underwriting of risks & claims management_life ins claims

8/2/2019 Underwriting of Risks & Claims Management_LIFE INS CLAIMS

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Life Insurance Claims


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IntroductionA claim is the payment made by the insurer to the insuredor claimant on the occurrence of the event specified in thecontract, in return for the premiums paid for the insured.

A claim is the demand that the insurer should redeem thepromise made in the contract. The insurer has then toperform his part of the contract i.e. settle the claim, aftersatisfying himself that all the conditions and requirementsfor settlement of claim have been complied.


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Preliminary Procedure

Insurer is expected to follow through the followingprocedure at the start:

Whether the policy is in active state?

Whether the policyholder has performed his part?

The policy status with regard to payment of premium, ageadmission, outstanding loan & interest, if any, legalrestrictions such as under Foreign Exchange Regulations,report of investigation, police report, if any.

Whether insured event has taken place?

What are the obligations assumed under the contract,which are required to be performed like payment of bonus, survival benefits, payment of SA in instalments,waiver of future premiums, etc?


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Who are persons entitled to demand performance?

Submission of Claim Form,

Submission of Primary level documents.


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MATURITY CLAIMS Under endowment policies, the SA is to be paid when the

term of the policy is over. The amount payable onmaturity is the SA, less any debts like loan and interestor outstanding premiums. If it is a with-profit policy, thebonuses, as applicable, would be added.

Advance intimation is sent to the insured informing himabout the maturity and requesting for submission of discharge voucher and policy document.

The insurer has to satisfy that:there are no assignmentsthe identity of the policyholder is provedthe age stands admitted

all the premiums are paidthe original policy is submittedthe discharge voucher duly completed is received


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Once the documents are received, the insurer sends apost-dated cheque few days in advance. In case, theoriginal policy is reported to be lost, the matter is

examined in detail to ascertain the genuineness of claimand is settled on the basis of indemnity and publicnotification, if found genuine.

Under MWP Act polices, the proceeds of the policy will bepaid to the trustees. If there are no trustees, the officialtrustee will step in. But if the beneficiaries are major andcompetent to contract, payment can be made directly tothem without intervention of trustees. The policyholder isnot expected to sign the discharge.


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In case of absolute assignment, the payment will be madeto the assignee. If the assignment is conditional, revertingto the life assured on maturity, payment can be made tothe assured himself. However, it will be prudent to checkthat the assignee has no outstanding claims.

Some maturity claims may be payable not on the date of maturity, but later in instalments. In such cases, while thedecision to settle may be taken on the date of maturity, thesettlement process will continue for few years.


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SURVIVAL BENEFIT CLAIMSMoney During Policy Period


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A survival benefit is paid during the currency of the policy , before the date of maturity. The procedure will besimilar to payment of maturity claims.

The insured sends advance intimation and dischargevoucher and the life assured is required to return thesame duly stamped, signed, witnessed and send theoriginal policy document also for necessary endorsement.Thereafter post dated cheques will be sent in advance.


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If the policy is reported to be lost ,Insurers are unlikely to

settle on the basis of an indemnity, as is done in case of a

maturity claim. Because after payment of survival benefit,the policy remains in force. Hence, the insured is advisedto obtain a duplicate policy .

If the insured dies after the date when the survival benefitwas due, but before it is settled,

The survival benefit will not be paid tothe nominee. Only the death claim will be paid to thenominee.


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DEATH CLAIM


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The procedures in settling a death claim are more complexthan in the case of maturity claims. This is mainly because,the facts relating to death have to be studied and the

identities of claimants have to be established .

The death claim action is initiated with the receipt of intimation from nominee/assignee/relative of lifeassured/the employer /agent/development officer.

The insurer need not wait tillthe receipt of intimation. They may even take note of theinformation received from newspaper reports/mediaprovided identity of the deceased is established.


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The following will be necessary before settlement of adeath claim:Policy documentsDeeds of assignments/ reassignmentsProof of age, if not already admittedCertificate of deathLegal evidence of title, if the policy is not assigned or

nominatedForm of discharge executed and witnessed


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If the death has within three years from thecommencement of policy, or from revival, followingadditional requirements may be asked to verify the

possibility of suppression of material facts at time of proposal :Statement from the last medical attendant giving details of last illness and treatmentStatement from the hospital, if the deceased was admitted toa hospital

Statement from the person, who had attended last rites andhad seen the dead bodyStatement from the employer, if the deceased was employed,showing the details of leave


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If the life assured had an unnatural death , such asaccident, suicide or unknown causes, police inquest report,panchnama, chemical analyzer s report/ post mortem

report, coroner s report etc. would also be asked andexamined. Depending on preliminary data, a specialenquiry may be ordered.

In case a claim is repudiated, it is quite likely that thematter may go to court which tend to be sympathetic tothe claimant because they are the weaker party. Hence theinsurer has to prove beyond any doubt that there has beensuppression of material facts duly supported by necessaryevidences.


