriter does and why its so important

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

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

insurance products are frequently received they have an impact upon the

claims reserves and warrant review of the product and take decision

either to modify the terms or continue.

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

insurance product or other changed, are discussed upon frequency of

claims and quantum of amount paid. Thus the underwriter fixes thepremium of the product considering various factors such as cost of risk,

administration expenses, brokerage or marketing ezpenditure, claims

settlement expenses and budgeted profit.the premium is the present value

of the future risk. The underwriting department and claims management

are related in sharing the information of the claim to find out the current

weaknesses, strengths and the possible improvements.


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

insurance company is taking on some of your risk. The underwriter's job

is to use all the information gathered from numerous sources to determine

whether or not to accept a particular applicant. Individuals applying for

individually-owned life and health insurance typically receive more

underwriting scrutiny than members holding a group policy. An

underwriters job is to make sure that the insurance charges just the right

amount for the coverage it provides. They figure how much risk is

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

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

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

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

provide the necessary information for the risk selection process. These

sources include:

The policy application; Medical history and examinations; Inspection reports; The Medical Information Bureau (MIB); and The producer or insurance agent.

Life insurance companies each have their own extensive policy and

procedure manuals they are supposed to follow in determining whether or

not to issue an Individual Life insurance policy, and in pricing that policy.

The insurer's underwriters typically use a combination of factors that

experience shows equates with the risk of death (and premature death).

They include the applicant's answers to a series of questions such as:
http://www.finweb.com/insurance/your-health-insurance.htmlhttp://www.finweb.com/insurance/underwriting-group-policies.htmlhttp://www.finweb.com/insurance/underwriting-group-policies.htmlhttp://www.finweb.com/insurance/your-health-insurance.html


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

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

parents and siblings),

(3) the purpose of the insurance

(4) marital status and number of children,

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

insurance s/he proposes to buy

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

income (to help determine suitability),

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

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

Thus the claims payment and information relating to the claims

settlement will be directly helpful to the underwriting departments either

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

future.


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FRAUDS IN CLAIMS SETTLEMENT

Insurance fraud is any deliberate deception/dishonesty committed against

or by an insurance company, insurance agent, or consumer for unjustified

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

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

claimants, intermediaries and professionals who provide services to

claimants. The nature of these frauds may vary from an

inflated/exaggerated value of a legitimate claim to a completely

fabricated or bogus claim where losses never really occurred. Promises

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

The essential components of an insurance fraud are:-

Intent to deceive

Desire to induce insurance company to pay more than it otherwisewould.

The fradulent claims may be of two categories:

The cause or the claim itself is fradulent The claim may be genuine but the method of calculation or the

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


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

insurance contract or the claims settlement, makes the entire contract

viocable at the option of the person on whom the fraud is played.

Creating forged documents such as wills, legal heir certificates,

assignments of the policies and other papers to support their claim,

deliberate destruction of the insured subject with an intention to get the

policy amount all constitute different types of frauds. Sometimes the

frauds may also result from gross negligence or forbearance to use

reasonable exertions and means at hand. The fradulent claim by the

assured will deprive him the right to claim as the insurer has the right to

reject it.

Examples of insurance fraud:

1) Creating a fraudulent claim2) Overstating amount of loss3) Misrepresenting facts to receive payment4) Bogus agents/Sale of forged cover notes

How to protect yourself from a fraud:

1. Be wary of unregistered insurance agents. Before purchasinginsurance, contact your insurance company to ensure the agent is

an authorised agent.

2. Avoid paying premiums in cash. Opt to pay for premiums bycheque or money order. Made payable to the insurance company

instead of the agent.


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

4. Immediately examine your insurance policy to ensure the coverageis what you have requested for and ensure that the premium

amount paid is reflected in the cover note/policy. Request for a

receipt as evidence of payment of premium.

5. Do not sign a blank insurance application, or insurance claim form.6. Be suspicious if the price of insurance seems suspiciously low

from other insurance companies.

7. If you meet with an accident, be careful of strangers who offer youquick cash or urge you to deal with specific workshops, medicalclinic or law firm. They could be part of a fraud syndicate.

8. Insist on detailed bills for repairs and medical services renderedand check for accuracy.

9.

Discreetly contact your insurance company or the police if you arebeing defrauded or have been/are being persuaded to take part in a

fraud. Provide as many details as possible about the incident -

name of the individual(s) involved, amount, date(s), and type of

fraud.


