underwriting of risks

7/29/2019 Underwriting of Risks

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Life Insurance Claims


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Introduction

A claim is the payment made by the insurer to the insured orclaimant on the occurrence of the event specified in the contract, inreturn for the premiums paid for the insured.

A claim is the demand that the insurer should redeem the promisemade in the contract. The insurer has then to perform his part of thecontract i.e. settle the claim, after satisfying himself that all theconditions and requirements for settlement of claim have beencomplied.


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Preliminary Procedure

Insurer is expected to follow through the following procedureat 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, age admission,

outstanding loan & interest, if any, legal restrictions such as underMWP Act, 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 arerequired to be performed like payment of bonus, survival benefits,payment of SA in instalments, waiver of future premiums, etc?


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Once the documents are received, the insurer sends a post-datedcheque few days in advance. In case, the original policy is reportedto be lost, the matter is examined in detail to ascertain thegenuineness of claim and is settled on the basis of indemnity andpublic notification, if found genuine.

Under MWP Act polices, the proceeds of the policy will be paid tothe trustees. If there are no trustees, the official trustee will step in.But if the beneficiaries are major and competent to contract,payment can be made directly to them without intervention oftrustees. The policyholder is not expected to sign the discharge.


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In case of absolute assignment, the payment will be made to theassignee. If the assignment is conditional, reverting to the lifeassured on maturity, payment can be made to the assured himself.However, it will be prudent to check that the assignee has nooutstanding claims.

Some maturity claims may be payable not on the date of maturity,but later in instalments. In such cases, while the decision to settlemay be taken on the date of maturity, the settlement process willcontinue for few years.


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SURVIVAL BENEFIT CLAIMS

Money During Policy Period


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A survival benefit is paid during the currency of the policy, beforethe date of maturity. The procedure will be similar to payment ofmaturity claims.

The insured sends advance intimation and discharge voucherand the life assured is required to return the same duly stamped,signed, witnessed and send the original policy document also fornecessary endorsement. Thereafter post dated cheques will be sentin 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 inforce. Hence, the insured is advised to obtain a duplicate policy.

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

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


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DEATH CLAIM


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The procedures in settling a death claim are more complex than inthe case of maturity claims. This is mainly because, the factsrelating to death have to be studied and the identities ofclaimants have to be established.

The death claim action is initiated with the receipt of intimation fromnominee/assignee/relative of life assured/the employer/agent/development officer.

The insurer need not wait till thereceipt of intimation. They may even take note of the informationreceived from newspaper reports/media provided identity of thedeceased is established.


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The following will be necessary before settlement of a death claim:

Policy documents

Deeds of assignments/ reassignments

Proof of age, if not already admitted

Certificate of death

Legal evidence of title, if the policy is not assigned or nominated

Form of discharge executed and witnessed


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If the death has within three years from the commencement ofpolicy, or from revival, following additional requirements may beasked to verify the possibility of suppression of material facts at timeof proposal :

Statement from the last medical attendant giving details of last

illness and treatment Statement from the hospital, if the deceased was admitted to a

hospital

Statement from the person, who had attended last rites and hadseen the dead body

Statement 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 as accident,suicide or unknown causes, police inquest report, panchnama,chemical analyzers report/ post mortem report, coroners report etc.would also be asked and examined. Depending on preliminary data,a special enquiry may be ordered.

In case a claim is repudiated, it is quite likely that the matter may goto court which tend to be sympathetic to the claimant because theyare the weaker party. Hence the insurer has to prove beyond anydoubt that there has been suppression of material facts dulysupported by necessary evidences.


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In many cases, the insurer may not be able to garner enoughevidence to repudiate the claim, despite strong suspicion and evenafter extensive enquiries.

Ultimately such claims have to be paid. But still the insurers go

through the process of enquiries in case of early death claims whichenable them to improve the underwriting standards and also identifythe agents and regions, which are prone to more early claims.

In case there is no nomination or assignment, the claimant would

have to prove his title through legal process under relevant law ofsuccession.


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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 the date ofcommencement of policy or from the date of revival is classified as

Early claim.

In all cases of early claims and very early claims, investigation will

be done by the insurer to make sure that the claim is genuine.


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ACCIDENT AND DISABILITY INSURANCE


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These benefits are conditional on conclusive evidence, that all theeligibility conditions are satisfied and that the exclusions do notapply. 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 that accident

the death must occur within 120 days or such other period as 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 lapsed and nothingis payable, yet the insurer pays the death claim.

The L.I.C. pays claim in full in the following circumstances, afterdeducting the outstanding premium with interest. In both the cases,

the policy could have been revived by just paying the arrears ofpremium and no proof of good health would have been necessary:

After three years, if death claim arises within six months from thedate of lapse

After five years, if the death claim arises within twelve months fromthe date of lapse


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If premiums have been paid for a period of 3 years but less than 5years; and in case of death of policyholder within 6 months from thedate of First unpaid premium (FUP), the full sum assured is paid tothe beneficiaries. This is called claims concession.

If the premiums have been paid for 5 years and above, the claimconcession is extended for a period 12 months. This is calledExtended claims concession.

In both the above cases, unpaid premium that has fallen due/will befalling due in the policy year of death will be recovered.


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PRESUMPTION OF DEATH


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Sometimes a person is reported missing without anyinformation about his whereabouts. Indian Evidence Act providesfor presumption of death in such cases, if he has not been heardfor seven years. If the nominee or heirs claim that the life insured ismissing and must be presumed to be dead, insurers insiston a

decree from a competent court.

