Claim Management in Life Insurance

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Claim Management in Life Insurance

CHAPTER-1

INTRODUCTION TO INSURANCE

I) WHAT IS INSURANCE?

The business of insurance is related to the protection of the economic values of

assets. Every asset has a value. The asset would have been created through the efforts of the

owner. The asset is valuable to the owner, because he expects to get some benefits from it. The

benefit may be an income or some thing else. It is a benefit because it meets some of his

needs. In the case of a factory or a cow, the product generated by is sold and income generated.

In the case of a motor car, it provides comfort and convenience in transportation. There is

no direct income.

Every asset is expected to last for a. certain period of time during which it will perform.

After that, the benefit may not be available. There is a life-time for a machine in a factory or

a cow or a motor car. None of them will last for ever; the owner is aware of this and he can so

manage his affairs that by the end of that period or life-time, a substitute is made

available. Thus, he makes sure that the value or income is not lost However, the asset may

get lost earlier. An accident or some other unfortunate event may destroy it or make it non-

functional. In that case, the owner and those deriving benefits there from, would be deprived

of the benefit and the planned substitute would not have been ready. There is an adverse or

unpleasant situation. Insurance is an Indians that helps to reduce the effect of such adverse

situations.

II) DEFINFITION: -

Insurance is a contract between two parties where in the insurer agrees to pay

insured a certain sum of money for a valuable consideration on happening of an

uncertain event.

III) WHAT IS LIFE INSURANCE?

Life Insurance is a contract for payment of a sum of

money to the person assured (or failing him/her, to the person

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entitled to receive the same) on the happening of the event

insured by the contract.

Usually the insurance contract provides for the payment of an amount on the dateof maturity or at specified dates at periodic intervals or at unfortunate death if it occurs

earlier. Obviously, there is a price to be paid for this benefit. Among other things, the

contract also provides for the payment of premiums by the assured. Life Insurance is

universally acknowledged as a tool to eliminate risk, substitute certainty or uncertainty

and ensure timely aid of the family in the unfortunate event of the death of the breadwinner. It

is sometimes called as the civilized world's partial solution to the problems caused by

death.

In a nutshell, life insurance helps in two ways: premature death, which leaves

dependent families to fend for itself and old age without visible means of support.

IV) LIFE INSURANCE AND CLAIM:

Life insurance helps to ensure that the family is protected against financial

difficulties in the event of a premature death. Combined with investment, retirement

and estate planning, life insurance is the fundamental part of a sound financial plan.

Settlement of claims in life insurance is a prominent phase as it requires more

attention and expertise. Every claim has to a dealt with separately depending upon the

nature of the policy and the nature of the claimant and the policyholder.

INTRODUCTION TO CLAIM MANAGEMENT

Claims management is an expert system which generates the rules an d

regulations for the assessment of general damages using the key information

contained in medical reports, surveyor reports, loss assessor's reports, claimant's

petition and the procedures or conditions and warranties contained in the policy

document. The claims management regulates the payment of general damages

and also payment of the loss of future earnings. The claims managers, actuaries

and underwriters form the claims management group.

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An appraisal of a claim is an evaluation or an attempt to establish the value

of .in item. To estimate means to calculate approximately the amount or extent

of something. In the context of claims management it means the amount of

damage sustained by property that is the subject of an insurance claim, the

claims management department is responsible to interpret the policy and advice

the company as to its meaning any time or when the loss occurs. It also plans and

suggests the methods to reduce the gap between the claimants and insurers when

there is a huge difference in the valuation of damages. Claims handling and

settlement are characterized by active care management, transparency, objectivity,

precision, thoroughness, efficiency, skills and expertise. The payment of claim andclaim management requires the scrutiny of the policy document, the time period of

the policy, commencement of insurance cover, payment of the premium, including

and excluding clauses available in the policy and other terms and conditions of the

insurance contract.

The payment of claim and assessment of the loss depends upon various

factors and differs from insurance to insurance. A claim in life insurance differs

from that of claims in general insurance. However, in all the cases the payment of the

claim discharges the insurer from the obligations of the insurance contract. If the

insured is not satisfied with the claim received, he may knock the doors of the

judicial authority for pronouncement of additional award on the petition.

Payment of claim is an obligation of the insurer under the insurance contract.

It is the consideration of the contract. The consideration of the insurance contract

from the angle of the insurer is the promise to compensate the insured from the loss

suffered on payment of a certain amount known as the premium. A simple promise of

the insurer does not create the cause for the payment of compensation. Further to the

promise both parties of the contract should perform some actions and fulfill some

condition of the contract. The insured has to pay the premium and the insure has to

prepare the policy document as a token of acceptance of the contract and deliver the

same to the insured. In some contracts of insurance, the insurer delivers the cover note

in place of the insurance policy. Thus, it is essential that both the parties shouldperform the formalities before the promise becomes effective. Payments of

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consideration, and the premium, create a legal relationship between the insured and

insurer and a set of rights and duties are created. And promising to pay the

compensation gratuitously will not create the legal relationship but only moral

obligation.

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CHAPTER-2

ORGANISATION STRUCTURE AND CLAIM DEPARTMENT:

ORGANISATION STRUCTURE:

The organization is the form having independent or coordinated parts for unit

action for the accomplishment of common objectives. As such the organization

relating to insurance business is a form having different functional divisions units

with the ultimate aim of providing effective services to the customers consumers

of the insurance products. An effective organization is essential to share

information and effectively execute the managerial decisions. The organizational

structure differs for different types of business. The organization structure is based on

the objectives or mission of the business organization. It may have a division based on

the functions of the organization or the division of work areas of business. It may also

execute the division of work or duties with a chain command and control. The internal

grouping and management hierarchy will for the benefit of the organization and not for

delaying decisions. The organization should be structured with an aim to coordinate,

not only with internal managers or groups, but also with the external world, the

customers, authorities and other persons directly or indirectly interested in it.

