Professional Documents
Culture Documents
Abstract
The field of insurance has taken a giant leap at the threshold of
twentieth century. Insurance have become an integral part of life of man
all over the globe. The proverb ‘Need is the mother of invention’ is
proving equally correct in case of insurance Insurance have already had a
considerable impact on many aspects of our society.Claims management
is another important aspect on insurance. It is complex in nature that is
true but it is a driving force to plant confidence in the hearts of people.
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Definition of Insurance:
Insurance in its basic
form is defined
as “A contract between
Claims Management two parties whereby
in Life Insurance
one party called
insurer undertakes in
exchange for a fixed
Introduction to Insurance in India sum called premiums,
to pay the other party
called insured a fixed
The insurance sector in India has come a full circle from being an
amount of money on
open competitive market to nationalisation and theback to a liberalised
happening of a
market again. Tracing the developments in the Indian
certain event." sector
insurance
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 terms 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 members a predetermined sum of money in case of any
unfortunate event for a predetermined fixed sum payable which is in
normal term called Insurance Premiums.
Insurance is basically a protection against a financial loss which
can arise on the happening of an unexpected event. Insurance companies
collect premiums 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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Claims in Insurance
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Most of the time these premiums 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 premium. The insurer promises to save 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.
Claims Management
Many insurers have recognized the need to improve the efficiency
of their claims management process. They have streamlined processes,
eliminated paper-based 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.
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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.
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 verifying the claims, reviewing the claim
application, respond to the claimant, carry out claims investigation,
claims negotiation, claim settlement and claim payment.
• Claims management:
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relating to the policy documents, payment of premium and using the staff
or the agents for the settlement of claims disputes. The branches maintain
records relating to the claims payment and claims rejections. They wiill
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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Types of claims
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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.
➢ A report from the doctor who last treated the deceased person may
be required.
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Maturity Claims:
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Policy Loans:
This is strictly not a claim but a benefit given out by life companies
for life policies that have been in force for at least three years. To receive
a policy loan directly from a life company entails assigning the policy to
the life company and receiving a loan cheque. The insurance policy can
also be assigned to a bank and the loan is then granted by the banks and
the policy document utilized as security for the loan.
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Disability Claims:
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4) Where a proposal form is not used, the insurer shall record the
information obtained orally or in writing, and confirm it within a
period of 15 days thereof with the proposer and incorporate the
information in its 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.
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1) A life insurance policy shall state the primary documents which are
normally required to be submitted by a claimant in support of a
claim.
2) A life insurance company, upon receiving a claim, shall process the
claim without delay. Any queries or requirement of additional
documents, to the extent possible, shall be raised all at once and
not in a piece-meal manner, within a period of 15 days of the
receipt of the claim.
3) A claim under a life policy shall be paid or be disputed giving all
the relevant reasons, within 30 days from the date of receipt of all
relevant papers and clarifications required. However, where the
circumstances of a claim warrant an investigation in the opinion of
the insurance company, it shall initiate and complete such
investigation at the earliest. Where in the opinion of the insurance
company the circumstances of a claim warrant an investigation, it
shall initiate and complete such investigation at the earliest, in any
case not later than 6 months from the time of lodging the claim.
4) 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 account
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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 premium paid. The policy document needs to
be submitted in original unless it is in custody of LIC as security
for loan.
3) Age proof document (if age has not been admitted earlier):
The policyholder should also submit his age proof to the
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.
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LIC upon the receipt of the claim form will act in the following manner:
➢ Then the insurer will ask for necessary documents that are required
for settlement of claims. The claimant has to provide all the
necessary documents that are being asked by the insurer.
➢ After verification, the insurer arrives at the final amount that has to
be paid to the claimant and then prepares a cheque or such mode of
payment as has been agreed upon in the policy or between the
claimant and the insured.
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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
Administration 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:
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• If Death occurred after three months but less than six months after
the expiry of first unpaid premium date half of the Sum Assured
without bonus will be paid as Ex-gratia
If the death occurred between six months and one year from the due date
of the first unpaid premium date, claim may be considered to the extent
of the proportionate notional paid-up value on the basis of actual
premium paid.
Maturity claims
Beneficiaries in claims:
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 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
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Claims Management in Life Insurance
The disputes arising in such cases are general and 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. 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.
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:
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• The wife and children of the assured under the Married Women’s
property Act
Amount payable:
Amounts that can be paid under a life insurance policy are as follows:
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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.