It is necessary that the premium should be paid till the courtdecrees presumption of death. In special circumstances, the insurermay act on its own provided there is strong circumstantial evidenceto show that the life assured 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, acourt of law is required to appoint a person to act as a guardian tomanage the properties of the lunatic. Wherever required, thedischarge will be signed by the guardian only. If the person hasrecovered from mental disorder, a medical certificate to that effect,would be necessary.

Any order from a court or other judicial authority with reference tothe policy moneys has to be respected.


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Other Precautions.

If the life assured is reported to have died before the maturitydate, the claim has to be treated as a death claim and processedaccordingly. But if the insured is reported to have died after thedate of maturity but before the receipt is discharged, the claim isto be treated as a maturity claim and paid to legal heirs.

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

If a policy is financed by HUF, the policy belongs to HUF and policymoneys would be payable to the Karta of HUF.

If the intimation of death, is received in three years, after the date ofpolicy issue, there is reason to be suspicious. The matter can bedecided only after detailed investigations.


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NON-LIFE INSURANCE

CLAIMS


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Payment of claims is primary service in insurance to the public.Proper settlement of claims requires a sound knowledge of thelaw, principles and practices governing insurance contracts andthorough knowledge ofpolicy terms and conditions.

The settlement of claims involves examination of the loss in relationto coverage under the policy and compliance with policy terms andconditions and warranties. Doctrine ofproximate cause providesguidelines to decide whether the loss is caused by an insured perilor an excepted peril.


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The burden oronus of proofthat the loss is within the scope ofpolicy is upon the insured. However if the loss is caused by anexcluded peril the onus is on the insurer.

Compliance with conditions precedent to liability has to be

confirmed. The survey report will indicate whether or not thewarranties have been complied with. Observance ofutmost goodfaith by the insured is to be verified.

After the verifications, the amount payable has to be worked out

which would depend on the sum insured, extent of insurableinterest, value of the salvage, application of conditions of average,contribution and subrogation.


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Claims can be categorized as Standard, Non-Standard andEx-gratia.

While standard claims clearly fall within the scope of policy andsettled to full extent,

The non-standard claims involve breach of somepolicy condition or warranty and their settlement would dependupon rules and regulations of the concerned insurer.

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

However, in very special cases, to avoid hardship to the insured,settlement of these losses is considered as a matter of grace. Insuch cases only certain percentage of the claim is paid and thattoo without precedent.


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PRELIMINARY PROCEDURE

It involves immediate intimation of loss to the insurer so that necessarysteps forinspection, investigation and loss minimization are takenby insurers.

In case of losses involving criminal act, police should also be

informed.

In case oftransit claims, notice should also be given to the carriers/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), InsurancePolicy/Cover note, Claim form duly filled & signed by the insured & if

firm then duly stamped.]

Appointment ofsurveyors

Assessment of the loss
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FIRE Insurance Claim-Preliminary Process

Individuals/ corporate must inform insurer as early as possible, inno case later than 24 hours

Provide relevant information to the surveyor/claim representativeappointed by the insurer

The surveyor then analyzes the extent/ value of loss or damage

Variety of documents are needed (True copy of the policyalong with schedule, Report of fire brigade, Claim Form,Photographs, Past claims experience Forensic Departmentsreport, if applicable, Original Repair/ Replacement Bills withreceipt)


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Marine Insurance Claim-Preliminary Process

In Marine Insurance claims, all the documents of the claim is to besubmitted to the insurance company

The documents should be submitted in original

Wherever original documents are not available second copy may beaccepted, but photocopies are not acceptable

The documents are to be submitted preferably in one lot and withinreasonable time limit of occurrence of the claim and under allcircumstances before claim becomes time barred 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 in original, Copy of Claim Notice served on Carrier/Port

authorities along with postal acknowledgement card]


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Notice of Loss

Timely and prompt notice

Immediate information Practically

If contract is silent about reporting time of loss Act as prudent

person

Dont presume that Insurer will get the information on its own Lossof right to claim

Fire & Marine Immediate notice is utmost required

Motor Insurance Inform before displacement of damaged vehicle

Liability Insurance Involvement of third party as claimant


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Notice should contain:

Details of Insurance Policy

Date of incident

Full details of the accident/incident

Place of occurrence

Nature of loss Expected causes of loss

Estimated financial loss

Proof of loss

After giving the notice of loss, claimant should submit the claim formin the prescribed format, with utmost good faith.


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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 or ex-

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 assessors having

expertise in that area

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

disputes

Notice should be given to specified Branch of insurer as

mentioned in the policy document. In absentia Notice may

be given to registered office of the insurer

Notice given to an authorized agent, if nothing contrary has

been stated in the policy, also fulfills the requirement


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Loss Minimization

Common Law Duty on Insured to maintain good faith especially insituation of loss

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

For ex- Motor Insurance In the event of an accident or breakdownthe motor car shall not be left unattended without proper precautions

Marine Insurance Sue & labour clause- To prevent or minimize thelosses 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 damage insurerschecks that whether:

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

The loss or damage is by a peril insured by the policy

The subject matter affected by the loss is the same, asinsured in the policy

Notice of loss has been received without undue delay

After the checkup a number has been alloted to loss and enteredin claims register.

A separate file is opened for claim with a copy of the policy, orrelevant 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 regarding Circumstances of losses

Date of loss

Time of loss

Extent of loss

Other questions vary in accordance with different classes ofInsurance

For Ex- Motor Claim Form Rough sketch of the accident

Burglary Claim Form Notification to the police

Asset Insurance Valuation of the property


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