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Abstract
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 are needs 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 assessor’s reports, claimant’s petition and the
procedures or conditions and warranties contained in the policy document. The
claims management regulates the payment of general damages and also payment
of the loss of future earnings.
This paper is just a gist about how the insurance companies settle the claims of life
risks, the procedure that is followed, and the intermediaries that are involved in the
process and so on. This paper throws light on various aspects on claims
management of life risks and the problems faced by them.
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INTRODUCTION TO LIFE INSURANCE
Human life is subject to risks of death and disability due to natural and accidental
causes. (Redja, 2005). 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.
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 insurance –the sharing of losses
and substitution of certainty for uncertainty.
There are a variety of life insurance products to suit 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. 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.
CLAIMS MANAGEMENT
Many insurers have recognized the need to improve the efficiency of their claims
management process. They have streamlined processes, eliminated paper-based
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forms and redistributed work to match the demands to skills. However, to realize
even greater improvements in the claims handling process, insurers must also focus
on the effectiveness of their claims decisions. (Hansell, 2000).
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. (Seyewo, 2009). 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 employee participation and compliance.
Claims processing sometimes involve collating and sharing large amounts of
information among multiple parties involved in a claim, from Insurance company 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. (Oderinde, 1999)
Service representatives and claims adjusters need to access data from multiple
sources when processing or assessing a claim, which delays settlement time and
increases costs. Manual steps reduce transparency of the claims process and raise
the risk of fraud, manipulation or simply human error. Customer retention is also a
challenge – experts say that 75 percent of customers leave their insurer due to
claims issues. (Oderinde, 1999)
TYPES OF CLAIMS (LIFE INSURANCE BENEFITS)
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.
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Death Claims:
This is a claim paid when then the person insured dies. For a death claim to be paid
the following basic conditions must be fulfilled.
The policy document, original death certificate, burial permit, copy of the ID of
the deceased must be provided to the insurance company.
A report from the doctor who treated the deceased must be presented to the
insurance company.
Claim forms must be completed
A report from the doctor who last treated the deceased person may be required.
A police abstract report may be required where death occurs through an
accident.
The documentation required for payment of death claims are easily available and
claimants need to immediately inform the insurance company where problems are
encountered in securing the documents. The documents are usually required so as
to reduce on the possibility of paying fraudulent claims or paying the wrong
claimants. Many insurance companies will frequently waive certain requirements
under certain special circumstances.
Maturity Claims:
A maturity claim is paid out mostly on endowment and education insurance policies
whose duration has expired. Payment of a maturity claim is a straightforward affair
where the customer returns the original policy document and signs a discharge
form. The claim cheque is usually released in a period of about two weeks once all
required conditions are fulfilled.
Partial Maturity Claims:
Most endowment and education policies provide for payment of partial maturities
after a given duration. The partial maturity is normally paid on set dates in the
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policy document. A typical education policy of 10 years provides for payment of
20% of the sum insured after four years and every year thereafter until the expiry of
the policy. The life insurance company usually prepares partial maturity cheques in
an automated manner and the customer does not have to claim. The cheque is
either sent directly to the customer or the nearest branch office for ease of
collection.
Surrender Value Claims:
When a customer is unable to continue with the payment of premiums due to
unplanned events like retrenchment or dismissal he has the option of encashing the
policy to receive the surrender value so long as the policy has been in force for
more than 3 years. The procedure for lodging this type of claim is very simple and is
similar to the maturity claim whereby the customer returns the policy document
and signs a discharge form. The claim cheque is then paid to the customer within
two weeks.
Policy Loans:
This is strictly not a claim but a benefit given out by life companies for life policies
that have been in force for at least three years. To receive a policy loan directly
from a life company entails assigning the policy to the life company and receiving a
loan cheque. The insurance policy can also be assigned to a bank and the loan is
then granted by the banks and the policy document utilized as security for the loan.
Disability Claims:
This will arise in life policies where the customer purchases a personal accident
policy as an additional benefit. Disability claims are payable subject to sufficient
medical evidence being provided as proof of disablement.