The insurance business is concerned with the functions of marketing of

insurance products and its related functions like premium collections and premium

fixings, accepting the insurance proposals, issuing policy documents, maintainrecords

relating to the policies issued everyday in chronological order, and also payment of

claims. The marketing department is associated with the department that provides the

premium fixings, premium calculations, issue of the policy document and the notice

to the organizations on happening of event. Thus, the second part of marketing is

underwriting of the policy. 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

panel advocates. The investigation part may be assigned to an external or internal

group. The insurance company needs to protect the company from the claims

litigations of the clients by defending the claims in the courts and supervise other

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alternative dispute resolutions. It also has to look after the investment of the funds for

better profits. Thus the insurance organization is associated with the marketing of

policies, underwriting of policies, claims payments, claims defending and staff matters.

The organizational structure is also concerned with the fixing and allocating the duties

to units of working at each level to find out the effective results. Any unit of work

without proper contribution to the benefit of the organization is of no use. The

delegation of duties to each unit with well-defined limitations, responsibilities and

decision-making are all related to the organizational structure and management.

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

activities of the insurance consumers are dealt and handled at the branch level. The

branch office, depending upon its business, is headed by a Manager and each function

of insurance business like marketing, underwriting of policies, accounts, claims

payments, staff and administration matters are identified as departments of the

branch office with responsible officials such as Administration and Accounts Officers.

These are second line officers reporting to the Manager and directly related to the

consumers in their work. Each official handles a separate function and is responsible

for it. The AAOs are assisted by, other clerical staff of the organization. The managerial

decisions are based on the information supplied by the AAO, the functional head at

root level. All the functions of claims will be settled at the branch' level. The AAO of

life insurance business will deal with the maturity claims and death claims. If the

branch is smaller, all the types of claims will be dealt by one AAO and if the branch is

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

branch level, these officials have to maintain cordial relations and establish a system of

sharing information with the other departments , relating to the policy documents,payment of premium and using the staff or the agents for the amicable settlement of

claims disputed. 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 are reportable to their respective divisional office. If any

branch gets a claim and has a greater variance of terms and conditions, and there is a

problem in identifying the correct claimant among the claimants, or otherwise, a

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dispute of risk crops up, which will be forward 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

problem, as every problem has a solution. The divisional office will have a

department to settle such claims. Thus the divisional office has the second important

place in controlling the claims payments and reporting the information to the zonal

office, which in turn will forward the same to the head office. The branch is

responsible to report to the divisional office. The divisional office is responsible to

settle the claims referred by the branch off ice-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. The new product, before

being introduced into the market, should be approved by, the IRDA and Central

Government.

Depending on the quantum of business, agents or officials deal directly with the

branch manager, divisional manager or the zonal manager of the area. Thus the

organizational structure of the insurance business is most flexible and decided, based

on the above said factors.

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CLAIM MANAGEMENT DEPERTMENT:

The claims department is one of the key departments in an insurance company. The

other departments in an insurance company are underwriting, accounting and

investment. The claims department has the following functions to perform:-

To provide the customers of insurance and reinsurance companies with I 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 cost-monitoring 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

roleof 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

department must be able to find out the difference between fake and genuine claims. In trying

to create a good public image, the cost of claims should not be overshot. The importance of

cost of claims in the insurance industry cannot be undermined. At any point of time the

cost of claims should not exceed the available resources to pay the liabilities. If such a

situation arises then the insurance company is technically insolvent. So 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. It involves a variety

of specialized tasks, which only specialized people can perform. Various disciplines

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involved are marketing and sales, study of human behavior, finance, control systems and

business strategy making. The management of so many disciplines into a single

department makes the job more difficult. The presence of so many specialized people in a

single department will obviously lead to formation of groups. A healthy relationship within

the groups is required. 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.

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CHAPTER-3

SYSTEMS OF CLAIM MANAGEMENT

I) INTRODUCTION:

Claims management means and includes all the managerial decisions

processes concerning the settlement and payment of claims in accordance with the

terms of insurance contract. It includes carrying out the entire claims process with a

particular emphasis on monitoring and lowering the claims costs. The important

elements of claims management are claims preparation, claims philosophy, claim

processing and claims settlement.

The claims philosophy is defined procedure or 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 claim payment and improving the efficiency

of the claims settlement and payment systems and finally the plans for improving the

quality of services and avoiding unnecessary disputes of claims.

The claims process 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, itincludes 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 loss to the insurer or his agent or the loss assessor

and surveyors. The insurer, on receipt of the claim from the insured, has to take

certain immediate precautions and also proceed on methods such as verifying the

claim, reviewing the claim application, respond to the claimant, carry out claim

investigation, claims negotiation, claim settlement and claims payment.

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II) STAGES OF CLAIM SYSTEM:

The claims system is the system of payment of claims. It contains two stages:

Claims management

Claims handling

The claims handling is the integrated part of the claims management and

execution of the decisions made by the claims management machinery of an

insurance company. The claims system is associated with the organizational

structure, claims philos ophy , performance of the organi za tion in relation with

its missionary and performance of the claims machinery in the settlement of

claims.

III) PARTS OF CLAIM SYSTEM

The claims system also contains two parts:-

The first part being the claims in the hands of the insured and

Second being the claims in the hands of the insurer.

The insured has a right to claim when he suffers damages or losses due to

the happening of event of insurance. The insurer is under an obligation to handle

the claims received by it from a number of clients of the organization or the

insurance company. The integration of claims handling with the management

decisions and payment of claims as per the decisions or rejection of claims and

communicating the same to the insured is the function of the claims.

IV) Claims Management and Claims Handling

Though claims management and claims handling, are generally the

same externally, they are different in nature. Claims Management is a managerial

function in which the insurer has a definite role to play in analysis of data,

processing of application, decision-making, budget planning, and business

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control and funds management. It is subjective and objective, whereas the

claims handling is the procedural way of processing a claims application. In

claims management, the attention is on making principles and guidelines for

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

handling involves utilization of the laid down principles as yardsticks and the

measuring methods in settling the issues before it.

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 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 undertaking the

negotiating process. It does not include any managerial outlook such as risk

management, policy making and decision making. It is concerned with the

processing of application of claim, identifying and comparing the causes of the

event or risk happening, quantifying the loss and comparing with the terms of

policy documents, verifying and scrutinizing the warranties and conditions of the

policy document and interpreting with the claims application and also applying

to the presented claim.