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The insured may opt for the following alternatives while settling the
claims:
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The time element is very important in the claims payment for the
following reasons:
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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.
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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.
The insurer may not get the cooperation of the insured or the
claimant to finalize the claim or arrive at some compromise.
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Claims Management in Life Insurance
The delay on the part of the insurer may be intentional or due to the
pressure of work.
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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
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Insurance users pay their premiums, 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 user 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 and insureds, and the insured’s rights and duties 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.
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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:
i. 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.
ii. maintaining confidentiality and neutrality without jeopardising the
liability of the insurer and claim of the insured;
iii. examining, inquiring, investigating, verifying and checking upon
the causes and the circumstances of the loss in question including
extent of loss, nature of ownership and insurable interest;
iv. conducting spot and final surveys, as and when necessary and
comment upon franchise, excess/under insurance and any other
related matter;
v. surveying and assessing the loss on behalf of insurer or insured;
vi. assessing liability under the contract of insurance;
vii.pointing out discrepancy, if any, in the policy wordings;
viii.satisfying queries of the insured/insurer and of persons connected
thereto in respect of the claim/loss;
ix. giving reasons for repudiation of claim, in case the claim is not
covered by policy terms and conditions;
x. taking expert opinion, wherever required;
xi. A surveyor or loss assessor shall submit his report to the insurer as
expeditiously as possible, 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
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(1) age, sex (except in several states that require "uni-sex" rates,
(2) height, weight, and health history (and often family health history --
parents and siblings),
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Intent to deceive
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3. Make sure you receive a written policy after payment of your first
premium.
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Claims by death
Numbers(in lakhs) 6.73 6.02
Amount 5,250.40 4,443.32
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payable:
Claims settlement
Claims settled during the year
Maturity
Death
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Case study
(1)
Life Insurance Corporation of India v/s Mrs. Sunanda Kanthale
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necessary directives to the LIC for paying Rs 40,000 along with 18 per
cent interest, a 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, 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.
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(2)
Life Insurance Corporation of India v/s Neelam Mehta
The case arose following the refusal of LIC to pay the insurance
money following the death of her husband Mahendrabhai Mehta. LIC had
repudiated the life policy alleging that he had hid from it that he was
suffering from diabetes at the time of taking the insurance policy in
december 1993. On 6 November 1994 he died following a heart attack.
Neelam told the consumer forum that she came to know that her husband
had a life policy with lic three months after his death, when she started
receiving 'forms one after another to be filled through lic agent'. She then
filled up all the relevant papers.
She also formally informed lic about the death of her husband and
claimed the insurance money. thereupon, lic intimated her that the claim
for her husband's insurance policy was repudiated because the life
assured had 'deliberately' withheld information regarding his 'pre-existing
illness which was diabetes' and which, it said, had led to his death. it also
alleged that because of this disease he had been hospitalised before his
death and that he was a insulin-dependent diabetic. Neelam represented to
both the bhavnagar and ahmedabad offices of lic and later to its zonal
office in mumbai urging them to recommend her claim to the review
committee.
This request was made in september 1996 and till now no decision
had been taken and the 'matter is still under consideration'. she also
denied that her husband was a diabetic or that he had been hospitalised
for this. He had not been treated for any ailment during the five years
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preceding his death, she asserted. The forum comprising its president,
K.D. Desai, members Leena Desai and Malaybhai Kantharia, found that
lic had failed to prove that Mr. Mehta had made false statement and
misrepresentation about his health. "the burden of proving that there was
suppression of material fact and that it was made fraudulently" lied on lic
and it had failed to prove it, the forum observed. LIC therefore was
legally and morally duty-bound to pay the claim, it said.
(3)
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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.
Conclusion
The insurance business is major service oriented business in the
world. The services offered by the insurance industry is well recognized
and utilized by the general public and commercial sector of the world.
The life insurance business has covered nearly 40% of the population of
the world. Global players with strong brands in the insurance industry
today set up their back office operation in low cost countries, manage
capital on a global basis, make use of their special skills world wide and
use their superior managerial ability to secure leadership positions in the
industry.
Bibliography
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Webliography
www.insuremagic.com
www.licindia.com
www.icicprulife.com
www.insurancewatch.com
www.insuranceonline.com
Search engines:
www.google.com
www.ask.com
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