Claim Managment In Lic l1j68

Claims Management in LIC

CHAPTER 1 INTRODUCTION TO INSURANCE IN INDIA The insurance sector in India has come a full circle from being an open competitive market

to nationalization and back to a 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. In simple 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 a predetermined sum of money in case of any unfortunate event for a predetermined fixed sum payable which is informal term called Insurance s. Insurance is basically a protection against a financial loss which can arise on the happening of an unexpected event. Insurance companies collect s 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.

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Definition of insurance: Insurance in its basic form is defined as "A contract between two parties whereby one party called insurer

undertakes in exchange for a fixed sum

called s, to pay the other party called insured a fixed amount of money on the happening of a certain event."

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. 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 losses by way of a ‘benefit’ in the case of life insurance. It is the uncertainty that is risk, which gives rise to the necessity foursome 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 tithe same risk. This is the essence of insurance –the sharing of losses and substitution of certainty for uncertainty. Page |2


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 ed 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.

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 own

assessment

of

claim,

based on

their

the circumstances. Individuals who take out home, life,

health, or automobile insurance policies must maintain regular payments called s to the insurers. Most of the time these s are used to settle another person’s insurance claim or to build up the available assets of the insurance company. 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 . The insurer promises to save Page |3


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 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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CHAPTER 2 CLAIMS MANAGEMENT Claims Management: Many insurers have recognized the need to improve the efficiency of their claims management process. They have streamlined processes, eliminated paperbased 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 ; 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 employee participation 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. Infect, losses and loss expenses absorb 80% of collected by carriers. Page |5


Service representatives and claims adjusters need to access data from multiple sources when processing or and

increases

costs.

assessing a claim, which delays

Manual

steps

reduce transparency

settlement of

the

time claims

process and raise the risk of fraud, manipulation or simply human error. Customer

retention

is

also

challenged – 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 of insurance contract. It includes carrying out the entire claims process with a particular emphasis on monitoring and important

elements

of

lowering

the

claims

costs.

The

claims management are claims preparation, claims

philosophy, claims processing 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 ing the claims, reviewing the claim application, respond to the claimant, and 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.  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, decisionmaking, 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. Page |7


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. 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 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 insurer’s commitment to the service of the customer is a part of the claims management. Page |8


NEED TO HAVE A CLAIMS MANAGEMENT SYSTEM The following elements express the need of effective claims management system:a) Sharing of data and information within the organization by different departments like underwriting staff, collection staff, and claims management staff, claims payment staff and others. b) The claimant, requirement for information, the extent of processing of their claims, information regarding particular policy can all be fulfilled only if a proper claims management system exists. c) It also helps to reduce fraudulent claims, exaggerate and repeated claims and hence helps to avert frauds at the initial stage d) This system is necessary to updated information, and for proper analysis and for decision making.

ESSENTIAL ELEMENTS OF CLAIMS 1. The payment of insurance amount is based on the principles of good faith. An insurance contract embodies an implied covenant of good faith and fair dealing. The claim contract must contain following important elements. 2. The claimant should have an insurable interest on the subject matter, which is lost and for which claims is made. 3. There should be loss or damage to the subject matter. 4. The subject matter of the insurance policy should suffer loss due to risk mentioned in the contract. 5. The insured and insurer have to show their efforts to mitigate the loss and the intension to save the other. 6. The disclosure should have concerned with subject matter and contract of insurance. 7. The loss suffered should be actual but not constructive.

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CHAPTER 3 Life Insurance Corporation of India

The Life Insurance Corporation (LIC) was established about 44years 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 laky employees and 2,048 branches and over six laky agency force. 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 Sale straining Centers.LIC of India

is

one

of

India’s

leading

financial institutions, offering complete

financial solutions that encom 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’s 1,800 cores. With a presence in 82cities in India and it services customer base of over 20, 00,000.

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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 core annually to 5.6 million policyholders. It has been started with the objectives of spreading Life Insurance widely and in particular to the rural areas, meets 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-ordinate parts for unit action for the accomplishment of common objectives. As such 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 omission 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 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 collections

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and

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 of advocates. The insurance company needs to protect the company from the claims litigations of the clients by defending the claims in the courts resolutions.