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 notdrastically change every moment. It is a

flexible as well as a rigid way of handling the issues having interest of the insurer

in mind. It is a systematic way of receiving the claims and following other

procedures required for quicker and efficient payment of the claims. It involves

consistency and also the willingness to compromise to settle the issues. Every

insurer has a standardized way of claims handling which will improve quality

and customer service. The people who do the work should be instrumental in

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developing standards. The insurers commitment to the service of the

customer is a part of the claims management.

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CHAPTER-4

TYPES OF CLAIM

Claim management has two intimations such as:

Maturity claim

Death claim

MATURITY CLAIM:

Maturity claims are payable as per the terms of the policy. These policies are

generally endowment polices including money back policies. The amount payable at

the time of maturity includes sum assured and bonuses/incentives. The insurer

normally sends advance intimations to the insured. The insurer has to satisfy that :

The life assured is the holder of the policy and his identity is proved

.The age stands admitted.

The premiums are all paid,

The original policy is handed in together with a completed discharge

voucher before making payment.

The insurance company is expected to make payment on the maturity date.

Post-dated cheques are normally set in advance.

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I) Payment of Claims in Maturity

The payment of claims in case of life insurance policies arises upon

maturity or on the happening of the event insured.

Payment of maturity claims is the easiest to manage. Maturity payment

also includes the payments made during the period of assurance called 'survival

benefits' under certain types of policies popularly known as 'money back' policies.

Payment in these cases is easy without much litigation because of the presence of

terms and conditions of the policy as there is no need on the part of the

policyholder to prove the happening of the event. The policyholder is alive so

proof of title does not pose any problem and the insurance company need not

await any c laim from the policyholder but take initiative to settle the claims

expeditiously.

II) Procedure for a Settlement of Maturity Claim

The procedure for filing a claim for a life insurance policy in case of

maturity is simple and there are no hassles as are normally witnessed with the

cases of premature payments. The procedure for making a claim application

and the subsequent action by the insurer in such claims is simple and is as

follows -

The policy document must be submitted by the insured to the insurer.

If the age is not endorsed, a proof of age is required to be sent by the

assured to the insurer.

If there has been assignment or reassignment, the original deed of

assignment or reassignment is to be submitted by the insurer.

Other documents, such as receipt of payment and policy document or

acknowledgement of assignments and transfers or other endorsements

of the policy, if any, made or as asked by the insurer to be submitted by

the insured.

A discharge form is supplied by the insurer which is to be signed, stampedand attested. This form is an acknowledgement of the receipt of money and should

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bear a paisa revenue stamp. The assured should get it attested by any witness.

The insurer upon the receipt of the claim form will act in the following

manner -

The insurer will send an acknowledgement to the effect that the claim

form has been received and the aforesaid document will also state that the

insurer is in the process of checking all the necessary items and will get

back to the claimant shortly.

The insurer upon receipt of the claim prepares a list of maturity claims,

that is, those claims, which have been claimed upon maturity or which

have been due or are about to be due near that date. This is an exercise

which helps the insurer get an account of his liabilities which have either

matured or are on the verge of maturing.

The insurer then verifies the dues that have been outstanding. This is a

co un te r veri fica tion exercise which helps the insurer to ver if y and

authenticate the amount of the claim made by the insured.

After the verification of the dues payable to the insurer, the insurer arrives

at the final amount that has to be paid to the claimant and then prepares a

cheque or such mode of payment as has been agreed upon in the policy or

between the claimant and the insurer.

The cheque is then sent to the insured/claimant

III) Beneficiaries under maturity claim

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

maturity claims of life insurance policies can be the policyholder or the

assignee to whom the holder of the policy has transferred the policy. The

persons entitled to claim under these policies can be

The assured himself.

The payee, whose name appears in the benefit schedule of the policy

as a party interested.

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The creditor who has been properly assigned and nominated to

receive the payment under the policy.

IV) Amount payable

The amount payable upon the maturity of the policy, that is, non-

happening of the event is the sum assured plus profits and/or bonus that

accrues with the policy. The profits are paid pro rata, that is, in the proportion

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

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

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

insured. There are policies which do not have the clause of payment of profits

upon maturity. In India, generally the clause of payment of profits is found

on whole life policies. There are whole life policies with both the clauses of

payment and non-payment of profits.

V)Disputes in payment of maturity claims

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

of age if the age is not admitted at the time of issuing the policy document and

about the good title of the claimant on the policy. In cases of maturity, disputes

relating to the amount of payment seldom arise. Incase of the insurer shrugging off

his liability to make the payment of profits which are accrued to the insured upon

maturity and in case the payment of profit is as per the contract, the insurer has

every right to move to the court and to claim for such payment. The policy

document and scheme of the policy contains the details of the payment and the

payment made accordingly may not drag the parties into litigations.

II) DEATH CLAIM

The procedure of consideration of a Death Claim comes into operation on

receipt of written intimation of death of the Policyholder. (Sometimes death is intimated

by telegram but as it may not contain necessary particulars as required it is preferable to

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call for written intimation of death). Such intimation of death is usually received from

the Assignee or Nominee under the Policy or from a person representing such

Assignee or Nominee. Where there is no Assignee or Nominee, a Policy-holder's death

is usually intimated by his nearest legal heir such as his widow or son. Where a Policy is

assigned to a creditor or a Bank for valuable consideration, intimation of death may be

received from such Assignee. In cases where it is found that any third person who

apparently is not concerned with the claim, intimates death of a Policyholder and claims

Policy moneys, a reference should be made to find out whether he has any bonafide

interest in the Policy and it should be established that and kin. No correspondence

should be entered into with such a person with regard to requirements for consideration

of the claim unless it is shown that he has right, title or interest in the Policy on the

strength of some legal instrument in his favor, such as a transfer or mortgage deed, etc.

This precaution has to be taken to avoid unnecessary trouble in future for having

entered into correspondence with a person who has interest in the Policy. In short, an

intimation of Policyholders is received from the proper person entitled to receive the

Policy amount as aforesaid.

While intimating a Policyholders death, the Claimant (meaning person legally entitle to

receive the Policy amount) would state

(1) the number/s of the Policy/is

(2) The name of Me Policyholder,

(3) The date of death

(4) The cause of death and

(5) His or her relationship with the deceased, etc.