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In many cases, the insurer may not be able to garnerenough evidence to repudiate the claim, despite strongsuspicion and even after extensive enquiries.

Ultimately such claims have to be paid. But still theinsurers go through the process of enquiries in case of early death claims which enable them to improve theunderwriting standards and also identify the agents andregions, which are prone to more early claims.

In case there is no nomination or assignment, the claimantwould have to prove his title through legal process underrelevant law of succession.


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Death claims occurring within 2 years from the date of commencement of the policy, or from the date of revival of the policy is called Very Early Claim.

Death claims occurring and between 2 to 3 years from thedate of commencement of policy or from the date of revivalis classified as Early claim.

In all cases of early claims and very early claims,investigation will be done by the insurer to make sure thatthe claim is genuine.


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ACCIDENT AND DISABILITYINSURANCE


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These benefits are conditional on conclusive evidence,that all the eligibility conditions are satisfied and that theexclusions do not apply. The conditions are that:

the accident must be caused by external, violent means,not self inflicted

the death must be as a result of injuries caused by thataccident

the death must occur within 120 days or such other periodas may be specified


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The exclusions are:

Intentional self injury, attempted suicide, insanity,immortality, intoxication

Accident while engaged in civil aviation or aeronautics,other than as a passenger

Injuries resulting from riots, civil commotion etc.


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CLAIM CONCESSION

There are situations when, though the policy has lapsedand nothing is payable, yet the insurer pays the deathclaim.

The L.I.C. pays claim in full in the following circumstances,after deducting the outstanding premium with interest . Inboth the cases, the policy could have been revived by justpaying the arrears of premium and no proof of good healthwould have been necessary:

After three years, if death claim arises within six monthsfrom the date of lapse

After five years, if the death claim arises within twelvemonths from the date of lapse


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If premiums have been paid for a period of 3 years but lessthan 5 years; and in case of death of policyholder within 6months from the date of First unpaid premium (FUP), thefull sum assured is paid to the beneficiaries. This is calledclaims concession.

If the premiums have been paid for 5 years and above, theclaim concession is extended for a period 12 months. Thisis called Extended claims concession.

In both the above cases, unpaid premium that has fallendue/will be falling due in the policy year of death will berecovered.


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PRESUMPTION OF DEATH


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Sometimes a person is reported missing without any information about his whereabouts . Indian EvidenceAct provides for presumption of death in such cases, if hehas not been heard for seven years . If the nominee orheirs claim that the life insured is missing and must bepresumed to be dead, insurers insist on a decree from acompetent court.

It is necessary that the premium should be paid till thecourt decrees presumption of death. In specialcircumstances, the insurer may act on its own providedthere is strong circumstantial evidence to show that the lifeassured could not have survived a fatal accident or hazard.Insurers as a matter of concession waive the premiumsduring the seven year period.


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PRECAUTIONS

As per the Indian Lunacy Act, if a person is mentally deranged , a court of law is required to appoint a person toact as a guardian to manage the properties of the lunatic.Wherever required, the discharge will be signed by theguardian only. If the person has recovered from mentaldisorder, a medical certificate to that effect, would benecessary.

Any order from a court or other judicial authority withreference to the policy moneys has to be respected.


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Other Precautions.

If the life assured is reported to have died before thematurity date , the claim has to be treated as a deathclaim and processed accordingly. But if the insured isreported to have died after the date of maturity but

before the receipt is discharged , the claim is to betreated as a maturity claim and paid to legal heirs.

Payment of claim amount to non-residents are governed bythe FEMA and regulations made there under.

If a policy is financed by HUF , the policy belongs to HUFand policy moneys would be payable to the Karta of HUF.If the intimation of death, is received in three years, afterthe date of policy issue, there is reason to be suspicious.The matter can be decided only after detailedinvestigations.


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NON-LIFE INSURANCE

CLAIMS


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Payment of claims is primary service in insurance to thepublic. Proper settlement of claims requires a sound knowledge of the law, principles and practices

governing insurance contracts and thorough knowledgeof policy terms and conditions .

The settlement of claims involves examination of the lossin relation to coverage under the policy and compliancewith policy terms and conditions and warranties. Doctrineof proximate cause provides guidelines to decide whetherthe loss is caused by an insured peril or an excepted peril.


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The burden or onus of proof that the loss is within thescope of policy is upon the insured . However if the loss iscaused by an excluded peril the onus is on the insurer.

Compliance with conditions precedent to liability has to beconfirmed. The survey report will indicate whether or notthe warranties have been complied with. Observance of utmost good faith by the insured is to be verified.

After the verifications, the amount payable has to beworked out which would depend on the sum insured,extent of insurable interest, value of the salvage,application of conditions of average, contribution andsubrogation.


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Claims can be categorized as Standard, Non-Standard and Ex-gratia .