Thus

marketing of

and supervise other alternative dispute

the insurance organization

policies, underwriting of policies,

is

associated with

claims payment,

the claims

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

s, claims payments, staff and istration matters are identified as departments of the branch office with responsible officials such as istration and s Officers. The managerial decisions are based on the information supplied byte 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 P a g e | 12


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 and using the staffer the agents for the settlement of claims disputes. The branches maintain records relating to the claims payment and claims rejections. They will 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 any branch 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 the claims referred by the branch office and also report the same to the zonal office, which in turn will consolidate the data and submit the same as required by the statute or 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.

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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 companies with 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

of

insurance exceed the costs of claims. This role is referred to as the costmonitoring role of the claims department.  To see that the expectations of the customers are met with regard to speed, manner and efficiency of the service. This is called the customer service role of the claims department.  To meet the standard of service, to keep up to the customers’ expectations 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. P a g e | 14


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

claims

department, in effect, acts as an interface between the customer service quality and insurance company’s objectives. It has to be given the proper weight age and motivation so that the business as a whole functions well.

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 s i.e. Claims are only payable if s 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.  The policy document, original death certificate, burial permit copy of ID of the deceased must be provided to the insurance company.

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the


 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 is 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 frequently

waive

certain

requirements

under

will

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 15anniversary after affecting the policy. Payment of a maturity the claim is a straightforward affair where the customer returns the original policy document and signs a discharge form. The claim cherub is usually released in a period of about two weeks once all required conditions are fulfilled.

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 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 10years 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 cherubs

partial

maturity

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 s due to unplanned events like retrenchment or dismissal he haste option of encasing 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 policy loan directly from a life company entails asg 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.

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 Disability Claims: This will arise in life policies where the customer purchases personal accident policy rider as an additional benefit. Disability claims are payable subject to sufficient medical evidence being provided as proof of disablement. Guidelines for claims settlement by IRDA.

Guidelines for claims settlement by IRDA Proposal for insurance: I.

Except in cases of a marine insurance cover, where current market practices 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 frees of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form. Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in languages recognized under the Constitution of India.

II.

In filling the form of proposal, the prospect is to be guided by the provisions of Section 45 of the Act. Any proposal from seeking information for grant of life cover may prominently state there in the requirements of Section 45 of the Act. Where a proposal form is not used, the insurer shall record the

III.

Information obtained orally or in writing, and confirms it within a period of 15 days thereof with the proposer and incorporates the information in its

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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 information or provided misleading or false information on any matter material to the grant of a cover. Wherever the benefit of nomination is available to the proposer, in IV.

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.

V.

Proposals

shall

be

processed

by

the

insurer

with speed and

efficiency 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:  A life insurance policy shall clearly state: 1. the name of the plan governing the policy, its and conditions; 2. whether it is participating in profits or not; 3. the basis of participation in profits such as cash bonus, deferred bonus, simple or compound reversionary bonus; 4. the benefits payable and the contingencies upon which these are and the other and conditions of the insurance contract; 5. the details of the riders attaching to the main policy;

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payable


6. the date of commencement of risk and the date of maturity or date(s) on which the benefits are payable; 7. The s payable, periodicity of payment, grace period allowed for payment of the , the date the last installment of , the implication of discontinuing the payment

of

an

installment(s)

of

and also the provisions of a guaranteed surrender value. 8. the age at entry and whether the same has been itted; 9. the policy requirements for (a) conversion of the policy into paid policy,