If therefore on receipt of an intimation of death it is found that any of these

particular are wanting a reference should be made to the claimant calling from them by using

the Form No. 3782 unless from such particulars as are furnished in the Claimant's letter it

is possible to establish the identity of the Policy.

I) Payment of Claims upon Death

Life insurance is basically for providing financial security to the families

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of deceased policyholders. Death claim settlement naturally assumes great

importance in the total operations of many life insurance policies. Despite

several problems encountered, life insurance companies still struggle to attend

to this function efficiently and effectively. Unlike in maturity and survival

benefit claims, the policyholder in this case is not alive. This it poses an array of

problems. Broadly, the problems in the settlement of death claims are -

Obtaining satisfactory proof of death,

Obtaining satisfactory proof of title, and

Regarding the amount of claim.

These requirements are independent of each other. It is necessary for aninsurance company to decide first whether any liability lies in a death claim. It not

only depends on the proof of the happening of the event i.e., death, but also on the

status of the policy as on the date of death. It is necessary to verify whether the

policy in question is in force or in a reduced paid-up condition. In these cases,

some money becomes payable. But there may be cases where the policy had lapsed

without acquiring any value. It is also necessary on the part of insurance company

to ver ify wheth er any claims concessions or administrative concessions are

applicable or whether the claim can be considered on ex-gratia basis. Cause of

death also assumes importance. If it is a suicide, it is to be considered whether it is

within one year from the date of the policy. If it is an accident, it is to be verified

whether accident benefit becomes payable. Once liability is admitted, the office

should have to verify the position of the title to policy monies and arrange

payment to the persons legally entitled to receive the same.

II) Procedure for Claim Settlement in Death

The initial procedure of filing the claim with the insurance company in

this case is as much the same, with the initial burden of giving the proof of death

and the proof of age, in cases where the proof of age is not provided by the assured.

The life insurance company is not expected to know about the death of a

policyholder unless the same is intimated by the claimants. Any action can

therefore be initiated only after receipt of such intimation. The letter of intimation

or the notice of death should contain the following particulars -

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Policy number and name of the life assured. These two should match,

otherwise the policy number or the name of claimant must be wrong.

Date of death, on which depends the status of the policy and amount

payable.

Name and address of the claimant as requirements are to be called

from them. Usually, the death intimation should be sent by the nominee or

assignee or some one near and dear to the deceased life assured. If the

intimation is received from a stranger, the office should be careful to

verify as to why a stranger should be interested in the policy monies.

Once a notice of event is received, the insurer will verify to find out

information relating to:

Any dues pending under the policy.

Whether the policy is in operation or in lapsed status.

Whether the premiums are paid or any dues of premiums are pending.

Exclusion and inclusion conditions and conditions precedent to filing a

claim are fulfilled.

Whether any nominations or assignments of the policies or transfers of

thepolicies are effected.

It usually depends on the status of the policy on the date of death. The

procedure that an insurer follows is:

The insurer sends a receipt of acknowledgement that the claim

application has been received.

The insurer looks at his liabilities and prepares for the payment of

claim.

The insurer before making- the payment of the claim verifies the

identity of the claimant, and checks whether the person who has made

the claim holds a good title to the proceeds under the policy or not.

The insurer before making the payment ensures that dues have been

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verified, and the correct and exact amount passes to the claimant.

After such a diligent exercise, the insurer hands over the amount as

payable as per the policy to the claimant, in the form and mode as

agreed upon or as per the terms of the policy.

In considering a death claim, it becomes necessary to verify the

duration of the policy i.e., the time elapsed from the date of commencement of

risk under the policy (or date of revival of a lapsed policy) tell the date of death.

Normally, if the duration is of two years or less, such a claim is considered as

an 'early claim'. If the duration is more than two years, such a claim is

considered as a 'non-early claim'.

The Life Insurance Corporation of India calls for the following

requirements in cases of death claims -

Death certificate: Originally issued by

municipality/Corporation/Revenue Officials in the form prescribed by

the Government.

Claimant's statement: Here the claimant furnishes information about

1. The deceased life assured, his/her age, date of death, cause of death, place

of death, if hospitalized during a period of three years earlier to death,

details of the same;

2. Details of the claimant - name, address, how is he/she related to the life

assured, in what capacity claim is being made and

3. Details of any other policy/policies of the life assured so that all claims

can be considered together.

Statements from the hospital/nursing home where the life assured

had treatment for terminal illness in which the hospital/nursing

home authorities furnish information about the life assured,

address, date of admission, date of discharge/date of death, time of

death, reasons for admission, primary cause of death, secondary

causes, duration of illness, whether treated in the same

hospital/nursing home at any time earlier for any ailment, if so

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details; whether treated by any other doctor earlier, if so details, etc.

Statement from the Doctor who attended to the diseased life assured;

the identification of the life assured, how long the doctor treated,

for what ailments, whether the doctor is the usual medical attendant of

the life assured and if so, for what ailments he treated him, etc.

Statement by a person having reputation, who is not related to the

deceased life assured and who is not interested in the policy monies,

who has attended the burial/cremation of the deceased life assured -

particulars of the life assured, any relationship, when did he last see

him alive, date, time and place of death, cause of death, whether the

body was cremated or buried, date, time and place of

cremation/burial, etc.

If the deceased life assured was an employee of any organization, a

statement from the employer furnishing the details of the life assured,

date of joining service, designation, date last attended duty, date of

death, details of any leave availed on grounds of sickness (for periods

of a week or more at a time) during the period of three years earlier to

the date of commencement of risk up to date of death, medical benefit

facilities, if any, availed by the deceased life assured - copies of leave

letters, medical certificates submitted for sanction of sick leave, copies

of medical prescriptions and bills produced for settlement of medical

benefits, etc.

In case of death due to unnatural causes like accidents, suicide, etc., the

following records are called for:

First Information Report of the' Police.

Panchanama Report/Police Inquest Report.

Post Mortem Report.

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Chemical Analysis/ForeVisic Report in cases where post

mortem is not conclusive about the cause of death.

In very rare cases, Police Final Investigation Report.

A few cases arise where it may not be possible for the claimants to

obtain and submit the original death certificate issued by the concerned

authorities. In such cases, alternative proofs also are considered. Here are a

few examples

Death in an air crash - where there are no survivors, the list of

passengers as per the records of the airlines company can be

accepted as an alternate proof of death.