Matters to be stated in life insurance policy:
1. A life insurance policy shall clearly state:
a) The name of the plan governing the policy, its terms and conditions;
b) Whether it is participating in profits or not;
c) The basis of participation in profits such as cash bonus, deferred bonus, simple or
compound reversionary bonus;
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d) The benefits payable and the contingencies upon which these are payable and
the other terms and conditions of the insurance contract;
e) The necessary details attaching to the main policy;
f) The date of commencement of risk and the date of maturity or date(s) on which
the benefits are payable;
g) The premiums payable, periodicity of payment, grace period allowed for payment
of the premium, the date the last installment of premium, the implication of
discontinuing the payment of an installment(s) of premium and also the provisions
of a guaranteed surrender value.
h) The age at entry and whether the same has been admitted;
i) The policy requirements for (a) conversion of the policy into paid up policy, (b)
surrender (c) non-forfeiture and (d) revival of lapsed policies;
j) Contingencies excluded from the scope of the cover.
k) The provisions for nomination, assignment, and loans on security of the policy
and a statement that the rate of interest payable on such loan amount shall be as
prescribed by the insurer at the time of taking the loan;
l) Any special clauses or conditions, such as, first pregnancy clause, suicide clause
etc.; and
m) The address of the insurer to which all communications in respect of the policy
shall be sent.
n) The documents that are normally required to be submitted by a claimant in
support of a claim under the policy.
2. While acting under regulation in forwarding the policy to the insured, the insurer
shall inform by the letter forwarding the policy that he has a period of 15 days from
the date of receipt of the policy document to review the terms and conditions of the
policy and where the insured disagrees to any of those terms or conditions, he has
the option to return the policy stating the reasons for his objection, when he shall
be entitled to a refund of the premium paid, subject only to a deduction of a
proportionate risk premium for the period on cover and the expenses incurred by
the insurer on medical examination of the proposer and stamp duty charges.
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3. 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 are normally
required to be submitted by a claimant in support of a claim.
2) A life insurance company, upon receiving a claim, shall process the claim without
delay. Any queries or requirement of additional documents, to the extent possible,
shall be raised all at once and not in a piece-meal manner, within a period of 15
days of the receipt of the claim.
3) A claim under a life policy shall be paid or be disputed giving all the 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) Where a claim is ready for payment but the payment cannot be made due to any
reasons of a proper identification of the payee, the life insurer shall hold the amount
for the benefit of the payee and such an amount shall earn interest at the rate
applicable to a savings bank account with a scheduled bank (effective from 30 days
following the submission of all papers and information).
5) Where there is a delay on the part of the insurer in processing a claim for a
reason other than the one stated in number (4), the life insurance company shall
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pay interest on the claim amount at a rate which is 2% above the bank rate
prevalent at the beginning of the financial year in which the claim is reviewed by it.
PROCEDURE FOR SETTLEMENT OF CLAIMS
Settlement of maturity claims:
The processing of claims by maturity is normally undertaken by Insurance Company
about two months before the date of maturity. The insurer 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 Insurer 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 policyholder till around 2
months before the date on which the policy matures, he should contact the
concerned Insurer and obtain a copy of the maturity intimation.
2) Policy Document (if not in the custody of Insurer 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 Insurer 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 Insurer in case it has not
already been submitted. In case, the policyholder has already submitted his age
proof to Insurer, the form of Discharge to be executed by the policyholder, is also
sent along with the Maturity Intimation.
4) The Insurer accepts following documents as valid age proofs:
a. Birth certificate
b. High School Certificate
c. Service book.
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5) Discharge Form duly stamped & signed, attested by a witness:
The form of Discharge should then be properly filled, signed and sent to the Office
of Insurer from which it was issued. The signature must be on a revenue stamp and
must be attested by a witness.
6) Existence certificates in case of children’s Deferred Assurance & Pure
Endowment Policies.
7) In due course, Insurer sends a cheque to the policyholder for the money due to
him as per the terms of the policy.
The Insurer upon the receipt of the claim form will act in the following
manner:
The Insurer will send an acknowledgement to the effect that the claim form has
been received and the aforesaid document will also state that the insurer is in
the process of checking all the necessary items and will get back to the claimant
shortly.
Then the insurer will ask for necessary documents that are required for
settlement of claims. The claimant has to provide all the necessary documents
that are being asked by the insurer.
After verification, the insurer arrives at the final amount that has to be paid to
the claimant and then prepares a cheque or such mode of payment as has been
agreed upon in the policy or between the claimant and the insured.