(b)

surrender

(c)

non-forfeiture

and

up

(d)revival of lapsed

policies; 10.contingencies excluded from the scope of the cover, both in respect of the main policy and the riders; 11.the provisions for nomination, assignment, and loans in 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; 12.any special clauses or conditions, such as, first pregnancy clause, suicide clause etc.; and 13.The address of the insurer to which all communications in respect of the policy shall be sent. 14.The documents that are normally required to be submitted by a claimant in of a claim under the policy.  While acting under regulation 6(1) in forwarding the policy to the insured, the insurer shall inform by the letter forwarding the policy that he has a P a g e | 20


period of 15 days from the date of receipt of the policy document to review the and conditions of the policy and where the insured disagrees to any of

those

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 paid, subject only to a deduction of a proportionate risk for the period on cover and the expenses incurred by the insurer on medical examination of the proposer and stamp duty charges.  In respect of a unit linked policy, in addition to the deductions under subregulation (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.  In respect of a cover, where charged is dependent on age, the insurer shall ensure that the age is itted as far as possible before issuance of the policy document. In case where age has not been itted by the time the policy is issued, the insurer shall make efforts to obtain proof of age and it 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 of a claim. A life insurance company, upon receiving a claim, shall process the 2) 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. A claim under a life policy shall be paid or be disputed giving all P a g e | 21


3) 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) Subject to the provisions of section 47 of the Act, 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 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 acclaim 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 bit.

Procedure for settlement of claims: 1.Settlement of maturity claims: Under

LIC, claims

policyholder. The

can

processing

arise of

on claims

maturity by

of

maturity

policy is

of

the

normally

undertaken by Divisional Office of LIC about two months before the date of P a g e | 22


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 policyholder till around 2 months before the date on which the policy matures, he should the concerned Divisional Office and obtain 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

paid. The policy document needs tube submitted in original unless it is in custody of LIC as security for loan. 3. Age proof document (if age has not been itted 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 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:  Horoscope of the assured  Certificate relating to the baptism ceremony among Christians  Birth certificate from the Municipal Corporation  High School Certificate P a g e | 23


 Service book. 5. Discharge Form No. 3825 duly stamped & signed, attested by 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 a particular format (Form 3815). In such a case the claim is settled in the absence of the policy document. 7. Existence certificates in case of children’s Deferred Assurance &Pure Endowment Policies. 8. In due course, LIC sends a cheque to the policyholder for the money due to him as per the 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 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. P a g e | 24


 After verification, the insurer arrives at the final amount that has tube paid to the claimant and then prepares a cherub or such mode of payment as has been agreed upon in the policy or between the claimant and the insured.

2.Settlement of Death claims: The death claim amount is payable in case of policies where s 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 or ii. The assignee of the policy or iii. The deceased policyholder’s nearest relative. The

letter

of

intimation

of

death

information: I. name of the life assured ii. A statement that the life assured is dead; P a g e | 25

should

contain

the

following


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 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

deceased

policyholder’s last illness.  Certificate of treatment in 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

employment at the time of death.

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if

the

policyholder

was

in


3) Submission of Proof of Age: The 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 (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 istration or Letters of Probate or a Will. 5) Payment and Discharge: 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; P a g e | 27


 The legal representative or successor. 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 Document Ii. Discharge Form 3801 iii. Assignment / Re-assignment Deed, if any Iv. Age Proof Document (if age has not been itted 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, on the Claim Form ‘E’ (F No. 3787 revised) vii. Certificate of Death viii. 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 the funeral on Claim Form ‘C’ (F No. 3785 revised) P a g e | 28


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 3801 Iii. Legal Evidence of Title Iv. Death Certificate v. 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 itted 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 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 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 date half of the Sum Assured without bonus will be paid as Ex-gratia.

P a g e | 29


If the death occurred between six months and one year from the due date of the first unpaid date, claim may be considered to the extent of

the

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

Important 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 which 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 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, i.e., in the proportion of the paid and declared are bonuses. The payment of profits is a condition inserted as a clause in

P a g e | 30


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. 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 itted at the time of issuing the policy document and about the good title of the claimant on the policy. In case 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 Women’s property Act  The creditor in whose name the policy has been endorsed

P a g e | 31


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 or where the assured surrenders the policy, the insurance company may pay a percentage of the paid according to the rules of the company.