Disappearance on board a ship - the log book maintained showing the

list of passengers on board the ship when it sailed off a particular port

and similar list after it reached the next port - if the name of the

passenger (who was the life assured under the policy) appeared in the

former register but not in the latter, it should be presumed that he fellinto the sea and drowned as there can be no other way of explaining

the disappearance.

Presumption of death - as per Section 108 of the Indian Evidence Act,

1872, if a person has not been heard of for seven years by those who

would naturally have heard of him had he been alive, there is

presumption of law that he is dead. Here also, what is presumed is

death of the life assured but not the date of death? Hence, the date of

the order of the court declaring presumption of death is taken as date of

death.

On receipt of the requirements, the insurance office decides whether

there is any liability or not. In cases where the office could obtain documentary

evidence of suppression of material facts by the deceased life assured at the time

of taking the policy or at the time of revival of the lapsed policy, the liability is

repudiated. Where the liability is admitted, the office proceeds to the next step

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viz., verifying the title to the policy monies.

III) Beneficiaries under Death Claim

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

the h happening of the event 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.

It is normally observed that in case there is an explicit nomination of 'a life

policy in favor of wife and child, the policy is not assignable for any other reason.

This is because the nomination in favor of wife and child creates a trust and is, a

property of the wife and children under the Married Women's Property Act.

IV) Amount Payable

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

The amount insured or the face value of the policy.

Bonus if declared by the company, which is recoverable as an insurance

amount.

The share of profits in case of participation policy.

Surrender value, where the policy lapses due to non-payment of the

premium or where the assured surrenders the policy, the insurance

company may pay a percentage of the premium paid according to the rules

of the company.

The insurance amount payable is the sum assured plus any profits or

bonus amount that accrues to the policy till the date of happening of the event. In

case of death occurred by accident, the amount payable under the policy will be

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the sum assured plus the amount payable under the accident rider, if the assured

has, at the time of entering into the contract, taken an accident rider.

CHAPTER-5

CLAIM SETTLEMENTS

The important aspects of the claim management are claims settlement

and claim payment to the beneficiary or the claimant under the insurance

contract. When the insured or the claimant has complied with the requirements

of claim procedures such as notice, submission of supporting information of

the claim and evidence of loss and assessment of the loss, the other part of the

duty is shifted on to the insurance company. The duty involves two importantelements such as claim handling and claim decision. Claim handling is

concerned with the adoption of the procedure to settle claims whereas claims

decision is a managerial function. It includes consideration of various inputs

available such as the information given by the insured, information available

in the records and policy documents, information available in the manual of

claim payment or the procedures laid down by the company, availability of the

resources such as the claims budget, reserve, allocation, estimation andpayment. The decision for the payment is also associated with the managerial

decision regarding the compensation payable, the actual loss, loss as stated by

the insured, loss as reported by the loss assessors or the amount of insurance as

stated in the policy. The payment of a claim is made an ex-gratia, as a compulsory

liability, as an indemnity or otherwise as per the orders of the claims settlement

machinery.

The claims settlement is generally and in strict sense associated with the claim

settlements procedures and implementation of the claims management decision. The

claims settlement is also associated with managerial, legal and accounting functions. The

managerial functions include analysis of the information, making a decision, allocation of

budget payment of the claim and verification of feedback. The legal function includes the

verification of contents of the claims application comparison with the provisions of the

policy document and verification of legalities of the insurable interests and complexities

expected on non-payment or rejection of the claims. Thus the function of claims

handling includes selection of the procedure to be adopted for the settlement of claim,

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verifying the genuineness of the documents submitted along with the claim application

including the policy document, verifying the clauses-exclusive or inclusive, incorporated

in the policy verification of the declarations made by the insured, verification of conditions

and warranties associated with the class of the insurance and type of the insurance

policy, assessing the excesses of variance of terms and considering other factors

effecting the claims payment such as insurable interest, third party liabilities

negligence, role of frauds and concealment.

The claims settlement is the most complex subject as there are different classed of

insurances like personal insurances and property insurances. The personal insurance

includes the life insurance and health insurances. It also deals with the volume of the

business and ever increasing number of the insurance policies and claims, the intentions of

claimants and other beneficiaries related to the insurance policies. The fraudulent

intentions or misrepresentations further make the system of claims settlement a complex

one. Sometimes the claimants submit the exaggerated claims, which have no relevance to

the policy or the terms of the contract. Non-submission of the timely information may

also hinder the settlement of the claim. It is an agreed fact that the claims are to be

settled quickly, efficiently, and without giving scope for any future litigation. It should

be aimed at reducing the costs of claim and procedure should be shorter and simpler.

The information required for claims settlement is about the contract of insurances, the

event, which caused theloss, claim estimation and availability of outstanding claims

reserve funds.

The claims manager has to verify the following documents to assess the validity

of claim: -

Claim Application Form

Policy Document

Submission of Evidences

A Report of the licensed Surveyors and Los Assessors

Verification of Documents

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Conditions and Warranties

1) Claim Application Form:

The insured is under an obligation to give a notice of loss of the subject

insured within a reasonable time. The 'reasonable time' is a relative question as

regards the incident and gravity of the event. When the notice is received by the

insurance company the insurer should immediately take all precautions to save

the insured from further loss and the preliminary investigation has to be

conducted by the official of the company or by the licensed loss assessor. The

claim form contains information relating to the insurance policy, insurance

subject and insured. It contains a declaration made by the insured relating to the

facts mentioned there to be true. The information given in the claim application

form should not be contrary in itself stating different information at different

places, which make the insurer to doubt the claim. The application form should be

supported with documentary proof of the loss. The policy document should be

attached with the claim application form. The contents of the claim application and

the policy should be similar. The risk as stated in the application and in the policy

document should tally, if not, a thorough investigation of the facts can be made

by the insurer. The application form has to be verified to know if any column to be

filled-in is left unfilled, which may affect the decision-making. In such a case, the

insurance claims manager canrequest the claimant for the unfilled information in

the application. The claims manager can utilize the services of agents or staff

members to verify the facts of the lease or information stated in the application

form. The application of claim or claim application form is an important documentin claim settlement as it provides ill the information relating to the insured subject

and event of loss. It differs from lone insurance claim to another.