Settlement of Death claims:
The death claim amount is payable in case of policies where premiums are paid up-
to-date or where the death occurs within the days of grace. The following is the
process of settlement of claims in case of death claims:
1) Intimation of death:
The first requirement in the case of death claim is that an "intimation of death"’
should be sent to the branch office of the Insurer from where the policy was issued.
The intimation needs to be sent by the person who is entitled to get the proceeds of
the policy. It may be:
i. The nominee or
ii. The assignee of the policy or
iii. The deceased policyholder’s nearest relative.
The letter of intimation of death should contain the following information:
9
i. Name of the life assured
ii. A statement that the life assured is dead;
iii. The date of death;
iv. The cause of death;
v. The place of death; and
vi. Policy number / s
vii. Claimant’s relationship with the assured or his status (nominee, assignee, etc.).
Soon after the receipt of the intimation of the death, the branch office sends the
necessary claim forms along with instructions regarding the procedure to be
followed by the claimant.
2) Submission of Proof of Death
The proof of death required to be submitted is a certificate by
Local Government 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 to the deceased policyholder’s last
illness.
Certificate of treatment from the hospital where the policyholder died or was
treated by the hospital authorities.
Certificate of burial or cremation to be given by an independent person who
attended the funeral and has seen the dead body.
Certificate from the employer if the policyholder was in employment at the time
of death.
3) Submission of Proof of Age
The claimant should submit age proof of the policyholder to Insurer in case it has
not already been submitted.
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 Insurer would require legal evidence of title such as
Succession Certificate or Letters of Administration or Letters of Probate or a Will.
5) Payment and Discharge
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After completing all the above formalities, the insurance company issues a
discharge form for completion, which is to be signed by the person entitled to
receive policy money. That is, it should be signed by:
The nominee, in case nomination was made under the policy;
The assignee, in case the policy was validity and unconditionally assigned;
The legal representative or successor.
In due course, The Insurer sends the cheque for the amount due to the person
entitled to receive the same.
6) Early death claims:
If death occurs in less than three years from the date of the policy, following
requirements must be complied with:
i. Policy Document
ii. Discharge Form
iii. Assignment / Re-assignment Deed, if any
iv. Age Proof Document (if age has not been admitted earlier)
v. Certificate of treatment issued by the hospital authorities where the deceased
policyholder was treated last.
vi. Certificate by the employer if the deceased was an employee.
vii.Certificate of Death
viii.Legal Evidence of Title (if policy is not assigned / nominated)
ix. Claim Form
x. Statement from the Doctor who attended last to the deceased policyholder.
xi. Certificate of Identity and burial by a person who attended the
funeral.
7) Non early claims:
If death occurs exactly or after 3 years from the date of the policy the following
requirements must be complied with:
i. Policy Document
ii. Discharge Form
iii. Legal Evidence of Title
iv. Death Certificate
v. Claim Form No.
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vi. Assignment / Re-assignment Deed, if any (if policy not assigned /nominated)
vii.Age Proof Document (if age has not been admitted earlier)
8) Ex-gratia Settlement of Death Claims
Ex-gratia Settlement of Death Claims are not a right claim but on grounds of
humanity presently Insurer is giving such claim amount for the policies which are
not in force but
If Death occurred after the expiry of grace period of premium due date then Full
Sum Assured along with the bonus will be payable as Ex-gratia settlement
If Death occurred after three months but less than six months after the expiry of
first unpaid premium date half of the Sum Assured without bonus will be paid as
Ex-gratia
If the death occurred between six months and one year from the due date of the
first unpaid premium date, claim may be considered to the extent of the
proportionate notional paid-up value on the basis of actual premium paid.
ASSESSMENT OF LIFE ASSURANCE CLAMS
Life assurance claims are assessed following policy conditions. They are not as
complicated as property claims. Generally there will be no question of partial loss or
average as life assurance is not basically a contract of indemnity.
Although the sum assured is fixed at the inception of the policy, the actual amount
to be paid depends on several factors
i. Whether the policy participates in profits sharing
ii. Were policy loans granted?
iii. Are there outstanding premiums?
iv. Any variation in the age used to determine the premium to be paid?
v. The type of policy
vi. Mode of payment of the sum assured.
PARTICIPATING POLICY
A participating policy shares in the profits of the insurer. From time to time,
dividends are declared and a percentage of each of such dividends is credited to
the policy and usually paid at the time the policy comes up for a claim. The life
12
office does the calculation when a claim comes up. The amount of money to be
added for each year during which the policy was in force will depend on the rate of
bonus as declared and on the sum assured. Whatever it works out to be will be
added to the agreed sum assured.