While standard claims clearly fall within the scope of policyand settled to full extent,

The non-standard claims involve breach of some policy condition or warranty and their settlementwould depend upon rules and regulations of the concernedinsurer.

Ex-gratia payments are the losses which falloutside the scope of policy and hence not payable.

However, in very special cases, to avoid hardship to theinsured, settlement of these losses is considered as amatter of grace. In such cases only certain percentage of the claim is paid and that too without precedent.


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PRELIMINARY PROCEDURE

It involves immediate intimation of loss to the insurer so thatnecessary steps for inspection, investigation and lossminimization are taken by insurers.

In case of losses involving criminal act , police should also beinformed.

In case of transit claims , notice should also be given to thecarriers/ bailees.

After verification of policy validity and coverage, the claim isregistered with the help of claim form.


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MOTOR Claim-Preliminary Process

Giving the intimation

Be ready with Documents [Registration certificate

(photocopy & original), Driving License (photocopy & original), Insurance Policy/Cover note, Claim form dulyfilled & signed by the insured & if firm then duly stamped.]

Appointment of surveyors

Assessment of the loss
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FIRE Insurance Claim-Preliminary Process

Individuals/ corporate must inform insurer as early aspossible, in no case later than 24 hours

Provide relevant information to the surveyor/claimrepresentative appointed by the insurer

The surveyor then analyzes the extent/ value of loss ordamage Variety of documents are needed (True copy of the

policy along with schedule, Report of fire brigade, ClaimForm, Photographs, Past claims experience ForensicDepartments report, if applicable, Original Repair/Replacement Bills with receipt)


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Marine Insurance Claim-Preliminary Process

In Marine Insurance claims, all the documents of the claimis to be submitted to the insurance company

The documents should be submitted in original

Wherever original documents are not available second copymay be accepted, but photocopies are not acceptable

The documents are to be submitted preferably in one lot

and within reasonable time limit of occurrence of the claimand under all circumstances before claim becomes timebarred against carrier etc


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Plenty of documents are required for claims processing -[Claim Form duly filled in & signed, Original Policy/Certificate,Short Landing Certificate/Landed But Missing Cargo/Damage

Certificate (as applicable), Suppliers Invoice, Packing List,Quadruplicate copy of Bill of Entry, Steamer Survey report inoriginal, Copy of Claim Notice served on Carrier/Port authoritiesalong with postal acknowledgement card]


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Notice should contain:Details of Insurance PolicyDate of incident

Full details of the accident/incidentPlace of occurrenceNature of lossExpected causes of lossEstimated financial lossProof of loss

After giving the notice of loss, claimant should submit theclaim form in the prescribed format, with utmost goodfaith.


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Notice will facilitate the insurer in following areas:

To undertake investigation To know the causes & circumstances of the loss( for present and future claims)

For taking decision about stand in negotiation, compromise orex-gratia claims

To safeguard the remaining assets

For recovery of goods, under subrogation

Planning for amount of claim payable


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To identify the suitable surveyors and loss assessorshaving expertise in that area

Notice is a recorded proof, which can be used in futuredisputes

Notice should be given to specified Branch of insurer asmentioned in the policy document. In absentia Noticemay be given to registered office of the insurer

Notice given to an authorized agent, if nothing contraryhas been stated in the policy, also fulfills therequirement


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Loss Minimization

Common Law Duty on Insured to maintain good faithespecially in situation of loss

To bring the legal position pointedly clear, conditions areincorporated in the policy to establish the duty on theinsured

For ex- Motor Insurance In the event of an accident orbreakdown the motor car shall not be left unattendedwithout proper precautions

Marine Insurance Sue & labour clause- To prevent orminimize the losses On occurrence of insured peril


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Loss Minimization Methods

Protection of property after loss

Methods of salvage disposal

Methods of storage and segregation of damaged goods


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Procedural

On receipt of intimation of loss of damageinsurers checks that whether:

The policy is force on the date of occurrence of the loss

or damageThe loss or damage is by a peril insured by the policyThe subject matter affected by the loss is the same, asinsured in the policyNotice of loss has been received without undue delay

After the checkup a number has been alloted to loss andentered in claims register. A separate file is opened for claim with a copy of the

policy, or relevant extracts thereof. Therefore a claim form is issued to the insured.


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Claim Forms

Format varies with each class of Insurance

Generally requires information regardingCircumstances of lossesDate of lossTime of lossExtent of loss

Other questions vary in accordance with different classes of Insurance

For Ex-Motor Claim Form Rough sketch of the accidentBurglary Claim Form Notification to the policeAsset Insurance Valuation of the property


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Questions related to other policies are asked, in relation tosame subject matter of insurance

Involvement/ responsibility of any third party

Issue of claim form does not constitute an admission of liability on the part of the insurers; Insurers put thisremark on the claim form

All letters sent to insured carry the remark WithoutPrejudice To clarify, although the insurers are involvedin correspondence, But the question of liability under thepolicy is left open.


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