2)Policy Document:

The policy document is another important document in the claim settlement.

It is a document issued by the insurer as proof of conclusion of the insurancecontract. It contains all the information relating to the insured subject, the insurer,

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the risks covered, premium paid, date of expiry of the contract, warranties and

conditions, clauses relating to arbitration, giving notice of loss, time limits,

exclusion and Inclusion clauses and also extra risks covered on payment of extra

premium.

The claimant should submit the discharged original policy document along

with the claims form. The information stated in the application should be within

the scope of the information stated in the policy document. If the risk stated in the

application is different from that, which is mentioned in the policy document, or

the causes which result in the loss are expressly excluded, or some preconditions

intended to be followed before notifying the loss oreffecting the policy have not been

performed as per the requirements, the claim may be rejected and a conflict ofinterests may arise in the insurance payments. The claims manager is under an

obligation to verify whether any material changes are made to the policy

document; if so, any authentication is made by the insurer or not and the same is

not in the office records. The claims manager is to verify the eligibility and identity

of the claimant based upon information stated in the claims form and available in

the policy documents. The age of the persons, whether age is admitted or not, can

be verified from the contents of the policy documents. The policy also helps the

insurer to cross check the clauses of exclusions and inclusions and applicability of

clauses in relation to the claims applications.

Though, in practice, the policy document is to be submitted along with the

claims application form, it is not compulsory. If the insured has lost the policy

document, the claimant should satisfy the bonafide nature of the claim and

undoubted proof of identification of the claimant and rights of the claimants. A

duplicate policy is issued in place of the lost or destroyed original policy and canbe submitted along with the claims application. Presentation of original document

by other claimant will make the claims payment decision critical and the resulting

dispute is to be settled cautiously.

3)Submission of Evidence:-

The claimant has to submit the documents in support of his identity, age,

in case of death of the policyholder-the proof of death, if it is a accident-the proof

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of accident and police report, basis of loss assessment-actual total loss, partial

loss and information relating to the salvage and its valuation. The identity of the

claimant relates to physical identity and also the legal right to the claim or the

presence of insurable interest in the subject matter. If the claimant is a legal heir, he

has to submit the legal heir certificate, if the claimant has the will then,-the probate

and if there is no will or otherwise, sufficient proof of his relation with the

policyholder incase of the death claim, if the policyholder is alive, the interest in

the policy-as creditor, or mortgager or assignee of the policy as a proof. The

evidence presented by the claimant should establish the interest of the claimant

beyond anydoubt. The insurer should not have any doubt in paying the amount to

the claimant. The insurer has every right to demand the identity of the claimant.

The claimant can use the driving license, or proof of residence or an identification

card issued by the election officer or any recognized and government

organization. The identity lean is proved by submitting the statement of two

important well-known personsof the area where the claimant is living.

The other important document is the proof of age of the insured. The

following documents can be presented as proof of the age. This particularproof is required in the case of the life insurance policies if the age is not admitted

at the time of issuing the policy or there is a dispute of age due to contrary

information available in the claims form and policy document.

Birth registers extract from municipal or other authentic public

record

High School Certificate

Certificate of Baptism

Passport

Horoscope prepared at the time of birth

Declaration of an elderly person having knowledge of the date of

birth sworn before a magistrate.

Domicile Certificate

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Marriage Certificate

Extract from service register in case of government servants or

employees of other authorized institutions.

In case of death of a person the following documents are to be submitted:

Death Certificate issued by the Municipality or the local authority or

the Government Hospital where the claimant has expired stating the

cause ofthe death.

Claimant's statement relating to death of the policyholder mentioning

thedetails of the death such as place, time and cause of the death.

Statement of doctors if the death is due to some ailments, statement

related to burial grounds, statement of reputed persons of the place,

where the policyholder lived during his last days.

In case the death is accidental or unnatural the following documents off the

statements will prove the death and its causes.

First Information Report of the Police.

Panchanama Report/Police Inquest Report.

Postmortem Report.

Chemical Analysis/Forensic Report in cases where postmortem is no

conclusive about the cause of death.

In very rare cases, Police Final Investigation Report

In case of death due to earthquake, air crash or train accident or otherwise the

following are the sources to decide upon the death of a person .

The list published by the airport authorities.

A list published by the government of the place of accident.

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Newspaper coverage and list stated by authorized or responsible media

networks.

Statements issued by the local authorities including revenue authorities.

The log books of ships.

The above documents state the proof of death. If the persons are not

traceable the law presumes that they are dead and the process of insurance can be

initiated and the insurer has to take ample care while dealing with similar cases.

The other important documents required are the proof of the loss and proof

of the event. In life insurance the event is the maturity of the policy and the death.

in case of the maturity of the claim, the claimant is the policyholder himself andthe date of maturity is mentioned in the policy and well-known to the insurer

and insured in advance as such there will not be any dispute relating to the

payment In case of death, the claimant is to submit the proof of death to help

the insurer settle the claim.

4)A Report of the licensed Surveyors and Loss Assessors:

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

contains the investigations and results of the investigations and recommendation

assessments of the surveyor. The surveyors will state the causes of the loss whether

remote or direct, the extent of actual total loss, insurance policy amount, sing of

average clause, value of salvage and assessment of payment of claim. The report of

the loss assessors will be a solid ground to settle the claim. 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 he report

can decide the claims payment.

Whereas in the general insurance, the insurance relates to the property of

the assured and the loss to the assured is due to the loss of asset and a proof of the

loss of asset and extent of loss of the asset has to be proved beyond the doubt of the

claimant. If it is loss due to the accident, the FIR of the police, if the loss is due to

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fire-the report of the fire brigade or the local authorities, if the loss is due to flood-

the reports of local authorities and if the loss is due to theft or dacoit or robbery-the

FIR or the complaint made to the police and panchanama of the authorities are to

be submitted to prove the happening of the event.

5)Verification of Documents:-

The documents or the reports submitted are to be verified for the

following information.

Description of the risk in the policy document, office records and

description of the risks stated in the documents of evidence are to be verified and

compared. If the risk insured and the actual risk are similar, the claim has to be

paid and if there is deviation in the risk defined and the risk that actually caused

the loss, the percentage of the deviation and related applicability of the actual

with the risk insured have to be analyzed with and given leeway. The courts and

other machinery will have sympathy towards the insured while considering the

facts relating to the risk and will try to help the distressed person.