Any policy loans
The policy condition clearly stated that the outstanding amount shall be deducted
from any money payable in any settlement of the policy.
Outstanding premiums
If the policy is not already lapsed, the outstanding premiums with interest must be
deducted from any money payable at the time of claim.
Variation in age of assured
If at time of a claim a fresh evidence comes to light regarding the age of the life
assured, and it becomes clear that age was wrongly stated, then the sum assured
must be re-adjusted to total premium paid by the assured.
The type of policy
The sum assured as stated in the policy may not all be payable at the end of the
contract. Some percentage of it may be paid at various times during the policy
term. For example the common type of policy referred to by several insurers as the
anticipated endowment policy provide that certain percentages of the sum assured
be paid to the policyholder where he survives for a number of years within the term
of the policy. One form of the anticipated endowment pays 25% of the sum assured
after 5 years, another 25% at the end of 10years and the balance of 50% at
maturity after 15 years. Some companies would calculate the sum payable on death
as being reduced by the survival benefits earlier paid while others would still pay
the full sum assured disregarding earlier payments if claim is by death.
Variation in mode of payment
Some policies usually allow a claimant to choose the manner in which the benefits
will be paid. Instead of the usual lump sum option, a claimant may choose 13
installmental payment of the proceeds. Where this is the case, the office should be
able to calculate what each installment should work out to be.
Other considerations
A lapsed policy: when a policy lapses, the insurers often consider if there are any
benefits due to the policyholder. Where the office decides that a reduced-paid-up
policy is practicable, the policy comes up for a claim, the reduced paid up amount
has to be the basis of the settlement amount.
A Policy That Does Not Run The Full Term
Life policies may pay some benefits even when the policy does not run for the full
term. If the insured defaults in premium payment and the policy lapses, several
options are allowed by the insurer to make sure the premiums paid by the insurer
are partly credited to him. This is possible where some cash value has built up
under the policy and that happens after two or three years full premiums have been
paid. These possible benefits are described below.
Surrender values
When a policy has a cash value, some of this cash value may be paid to the insured
as cash surrender value (popularly called surrender value) where the insured so
desires. Where the insured is unable to continue payment of premiums but does not
request a surrender value, such surrender value may be applied in maintaining that
policy for some further length of time instead of allowing it to lapse immediately.
The surrender value is calculated using well developed formulae. The actual amount
paid will depend on any outstanding indebtedness of the policyholder just as in the
case of payment of the sum assured. It is paid in the same way as a survival
benefit. In Nigeria, some insurers indicate in their policies that the surrender value
for a policy that has been in force for three years works out to about one third of the
total premiums already paid. Other insurers give a table of surrender values
available to the insured at any time he wishes to surrender the policy.
Paid- up value
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This is a smaller sum assured paid in place of the original sum assured. It is
calculated at the time premiums have remained unpaid for a determined length of
time. This sum can be paid on death or survival to the term originally fixed for the
policy. This reduced sum is what the surrender value can purchase at that time.
Policy loan
After a policy has acquired a surrender value, the life office can grant a loan to the
policyholder. The advantage of this type of loan is that the interest rate is usually
much better than would obtain in other financial institutions offering similar
facilities. The amount that can be grated however is limited by the cash value of the
policy. Insurers often grant a loan of up to 90% of the amount of the surrender
value.
PAYMENT OF THE CLAIM
After the assessment of the amount payable has been concluded, the insurer must
take a decision on who to pay the proceeds for the policy to such a person must be
able to give a good discharge to the insurer otherwise, the insurer may be faced
with a claim from another person on the same loss. The right person to get the
policy money is not always the insured. Other persons may have the right to claim
as in the following circumstances.
i. In liability insurance cases, payment is usually made to the third party or
his representative.
ii. Where the insured is deceased payment is made to his executors or legal
representatives.
iii. Where the insured is a minor or of unsound mind or under some legal
disability, payment is made to his legal representatives.
iv. Where the insured has assigned the proceeds of the policy to another
person the assignee will receive the payment.
v. In the case of life policies, the policy itself may have been assigned or it
may be the subject of a trust.