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 gain from the situation.  The preconditions or warranties have to be compiled with. When conditions to be fulfilled before affecting the cover of the policy, are not performed, the P a g e | 32


cover of insurance will not come into effect even though the is paid and accepted by the insurance company.  Presence of insurable interest, in case of the property insurances, at least at the time of happening of event or loss sufferings. Without Having the insurable interest in the subject matter, no person can get benefit or compensation.  The

assured

should

suffer

loss,

actual

or

constructive,

to get

compensation. The assured should riot make benefits or gains out of the insurance contract as the insurance contract is of indemnity 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 along with the application form.  Multiple claims and reciprocal claims will be settled as per the of the contract of insurance.  Right to appeal or file a petition with the tribunal or the courts cannot be withdrawn. If the 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 the claims:  Pay the claims as reported by the surveyor or the claims made by the insurer whichever is less.  Take help of the agent or some other persons and compromise or to come to an agreement with the assured in case of a disputed claim.

P a g e | 33


 If the claim is rejected there may be litigation on the insurer. The litigation will cost the insurer more, as the insurer has to pay the interest for the amount due if he loses the litigation.  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 by purchasing a similar asset from the market.  Repair the asset to provide the similar type of services as provided before the happening of event.

P a g e | 34


CHAPTER 4

Elements in claim and Delay in Claims Settlement ELEMENTS OF CLAIMS MANAGEMENT Claims management means and includes all the managerial decisions and processes concerning the settlement and payment of claim in accordance with the term of insurance contract. It includes carrying out the entire claim process with a particular emphasis on monitoring and lowering the claims costs. The important elements of claims management are:A. Claims Philosophy B. Claims Processing C. Claims Settlement. A) The claims philosophy:It is a method or a document or a defined procedure or a specified approach to settle the claims. It contains the claims management principles and also claims handling methods or procedures. The claims philosophy includes the preparation of guide-lines 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 claims payment and improving the P a g e | 35


efficiency of the claims settlement and payment systems and finally the plans for improving the quality of services and avoiding unnecessary disputes of claims In India, the concept of claims philosophy has not grown to the extent required. The claims philosophy has external and internal advantages. It will impress the consumers of insurance business and help business to develop. Internally a detailed systematic claims process is created and delay in settlement of the claims can be avoided. The claims philosophy has a relation with the of service promotion, prices and people concerning insurance. It influences the nature of claims that are received by the insurance company, time period taken by the company to settle the claims or process them and the extent to which the claims are cost and service effective. B) The claims process:It includes the basic claims procedure and handling of claims. The handling of claims includes the monitoring of situations 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, or the process 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 the notice of claim or loss to the insurer, providing sufficient proof of the loss to the insurer or his agent or the loss assessor and surveyors. The insurer, on receipt of the claim from the insured, has taken certain immediate precautions and also proceeds on methods such as ing the claim, reviewing the claim application, respond to the claimant, and carry out claim investigation, claims negotiation, claim settlement and claims payment.

P a g e | 36


c) Claims settlement Claims settlement is the mission of the insurance company. Every insurer wants that the claims be settled and honored in accordance with the and conditions of the insurance policy document. The insurer never wants to get in to a dispute by rejecting the claims if they are filed by the insured along with sufficient proof of the loss or the damage. The quality of services in the claims settlement will reflect on the business of the insurer. The claims settlement is also claims handling and has two phases. The first phase is in the hands of the insured and the second phase is in the hands of the insurer. The first phase of the claims settlement or claims process starts from the date of happening of event or from the date of maturity in case of life insurance policies. On the day of happening of risk or the event, if the insured subject matter suffers damages and the insured has lost the economic use of the asset and is under economic loss of income generation, the insured initiates the process of the claims settlement. The second phase of the insurance settlement is in the hands of the insurer. As soon as the application or claim form is received by the insurer from the claimant, he should acknowledge its receipt and quickly respond to the claim and arrange the payment if there is no hitch or if the claim is in accordance with the of the contracts and the insured has already submitted the required data. Immediate settlement of claim and a satisfied consumer are the tools of insurance business and marketing. The other option available to the insurer apart from the payment of claim is rejection of the claim, which results in claims disputes. On appeal, the insurer may reconsider the appeal and the claim may be settled by way of a compromise or negotiation. If the claimant refuses to compromise or negotiate, the option of filing a suit is available to the insured.