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Comparative analysis of Life Insurance Corporation of India & ICICI

Prudential Life Insurance

Parameters LIC ICICI Prudential

Life cover LIC provides only

anticipated cover

ICICI offers 2 options

Anticipated cover

Group Term Cover

Customer service LIC is profit oriented

and customer service

& satisfaction are not

its main objectives.

ICICI is customer

oriented and customer

satisfaction and delight

are its main objectives.

Claims payment

period

The claims payment

period is long. It takes

almost a month to

settle the claims except

in some cases.

It settles the claims in

8-10 working days.

Documentation Claims settlement here

involves a lot of

documentation work.

It settles the claims

with least

documentation.

Use of technology LIC has only limiteduse of technology in

claims settlement such

as only data is

centralised.

In ICICI the claimsprocessing system is

all centralised from

data input till claims

payment.

Efficiency of

employees

The persons

employeed in claims

The persons

employeed in claims


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department does not

have indepth

knowledge and skills.

department in ICICI

are qualified

professionals in the

field.

Infrastructure The infrastructure is

not attractive. They

follow all the

traditional practices.

The infrastructure is

attractive and modern.

Current data of LIC

Outflow 2007-08 2006-07

Payments to

poliyholders

Rs in crores

Claims by maturity :

Numbers(in lakhs) 134.22 129.29

Amount 31,955.18 32,093.90

Claims by death :

Numbers(in lakhs) 6.73 6.02

Amount 5,250.40 4,443.32


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Annuties 2,393.24 2,189.64

Surrenders 18,024.59 15,955.31

Total 57,623.41 54,682.17

Outstanding claims

at the end of the year

2007-08 2006-07

Rs. In crores

Maturity 123.02 42.95

Death 232.41 205.44

Total 355.43 248.39

Ratio of outstanding

claims to claims

payable:

0.96% 0.68%


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Some performance highlights (as at 31/03/2007) :

1. Total Income : Rs. 1,76,559.28 crores

2. Total Premium

Income

: Rs. 1,12,307.77 crores

3. Total life fund : Rs. 5,72,602.80 crores

4. Total Assets : Rs. 6,74,514.78 crores

5. Total Investment : Rs. 6,12,705 crores

6. Investment in

Infrastructure

: Rs. 71,017 crores

7. Policies in force

(31/03/2006)

: 21.79 crores


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CASE STUDY

1. Life Insurance Corporation of India v/s Mrs. SunandaKanthale

According to complainant Sunanda Kanthale, her husband

Manoharrao Kanthale who worked as a stores superintendent with the

Amravati branch of Maharashtra State Corporation, purchased an

insurance policy for Rs 20,000 on November 28, 1992. The policy whichwas a non-medical one, was scheduled to mature on November 24, 2004,

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

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

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

Rs 40,000 (under double benefit provision in accident cases) and made an

application to the Akola Branch Manager of LIC. The senior manager of

LIC (Amravati Division) however refused to settle the claim vide his

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

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

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

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

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

She then lodged a complaint with Akola District Consumers Grievances

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

necessary directives to the LIC for paying Rs 40,000 along with 18 per

cent interest, a compensation of Rs 50,000 towards mental tension caused

and Rs 1,000 towards legal expenses.


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

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

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

the company alleged.

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

the policy purchaser had made statements about his health. The form was

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

proofs before the forum regarding heart disorder of the policy holder and

sick leave availed by him after taking the policy. However, they could not

prove that Manohar was not well on the day of purchasing the policy.

The District Consumers Grievances Redressal Forum has directed Senior

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

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

Sunanda Kanthale towards insurance claim besides interest on the amount

from October 22, 1993, till the date of payment at a rate of 12 per cent.

The forum has also directed LIC to pay compensation of Rs 10,000 to the

woman for causing mental tension to her during the four years, after her

husband's death, in releasing the insurance amount.

If the insurance company failed to pay the compensation within two

months from the date of receipt of copy of the judgment, the company

will be liable to pay interest at a rate of 18 per cent on the amount till

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

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

complainant, appeared exaggerated, considering the troubles she had to

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

her Rs 10,000 towards compensation.


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(2) Life Insurance Corporation of India v/s Neelam Mehta

The ca

Documents

14217786 Project on Claims Management in Life Insurance