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When a decision on the correct person to receive the policy money has been
reached, the insurer often sends claims discharge voucher requesting the claimant
to indicate his acceptance of the settlement amount by signing the voucher and
returning same to the insurer. The content of the discharges voucher for life
insurance are illustrated below.
a. Life assurance claims discharge voucher
Policy number ………………………………………………………………
I/we ……………………………………………………………………………
Of ……………………………………………………………………………….
Hereby agree to accept from the ABC insurance company the sum of
…………………………………………………… (N ), in full discharge and final
settlement of all claims and liabilities as a result of maturity,
First installment, surrender, death under policy
Number …………………………………………………., with effect from
………………….. day of ……………………………… 20……………
Assureds’/Claimants Name witness’s Name
…………………………………. ……………………………
Signature …………………… signature ………………
(official stamp in case of assignee/Bank)
Date …………………………. Date …………………….
When the discharge voucher is signed and returned to the insurer, it is an indication
of the acceptance of the amount of claim and the insurer can now send a cheque to
the person entitled to claim and the matter is concluded.
Further negotiations
Sometimes the insured or other claimant may reject the offer and there has to be a
negotiation between the parties until an acceptable level of compensation is
16
reached. Negotiations are very important especially where there are large claims.
Liability claims are often delicate and this is one of the reasons why insurers would
not like the insured to go into negotiations with the third party. An offer of a
settlement amount made may prejudice the position of the insurer. Claims
negotiation really needs persons experienced in the job. and a lot of difficulties in
the claims settlement procedure may be taken care of by such experienced
negotiators.
The issues of who a claim should be paid to assumes greater dimension where life
assurance is concerned because of the ease with which life policies can be assigned
or made subjects of trusts we consider claims payment under these circumstances.
Payment to named beneficiary
In certain circumstances the assured will name a person to whom the policy
proceeds may be paid. Where such is the case, the insurer will rely on section 59 (5)
of the insurance decree 1991 re-enacted in section 73 (6) of the 1997 insurance
decree which states “in the case of claims arising from life insurance policies, it
shall be sufficient for the insurer to make any payment due to the policy to the
beneficially named in the policy document.”
Hence as long as the named beneficiary is identified as such, the insurer can pay
the claims. The production of the policy document will also be necessary.
Payment of trustees
When the assured makes another person or other persons trustee(s) of the policy,
the proceed will be paid to the trustee(s). trustees are legal owners and as such can
give a good discharge. The presentation of the trust deed will be necessary to
identify the trustees. Where changes in trustees have occurred, deeds of
appointment or retirement of trustees must also be presented.
If these are in order, the life office can safely pay the policy money to the trustees
unless it has knowledge of an intended breach of the trust.
Where any appointment of new trustees has been made by the survivors of survivor
of two or more persons in whom the power to appoint new trustees was vested,
17
evidence of the deaths of trustees other than the last survivor should be furnished
together with the grant of representation of the estate of the last survivor.
The trustees may have employed the services of professionals like bankers,
solicitors or other agents. Such agents can be paid on presentation of evidence of
agency to the said trustees.
Where there are two or more trustees, the life office should not pay to only one
unless such a trustee is a banker, solicitor or other agent of the trustee. The office
should also avoid paying directly to the beneficiary where the policy is a trust policy
unless the trust instrument specified that such action is allowed.
Group policies which are used to secure some kinds of benefits to employees of the
policyholder (the employer always have trustees and all payments should be made
to the trustee.
Payment to assignee:
As assignee may be a legal or an equitable assignee. A legal assignee of a life policy
can give a good discharge to an insurer. He has to give the evidence of an
assignment and a notice of assignment if given earlier will facilitate payment. For
an equitable assignee, the life office will pay if personal representatives of the
assured join the assignee to discharge the insurer.
A policy may be used in mortgage transaction in which case it is like if it is assigned
though conditionally. Where the claims is made by the mortgagee, the life office will
normally pay the whole of the policy money to the mortgagee relying on the law of
property Act a section of which says
“The receipt in writing of a mortgagee shall be sufficient discharge for any money
arising under the power of sale conferred by this Act or for any money or securities
comprised in his mortgage”
Hence the life office needs not try to investigate whether part of the loan has been
repaid. However, it may make payments to the different interested parties.
18
If the office has notice that there is no debt outstanding under the mortgage but
reassignment has not been done, it should not pay the mortgage without involving
the mortgagor or persons deriving title from him. The mortgage deed will also have
to be presented as additional evidence.