P a g e | 37


Delay in Claim 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:  The delay in the claims settlement will have an adverse impact on the 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 and waste of time on litigations will be an extra burden on the insurer.  Litigations will affect on the productive areas of the business particularly in the marketing of the insurance business.  The delay also leads to the increasing number of cases with consumer protection councils.

P a g e | 38


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. The delay in claims settlement may be due to the following reasons:  Late submission of claim form: The claim forms may be submitted late 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 claimant may 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 not properly 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 ing 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 the claimant to finalize the claim or arrive at some compromise.  Destroying the evidences, with or without intention, that could have otherwise facilitated the estimation of the loss payable under the claim.

P a g e | 39


 Not providing information about the changes in the constitution of the 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 the pressure of work.  Lack of motivation, lack of knowledge of importance of the claims settlement, 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 cases are 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.

P a g e | 40


CHAPTER 5 Role of Surveyors and Agent in Claim settlement

Insurance s pay their s, 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 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 them – their job, their duties & responsibilities, their role vis-à-vis insurers the

insured’s

rights

and

duties

and insured’s,

and

vis-à-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. P a g e | 41


Duties and responsibilities of surveyors: 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 integrity by strictly adhering to the code of conduct expected of such surveyor and loss assessor. The following are their duties: a) declaring whether he has any interest in the subject-matter in question or whether it pertains to any of his relatives, business partners or through material shareholding. b) Maintaining confidentiality and neutrality without jeopardizing the liability of the insurer and claim of the insured; c) examining, inquiring, investigating, ing and checking upon the causes and the circumstances of the loss in question including extent of loss, nature of ownership and insurable interest; d) Conducting spot and final surveys, as and when necessary and comment upon franchise, excess/under insurance and any other related matter; e) surveying and assessing the loss on behalf of insurer or insured; f) Assessing liability under the contract of insurance; g) Pointing out discrepancy, if any, in the policy wordings; h) Satisfying queries of the insured/insurer and of persons connected thereto in respect of the claim/loss; P a g e | 42


i) Giving reasons for repudiation of claim, in case the claim is not covered by policy and conditions; j) taking expert opinion, wherever required; k) A surveyor or loss assessor shall submit his report to the insurer as expeditiously as possible, as 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

recommendation and assessments of

and

results

of

the investigations,

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 assessment of payment of claims. The report of the loss assessors will be 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 decide the claims payment.

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 P a g e | 43


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 the services. Section 42 of the Act enumerates the essential qualifications for their appointment and issuing of licenses. The appointment of agents to procure policies 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 promoting the insurance business, the agent binds the principal to all activities such as receipt of , 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 P a g e | 44


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: a) Full information must be provided to the proponent at the point of sale to enable him to decide on the best cover or plan to minimize instances of cooling off by the proponents. b) An agent should be well versed in all the plans, the selling points and also be equipped to assess the needs of the clients. c) Adherence to the prescribed Code of Conduct for agents is of crucial importance. Agents must, therefore, familiarize themselves with provisions of the Code of Conduct. d) Agents must provide the office with the accurate information about the prospect for a fair assessment of the risk involved. The agent’s confidential report must, therefore, be completed very carefully. e) Agents must also possess adequate knowledge of policy servicing and claim settlement procedures so that the policyholders can be guided correctly. f) Submission of proposal forms and proposal deposit to the branch office immediately to avoid delays and to enable the office to take timely decisions. g) A leaflet or brochure containing relevant features of the plan that is being sold should be available with the agents.

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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 overflowing fountain for

may provide them

an

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 insurance business. 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.