The information supporting the cause of the risk or the loss assessment

has to be used cautiously while making the decision of the claims settlement.

The documentation part of the policy and discharge of the insurer from the

liability of claim payment are to be recorded and verified to avoid future

litigations. The documents, which are not properly executed, will have no

effect of discharge and the liability will continue. The documents are to be

properly and adequately stamped to avoid future penalties and

punishments from the concerned authorities.

The validity of the policy should be verified particularly if it was in force at

the time of the event and covering the risk or not. If the policy is not renewed

and the event happens after the policy lapsed then the risk will not be

covered and no payment will be made.

The amount of claim mentioned by the claimant has to be compared with

the amount of claim recommended by the surveyors or with the amountstated in the policy document. If the actual loss is less than the policy

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amount and the amount stated by the surveyors, the same may be paid. If

the amount is more, then the amount payable will be the least of the amounts

stated in the policy and as recommended by the surveyors. The actual loss,

loss of income, loss of real wages, and other expenses are to be considered

within the purview and with reason. If the asset is subject to multiple

insurances the total payment should not be more than the face value of the

policy or the value of the asset. In no circumstances is the insured allowed

to make gains out of the insurance policy. The main objective of insurance

is to provide compensation to the insured and keep him in a similar position

as before the happening of event. No excess amount will be paid. If amount

paid is in excess, its recovery will be a disputed item.

The dues from the insured, either as penalties, interests or as premiums,

are to be recovered from the claims amount before payment is made to the

insured.

6)Condition and Warranties:-

Conditions are the provisions inserted in an insurance contract that qualifyor place limitations on the insurers' promise to perform. Warranties are the

stipulations, collateral to the main purpose of the contract. Breach of warranties and

conditions will lead to avoidance of the payment of insurance claim. The

warranties and conditions have a direct relation with the payment of the claim.

These warranties' and conditions may be precedent to the contract where their

performance or fulfillment is essential to initiate the claim or avail benefits under

the contract of insurance. These warranties maybe implied or express, precedent or

of future. The warranties may be materially relevant or may be needed to be

performed before filing the claim. The warranty or condition of giving notice to

the insurer relatingto the loss suffered or the occurrence of event is an example

of the mandatory nature. In case of any breach of the duty of warranty or

performing the acts as per the conditions laid down, the other party loses the

benefit under the policy.

The policy contains some regular clauses such as a clause promising to

adhere to the rules and regulations of the business, a clause to pay extra amounts

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for extra risks covered, a clause containing the promise to inform the changes in

the constitution of the organization and circumstances of the risk, change in the

address of the organization or any material change that takes place and other related

matters concerning the payment of claims. The policy also contains the clauses

stating the frights and duties of the assured and also the insurer. Some clauses may

be included as special clauses depending upon the class of the insurance contract

and the subject matter insured. Some clauses may exclude some responsibilities

of the insurer and are known as exclusive clauses. All the clauses are relevant to

the claims settlement.

After the claim application is received by the insurer, the important duty of

the insurer is to verify the clauses included in the policy and check for the presence

of special clauses. The information submitted by the claimant in the claim

application has to be compared with the warranties, conditions and clauses

available in the policy document. If the claimant fails to perform or fulfill the

conditions and 'warranties, due verifications have to be made for the delay in the

submission of the claim or giving notice of the claim. The other conditions are to

be verified with reference to the clauses mentioned in the policy document as

well as the claims application form. Any variance may be excused provided it is

not prejudicial to the insurer. The degree of variances, if increased, may avoid the

claim settlement. The claim may be rejected for not following strictly the terms

mentioned in the policy document. The claim may be avoided on the ground of

breach of warranty and insurers are relieved from the duty of claim payment if they

prove that the warranty, which was not performed, is of material importance to

the claims payment and insurance contract. The insurers are privileged to avoidthe payment of claim even when the breach of warranty is partial. The breach of

warranty can be excused only when it is rendered unlawful by subsequent law.

The insurer has a right to waive the performance of warranties. The waiver may

be expressed in words or may be implied. Once the insurer waives the

performance of warranty he cannot claim or demand its performance later.

All the words of the warranty or the conditions of the policy are very important

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particularly the forfeiture clauses of the policy should not be ambiguous. If the

conditions and warranties are not clear they are to be interpreted for the benefit of the

assured. If the insurer wants to avoid the claim with a plea of breach of warranty, the onus to

prove the breach to the satisfaction of the court is on the insurer. The burden is on the

company to prove that the error or omission is willful and in the nature of fraud.

Declarations made by the insured relating to the health, age, family history in the case of

life policies and answers given to the questions in other polices like fire policy, or

marine policies are binding upon the insured for the performance. If the

misrepresentations are made with an intention to deceive or are not in good faith then the

insurer has the right to disown the insurance contract and reject the same.

I) Factors Effecting the Claims Settlement

The factors effecting 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. Too remote a

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 complied with. When conditions to be

fulfilled before affecting the cover of the policy, are not performed, the cover of

insurance will not come into effect even though the premium is paid and

accepted by the insurance company.

Presence of insurable interest, in case of the property insurances, 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 insurable interest is created out of legal relation or pecuniary relation of

the insured subject.

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

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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.

The fraudulent claims, claims with fraudulent intention should not be

made as they are against the principle of good faith, which is the life-blood

of an insurance contract.

Multiple claims and reciprocal claims will be settled asper the terms of the

contract of insurance.

Right to appeal or file a petition with the tribunal or the courts cannot be

withdrawn. If the terms of the policy insist upon arbitration, it is not the

end of justice for the insurer or the assured .

These are some of the factors related claims settlement. The insurer

may sometimes, depending upon the circumstances of the individual cases, waive

some of the procedures required to be followed by the insured and some

warranties, which are not reasonable and impossible to form can be waived and

excused bythe insurer.

The insurer, after verifying the documents and facts of the claim, should

makea decision either to pay the claim or to reject it. The rejection of claim will lead

to thedispute and the assured can challenge the decision taken by the insured. As

such,decision-making is the most important function of claims management. The

insuredmay opt for the following alternatives while settling the claims.