PAYMENTS TO EXECUTORS
When the life assured has made a valid will, his executors are expected to manage
his estate. These executors usually specified in the will have authority to deal with
the insurer. On production of evidence of appointment the Grant of probate in this
case, the office can safely pay to the executors
Payment to administrations:
When a will is not made or the one made is not proved and therefore not valid, the
life assured is regarded as having died intestate. In that case, there will not be
executors and his legal personal representatives will be termed administrators. His
estate will be administered by such administrators and they will be able to give a
good grant of letters of administration.
It should also be necessary to investigate that administrators are appointed
appropriately. The method of appointment will depend on whether the life assured
contracted a marriage under the marriage act or under customary or Islamic law.
Appropriate law will suggest proper representatives. Such persons armed with the
grant of letters of administration will be able to give a good discharge.
Payment into court:
When there are several claimants on the same policy money, the insurer may
decide to pay into court having informed all interested parties. Payment could also
be made into court if insurer is not satisfied that the claimant will give a good
discharge. This mode of payment is to avoid the possibility of having to face
another claimant after having paid the claim to some other.
PROVING TITLE IN DEATH CLAIMS
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When the policyholder dies, the policy money reverts to the estate unless a proper
arrangement was made to transfer it to a particular person like a named
beneficiary. If no such arrangement was made, the administrators of the estate
become authorized by law to claim the policy money for the estate. They will be
able to prove title by presenting the usual court grants. Two types of grants are
issued by the probate division of the ministry of justice.
GRANT OF PROBATE
Where a will is left by the deceased, the will usually names one or more persons
called executors who are to administer the estate. To be able to administer the
estate, the executors must obtain a grant of probate from the probate registry. This
will be granted when they submit the will along with the request and when the
probate registry has satisfied herself/ himself that the will is valid and the last will of
the deceased. The grant of probate records the death of the deceased,the names of
the executors and attaches a copy of the will. The executor’s titles derive from the
will but the grant gives them the power to sue and the process of issuing the grant
allows time to prove the will. The insurer should insist on seeing the original grant of
probate before paying in order to avoid forgery.
GRANT OF LETTERS OF ADMINISTRATION
Where no will is left or where the will did not name any executors, any person who
is interested in administering the estate has to apply to the probate registry for a
grant of letters of Administration. A grant of letters of administration is similar to the
grant of probate. Each grant can be referred to as a grant of representation – a
common name.
ASSIGNMENT OF LIFE POLICIES
The ownership of life assurance policies is easily transferable from one person to
another. A transfer of ownership is known as assignment. For an assignment to be a
legal assignment it has to follow the stipulations of sections 53 to 56 of the
Insurance Decree of 1997.
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In the 1997 Decree, section 65 gives for making an assignment either by
endorsement of the policy document or using a separate instrument the form of
which was given in that section.
Section 64 requires that notice of any such assignment should be sent to the
insurer. The section provides as follows in S. 64 (1) “No assignment of a policy of life
insurance shall confer on the assignee or his personal representatives any right to
sue for the amount of the policy money or the insured money, unless and until, a
written notice of the date and purport of the assignment is given to the insurer
liable under the policy at his principal address of business”.
Section 63 provides that when a proper assignment has been done, the assignee is
able to give a proper discharge to the insurer liable to pay the policy money. Such
an assignee is also able to sue in his own name to recover such money. It is to be
noted that this section makes it clear that the assignee cannot have a better title
than the insured.
There are two types of assignment: absolute and collateral.
Absolute assignment implies that the transfer is complete and irrevocable and the
assignee receives full control of the policy and full rights of the benefits. Collateral
assignment is one in which the policy is assigned to a creditor as security, or
collateral, for a debt. If the insured dies, the creditor is entitled to be repaid his loan
put of the proceeds of the policy. The insured’s beneficiary will then be entitled to
the balance of the policy money due. If the loan is repaid, the policy holder is
entititled to the return of the assigned rights.
EQUITABLE ASSIGNMENT
What we just discussed is a legal assignment. Where the procedures detailed are
not conformed with, we may have an equitable assignment. The assignee has only
a charge on the proceeds of the policy. He cannot terminate the assured’s equity of
redemption and can only bring an action in court not in his name alone but the
assured or his representatives must be joined. An equitable assignee cannot give a
good discharge to the insurer unless he has the consent of the assured or his legal
representatives if he is deceased.
