Practice of

Life Insurance Claims

Claims
Contract of insurance comes to a natural end with Claims Claim may be defined as, the demand for performance of the promise made by the insurer at the time of making the contract. The insurer is obliged to perform his part of the contract, if the insured has performed his.

Claims
The insured contingency has happened Policy is in force

arises when

Claims Management
Prompt settlement of claims is crucial, because:
The speed, courtesy and fairness with which an insurer administers claims, reflect the level of services the company provides to its customers It creates goodwill of the organization through customer satisfaction It also affects the business directly by the ploughing back of claim proceeds

An

Acid Test

Claims Management
Four Issues to be Examined
Whether the policyholder has performed his part of the contract

What are the obligations of the insurer

Whether the contingency has happened

Whether the claimant is the person entitled to demand performance

LIFE INSURANCE CLAIMS

Under the contract of insurance, the insurer has to pay certain sums of money to the policyholder or the nominee, on the happening of specified incidents.

The claim may be on account of:

Survival up to the date of maturity - Maturity Claim Survival up to a specified period during the term of policy - Survival Benefit Claim (Money Back) Death during the term of the policy - Death Claim

MATURITY CLAIMS
When it is paid
Payable at the end of the policy term, if the life assured survives the term.

Whom it is paid

Payable to the policyholder and nomination is irrelevant. In case of absolute assignment, settlement is in favor of the absolute assignee. Includes the Sum Assured and any guaranteed additions plus vested bonus. Any outstanding loan as well as unpaid premium is deducted.

What is paid

MATURITY CLAIMS SETTLEMENT

Policy Bond Intimation by the insurer Discharge Voucher

Revenue Stamp Signature

Payment

SURVIVAL CLAIMS
In case of money back policies, the Sum assured is payable in installments , during the term of the policy.

On completion of a specified term (say, every 5 years), a specified amount (say, 20% of the Sum Assured) is payable.
The specified term and the specified amount may vary depending upon the type of the policy bought

SURVIVAL BENEFIT CLAIMS SETTLEMENT

Discharge Voucher may be collected from the life assured, duly signed and witnessed. Recovery of amount due from the policyholder towards unpaid premium and loan interest. Endorsement in the original policy bond to record the payment.

DEATH CLAIMS
Claim payable by the insurer, in case the policy holder dies during the term of the policy. Death claim may be Early Claim or Non-early Claim Claim arising within 2 years of commencement of policy, is known as early claim.

Claim arising more than 2 years after the date of commencement of policy is called non-early claim.

DEATH CLAIMS SETTLEMENT

Submission of claim forms and other documents Investigation, if required

Intimation

Payment

Issue of claim forms

Scrutiny

Decision

DEATH CLAIMS SETTLEMENT

Intimation by
Nominee Assignee any of the relative of the deceased

Intimation has to contain particulars like

policy number name of the policy holder date, place and cause of death

DEATH CLAIMS SETTLEMENT

In case of non-early claim, the documents required are:
Original policy document (bond) Claimants statement (with details like cause of death, nature of last illness, treatment, burial or cremation etc.) Death certificate from the local Municipality or any competent authority Proof of title of claimant

DEATH CLAIMS (Early Claim)

It is assumed (at the time of underwriting) that the life assured is good for life assurance and is not likely to die within 2 years of taking the policy.

Insurer to make sure that there was no intention to defraud or there was no concealment of material facts.

Additional requirements are called for in case of early claims:

Statement from the medical attendant giving details of last illness, previous history and treatment, if any. Statement from the hospital in case the deceased was hospitalized before death. Certified copies of the Post-mortem Report and Police Inquest Report in case death is due to accident or any other unnatural cause. Details of Cremation or Burial such as time, place and witness etc. Statement from the employer giving details of leaves availed on the ground of sickness.

Enquiries are made by the insurer about the life assureds state of health prior to the commencement of the policy, to ensure that there was no concealment or suppression of material facts.

CLAIM CONCESSION
Strictly speaking, if premium is not paid in time, the policy lapses and no claim is payable against a lapsed policy. However, insurers take a liberal view
After at least 3 full years premium are paid, the claim will be considered for full Sum Assured if the death occurs within 6 months of the first unpaid premium. After at least 5 full years premium are paid, the claim will be considered for full Sum Assured if the death occurs within 12 months of the first unpaid premium.

PRESUMPTION OF DEATH
Proof of death is essential for the settlement of death claim in case of a life insurance policy. Death certificate and Certificate of cremation/ burial is usually available from municipality or any other local authority. These documents serve as proofs of death. Sometimes, a person is reported missing without any information about his where about. It may pose a problem for the insurer at the time of claim settlement. However, under Indian Evidence Act, a person is presumed to be dead in case he is not heard of, for 7 years. In such a case, claims are settled presuming the death of the life assured, 7 years after he is reported missing. Death can be presumed by the insurer even within 7 years, if there are circumstantial evidences.

ACCIDENT BENEFIT
While settling death claim, Double Accident Benefit is paid, if death is due to an accident. The conditions are:
Death was due to an injury caused by outward, violent and visible means Death was solely and directly from the accident Death occurred within 120 days (or such other period stipulated in the policy) from the date of accident

The exclusions (when Accident Benefit is not paid):

When death is caused by intentional self-injury or suicide, insanity or under the influence of intoxicating liquor, drugs or narcotics When death is caused by riot, war, racing, hunting, mountaineering, Para-gliding etc. When death is a result of any breach of law When the accident is due to employment in police, military or aviation service

PERMANENT DISABILITY BENEFIT

Accident benefit is a part of death claim. However, disability benefit does not form a part of the settlement of death claims. The policy does not come to an end with the settlement of disability benefit.

In case of permanent disability, the benefits are:

Future premiums are waived A sum equal to Sum assured is payable in installments over a specified period (say, 10 years) In case of death during the specified period, the remaining disability benefit is paid along with the death claim

Interpretation of disability can pose some problems:

Usually the policy conditions define disability in physical terms. The disability must be total and permanent. The life assured must be unable to follow his own occupation or profession.

Claims Settlement Scenario

Claims Settlement Scenario