Pay the claim as reported by the surveyor or the claim made by the insured

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.

If the claim is rejected be prepared for the litigation. The litigation will cost

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the insurer more, as the insurer has to pay the interest for the amount due

if he loses the litigation. The costs of the litigation will also increase the

burden in addition to the payment of insurance amount and interest.

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.

Above were the factors that effect in claim settlement but, than so following

table shows how the life insurance corporation of India handles or cover the claim

settlement.

CLAIMS SETTLEMENT OPERATIONS

Claims Intimated Claims Settled During the Year Claims Outstanding

(including claims written back) at the End of the Year

YEAR Number(inlakh)

Amount (Rs.in crore)

Number(in lakh)

Amount (Rs.in crore)

Number-tin lakh)

Amount (Rs. incrore)

2002-2003 96.53 16953.95 96.91 17035.81 0.22 191.49

2003-2004 103.46 19596.11 103.53 19607.20 0.15 173.91

2004-2005 114.90 23563.62 114.91 23560.66 0.14 176.86

II) Delay in Claims Settlement

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

have to be submitted within a limited period mentioned in the policy document or

otherwise stated in the Act. In some cases, the death of a person or the accident of"

vehicle has to be intimated immediately either orally or in person, either by the

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policyholder or the claimant or by the representative of the claimant. The formal

application has to be made within 14 days of the death of a person. Giving notice of

the event is different from submitting the claim papers. The event has to be reported

immediately to the insurer so as to enable him to conduct preliminary investigation to

find out the actual loss and the cause of action leading to the event and whether the said

cause is remote or direct. When the papers are submitted to the insurer, in the life

insurances policies and if no dispute is traced out, the claims are to be paid within 30

days from the date of receipt of the claim form. If any further information is required

or some more claims are presented for the same cause of action or the policy the same

may be informed to all the claimants of the policy. If the conflict of opinion is found in

the claim papers or the insurer decides to reject the claim or defer the payment, the same

may be intimated to the claimant the insurer may direct the assured to be present before

the arbitrator provided the insurance policy contains the arbitration clause. If the

insurer, incase of lifeinsurance polices, is not able to identify the correct claimant or if

multiple claim are presented by different claimants claiming the insurance amount of

one policy no one presents sufficient proof of their eligibility, the insurer's

liability will be discharged when the insurer pays the amount in the court within

nine months after the maturity of the policy.

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.

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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.

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

presentand 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 Forms: 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 supporting documents are not submitted along with the

claim form to facilitate claim assessor to know the date of the event or the cause of the

event, claim settlement may be delayed.

The insurers 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, this could have

otherwise facilitated the estimation of the loss payable under the claim.

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 claims settlement.

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The delay on the part of the insurer may be intentional or due to the pressure

of work.

The increasing number of insurance policies and quantum of business in

relation to the staff of the insurer.

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 ofclaims.

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 field staff

will speed up claims settlement.

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CHAPTER-6

ROLE OF AGENTS IN CLAIM SETTLEMENT AS WELL AS

PAYMENT OF CLAIM IN COURTS

I) Role of agent in claim settlement:

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 thepayment 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 insurance company is the principal and

the person to whom the license is given to undertake the marketing of insurance

product is the agent and provisions of law of agency are applicable to the procedure

of appointment of agents and to their rights and liabilities. 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 premium,

enquiries and publishing of information ' of the insurance contracts and products.

The Insurance Act, 1938 and IRDA Regulations, 2000 enumerate the essential

qualifications of agents and other requirements. The Act and regulations also define the

code of conduct to be followed by the agents during the discharge of their duties, i.e.,

marketing of insurance products. The important duty or the function of the agent is

procuring the business of general insurance and life insurance, to maintain the

confidentiality of the business and to avoid unhealthy competitions, in the insurance

business market. While undertaking the business, as a part of duty, the agent is

under obligation to enquire into the facts of the insurance subject or insured properties

and the genuineness of the insured. The risk to be covered and the nature of its

exposure are known to the agents and the insured accepts the information stated by the

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insurance agents with confidence while processing the proposal for. The agent

collects premium from the insured and remits it to the insurer.

Passing of information to the insurance agent relating to the happening of

risk or event is akin to informing the insurer. 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. However, informing the fact of loss is binding on the insurer

as per the practice and the judgments of courts. The insurance agents are under an

obligation to provide services to the insured during the currency of the insurance

policy and help the insured in filling up the proposal forms and the claim forms.

Thus, the agent, though legally not bound, is under the moral obligation to help the;insured in filing the insurance claim with the insurance company. He provides the

claims form, filling the proof of the incidents and date of birth or the cause of death,

to the insurers satisfaction. In times of dispute, the agent is under an obligation to

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

customer.

II) Payments of Claim in Courts

By paying the claim in the court the life insurance company is discharged of its

obligation to pay the insurance claim. This device is not applicable to the

transactions of the general insurance contracts.

When the insurance company is not able to resolve the dispute relating to the

identity of genuine or eligible identity of the real claimant from a number of

claimants who have applied to receive the same claim, it may shift the burden ofidentification to the court by following a certain procedure mentioned in Section 47

of the Insurance Act, 1938. By paying the claim amount in the court, the intention of the

insurance company to settle the issue can be established. The duty to identify the

claimant and conduct the proceedings rests with the court and filing a petition and

payment of the amount in the court discharges the insurer from the liability.

The procedure laid down in the Section 47 of the Insurance Act, which is to be

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owed by the insurance company before depositing the amount into the court is follows:

The insurer has to file a petition for permission to pay in the court on

when all the efforts to identify the claimant are exhausted by the insurer

The insurer should submit all the details and report of its trials and effort

to identify the eligible claimant out of a number of claimants present I it.

The insurer has to file a petition within nine months from the date of

maturity of the policy but after six months.

The insurer has to file the petition in the court that has the jurisdiction.

The petition of the insurer should contain details of the claimants. He

should provide information such as name of the insured person an

address, date, and place of death of the insured, the nature of the and

amount secured by it, the name and address of each claimant so as I serve

the notices to them, the reason why the satisfactory discharge car be

obtained and the address of the insurer for the purpose of serving him

with notices of proceedings under th

Claim Management in Life Insurance

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