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A person who has possession of a policy of life assurance may claim the policy has
been assigned but once the procedure of legal assignment has not been followed,
He can at best regarded as an equitable assignee.
CLAIMS UNDER LOST LIFE POLICIES
When a policy is reported lost, the action taken by the insurer depends on when the
report arises. The loss may be reported either at the claims stage or before a claim
is made. The first step is to make a proper search of the policy. The assured will be
asked to make a proper search on his own. His bankers, lawyers or agents should
be contacted. The insures may also help by checking their records to see if any
assignment were recorded as transacted. If it is conclusively lost and cannot be
traced, the assured is asked to make a statutory declaration of the loss stating that
the policy has not been assigned or charge in any way. The claim can be paid after
a reasonable length of time has elapsed but the claimant may be required to
complete an indemnity against any losses to the life office. If the money involved is
large, the life office may require an indemnity bond from another life office.
Under the above procedure, if subsequently claims are brought by some assignee
who did not give notice claims, such a claim would not succeed due to lack of
notice.
If the loss is reported at a time a claim is not being made the life office may issue
what is regarded as a “copy policy” marked as such and being treated as
replacement of the old copy.
On the other hand, the lost policy may be cancelled and another one issued. The
new one bears a new number but gives the same benefits as the old one.
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
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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 the policy as a party
interested.
The creditor who has been properly assigned and nominated to receive the
payment under the policy.
Amount payable:
The amount payable upon the maturity of the policy, i.e., non-happening of the
event is the sum assured plus profits and bonus that accrues with the policy. The
profits are paid on pro-rata basis. 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.
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 Women’s property Act
The creditor in whose name the policy has been endorsed
Amount payable:
Amounts that can be paid under a life insurance policy are as follows:
The amount insured or the face value of the policy
Bonus if declared by the company, which is recoverable as an insurance amount.
The share of profits in case of participation policy.
Surrender value, where the policy lapses due to non-payment of the premium or
where the assured surrenders the policy, the insurance company may pay a
percentage of the premium paid according to the rules of the company.
CONCLUSION
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The insurance business is major service oriented business in the world.(Greene,
1998). The services offered by the insurance industry are well recognized and
utilized by the general public and commercial sector of the world. The life insurance
business has covered nearly 40% of the population of the world.(Swadener, 2005).
Global players with strong brands in the insurance industry today make use of their
special skills world wide and use their superior managerial ability to secure
leadership positions in the industry.
The claims management is an integral part of insurance. (Ohalhuwa, 2008). It
involves the storage, processing and transmission of information relating to
settlement of insurance claims. The use of Information Technology also plays a very
important role in claims settlement. In managing the claims handling function,
insurers seek to balance the elements of customer satisfaction, administrative
handling expenses, and claims overpayment leakages. As part of this balancing act,
fraudulent insurance practices are a major business risk that must be managed and
overcome. Disputes between insurers and insureds over the validity of claims or
claims handling practices occasionally escalate into litigation which should be
solved with due care.
In this fast developing scenario it will not be enough if companies have the futuristic
strategies. Implementation of the strategies, effectively adapting them to ongoing
changes can spell success. The success of claim management depends on the
satisfaction of the customers. The customers are attracted to an insurance company
by its state of art claim service. Therefore, before designing an IT system for claim
management, customer’s expectations are to be taken in to account. The
customers, their needs, knowledge of how the market products, and what they
want, these are the things that are important for an insurance company for serving
the customers in a better manner through better technology.
References
George E, Rejda. (2005) “The Principle of Risk Management and Insurance”, Oxford
University Press. New York.24
Hansell D.S. (2000) “Elements of Insurance”, Macbonald & Evans, Great Britain
Mark R. Greene (1988). “The Principle of Risk Management and Insurance”, Journal
of Financial Economics, 329-359.
Oderinde M.I. (1999) Towards Settling Insurance Claims. Oxford, Blackwell Publishing.
Ohalhuwa F.(2008).Tackling the Odds of Claims Management the Finance Post, vol.1
Seyewo S.S. (2009) “Insurance Claims and the Insuring Public” Amicable Bulletin vol.19.
Swadener W, (2005), “Risk and Uncertainty”. Journal of Risk Management and
Insurance 50, pp. 1029–1058
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