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CHAPTER 6 Data Analysis on LIC The outcomes of survey taken of 20 policy holder The researcher asks eight questions to each policy holder through questioner method. The following are outcome of question to policy holder 1) The 85% of the policyholders are satisfied with services of LIC while 15% of the policyholders were not satisfied with its services while Claim Settlement 2) The 60% of the policyholders did not face any problem while claim settlement &40% of the policyholders faced problems in claim settlement. 3) The 90% of the policyholder’s claim was settled within the 30 days of receipt of the relevant documents as per IRDA’s guideline while 10% policyholder’s claim was not settled within 30 days. 4) The 80% of the policyholders felt that LIC maintained transparency & secrecy while claim settlement while 20% policyholders felt that it had not maintained proper transparency & secrecy. 5) The 40% of the policyholder faced documentation problem at the time of maturity & death claim settlement while 60% of the policyholder did not face documentation problem at the time of claim settlement. 6) The 90% felt that there was not any unnecessary delay mad at the time of claim settlement process 10% felt that there was unnecessary delay mad at the time of claim settlement process. 7) The 75% policyholders felt that investigation mechanism of LIC was efficient at the time of claim settlement process 25% policyholders felt that investigation mechanism of LIC was not so efficient at the time of claim settlement process.

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Findings • The Policyholders are satisfied with the services of LIC of Claim Settlement. • Some of the policyholders face problems while Claim Settlement. • The Claim is settled within 30 days on the receipt of document as per IRDA guideline. • The LIC has maintained the adequate transparency & secrecy while Claim Settlement. • There is no unnecessary delay made at the time of Claim Settlement. • Death Claim Settlement Ratio has shown constant improvement every year due to efficient investigation mechanism.

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Data Analysis & interpretation The claim settlement scenario in insurance industry Life Insurance Corporation of India (LIC) has continued its good performance against private players when it comes to claim settlement. According to the IRDA annual report FY 2010-2011.

 Claims Report for Year 2009-10 & 2010-11 Name of Company

2009-10

2010-11

Claims

Claims

Claims

Rejected

Settled

LIC

1.21

ICICI Prudential

Claims

Claims

Claims

Pending Rejected

Settled

Pending

96.53

1.41

1.09

97.50

1.47

3.27

90.17

6.56

2.80

94.40

2.60

HDFC Life

4.67

91.14

4.20

3.97

96.03

0.61

Aviva Life

9.75

87.11

3.14

4.10

87.11

3.14

Birla Sun Life

10.62

89.09

5.82

4.99

94.66

0.35

India First Life

7.69

53.85

38.46

9.40

90.558

0.03

Max New York

12.31

65.71

7.14

14.85

78.01

7.14

14.75

83.27

1.96

16.74

82.24

1.03

IDBI Federal Life 23.81

49.52

26.67

21.00

65.00

14.00

Life SBI Life

P a g e | 49


The above table shows details about claim rejected, claim settled & claims pending of all insurance companies for year 2009-10 & 2010-11. The LIC is best insurance company among all companies regarding claim settlement ratio.

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CHAPTER 7 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 otherwise would. The fraudulent claims may be of two categories:

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 The cause or the claim itself is fraudulent  The claim may be genuine but the method of calculation or the evidences, or the information submitted may be fraudulent in nature. As such any fraud made by the insured or the insurer in concluding the insurance contract or the claims settlement, makes the entire contract violable

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

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 fraudulent claim by the assured will deprive him the right to claim as the insurer has the right to reject it. Examples of insurance fraud: A. Creating a fraudulent claim B. Overstating amount of loss C. Misrepresenting facts to receive payment D. Bogus agents/Sale of forged cover notes How to protect yourself from a fraud: a) Be

wary of

uned

insurance

agents.

Before purchasing

insurance, your insurance company to ensure the agent is an authorized agent.

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b) Avoid paying s in cash. Opt to pay for s by cherub or money order. Made payable to the insurance company instead of the agent. c) Make sure you receive a written policy after payment of your first . d) Immediately examine your insurance policy to ensure the coverage is what you have requested for

and ensure that

the

amount paid is

reflected in the cover note/policy. Request for a receipt as evidence of payment of . e) Do not sign a blank insurance application, or insurance claim form. f) be suspicious if the price of insurance seems suspiciously low from other insurance companies. g) If you meet with an accident, be careful of strangers who offer you quick cash or urge you to deal with specific workshops, medical clinic or law firm. They could be part of a fraud syndicate. h) Insist on detailed bills for repairs and medical services rendered and check for accuracy. i) Discreetly your insurance company or the police if you are being 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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CHAPTER 8 Case study & Limitation 1.Case Study (1) Life Insurance Corporation of India v/s Mrs. Sunanda Kanthale 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 which was a non-medical one, was scheduled to mature on November 24, 2004, she said. Unfortunately Manoharrao ed 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 P a g e | 54


compensation of Rs 50,000 towards mental tension caused and Rs 1,000 towards legal expenses. 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, P a g e | 55


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. (2) Life Insurance Corporation of India v/s Lily Rani Roy The petitioner has purchased a life insurance policy from the appellate and s were paid regularly. The maturity of the said policy was in 1978. Because of some personal reasons the claim was not filed. The petitioner had filed the claim after 13 years of its maturity. The LIC of India rejected the payment on a plea that claim is time barred claim and as such the claim will not be paid. The petitioner had filed a complaint with Consumer Council with a request to direct the LIC for the payment of the maturity claim as the policyholder had paid the entire till the date of the maturity and has the right to receive the claim amount. Assured held LIC guilty under Consumer Protection Act, 1986 Section (I) (g) for deficiency in service. But, the LIC of India pleaded that the Corporation will be maintaining the records for a period of five years only and the Corporation has received the claim notice from the petitioner in 1990 which is far beyond the time. The LIC also produced a photo copy of the Maturity claims payment showing the payment of the complainant’s money. After examining all the facts, the State forum has declared that the petitioners cannot claim the payment of policy as it is already time barred. On the decision of the State Commission, the petitioners have filed a petition with the National Commission.

P a g e | 56


The National Commission, after ing the of the policy, has opined that though the payment of claim is time barred, the insurance company should have given notice to that effect or should include a clause in the policy document stating that the time barred maturity claims will not be paid. As the Corporation has filed to bring this information to the notice of the policyholder or failed to create the awareness among the policyholders, it has failed in its duties and as such it is liable to pay the claim to the petitioners. Thus, the National Commission has ordered the payment of time barred maturity claims.

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2.Limitations Before concluding, it should be useful to point out some of the potential limitations of the study. There was a lack of numeric data or statistics related to this research question, nothing of what is needed is available. Even the data was collected from various financial related web sites & books, but the data is not really enough useful or enough relevant to be used in this research.  Qualification requirement used in the project may differ from investor to investors.  The data taken during the project study may not represent the realistic picture. Hence there may be margin of error.  Small sample size taken at convenience might have affected the result of the study.  Existence of biases in the respondent mind.  Most of authorized people working in the security market are afraid to disclose their strategies in investing in hybrid instrument.

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CHAPTER 9 CONCLUSION, BIBLIOGRAPHY& WEBLIOGRAPHY 1. CONCLUSION The easy & timely settlement of valid claim is an important function of an insurance company & Claim Settlement is the integral part of Claim Management. It is yardstick to judge the insurance company’s efficiency. There are different types of claims mainly divided into Death Claim & Maturity Claim. LIC of India after making proper investigation of documentation & cause of death settled the claim on time. Insurance Agents, Surveyors, Claim Assessors & Claim Underwriters play important role in Claim Settlement. There are cases of frauds in Claim Settlement that may happen but if the policyholder uses proper precautions he can prevent himself from fraud. LIC of India provides better corporate services for settling the customer claim as their total Claim Settlement Ratio is 98% & it has shown constant increasing trend. The IRDA guidelines for claim settlement are properly followed by the LIC which results in lower Claim Pending Ratio i.e., 1.47%.The Claim Repudiation Ratio of LIC is 1.09% which help the LIC of India to maintain better corporate image in Life Insurance sector. All the branches of the LIC of India were automated. If the LIC of India give some documentation relaxation to the policyholders & maintain the policy documents in electronic form like D-mat they can improve the transparency & efficiency of the Claim Settlement System.

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2.BIBLIOGRAPHY A. Theories and Practices in Insurance B. Insurance watch C. Business world D. Business today

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3.WEBLIOGRAPHY www.insuremagic.com www.licindia.com www.icirulife.com www.insurancewatch.com www.insuranceonline.com

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