CLAIM Managment in LIC

8/11/2019 CLAIM Managment in LIC

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Claims Management in LIC

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CHAPTER 1

INTRODUCTION TO INSURANCE IN INDIA

The insurance sector in India has come a full circle from being an open

competitive market to nationalization and back to a market again. Tracing the

developments in the Indian insurance sector reveals the 360-degree turn

witnessed over a period of almost two centuries.

Today Insurance Companies in India have grown manifold. The insurance sector in

India has shown immense growth potential. Even today a giant share of Indian

population nearly 80% is not under life insurance coverage, let alone health and

non-life insurance policies. This clearly indicates the potential for insurance

companies to grow their market in India.

In simple 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 informal 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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Definition of insurance:

Insurance in its basic form is defined as "A contract between two parties

whereby one party called insurer undertakes in exchange for a fixed sum

called premiums, to pay the other party called insured a fixed amount of money on

the happening of a certain event."

Introduction to Life Insurance

Human life is subject to risks of death and disability due to natural and

accidental causes. When human life is lost or a person is disabledpermanently

or temporarily, there is a loss of income to the household. The family is put to

hardship. Sometimes, survival itself is at stake for the dependants. Risks are

unpredictable. Death/disability may occur when one least expects it. An individual

can protect himself or herself against such contingencies through life insurance.

Though Human life cannot be valued, a monetary sum could be determinedwhich is based on loss of income in future years. Hence in life insurance, the Sum

Assured (or the amount guaranteed to be paid in the event of a losses by way of a

benefit in the case of life insurance.

It is the uncertainty that is risk, which gives rise to the necessity foursome

form of protection against the financial loss arising from death. Insurance

substitutes this uncertainty by certainty. The primary purpose of life insurance isthe protection of the family. Insurance in its various forms protects against such

misfortunes by having the losses of the unfortunate few paid by the contribution of

the many that are exposed tithe same risk. This is the essence of insurance the

sharing of losses and substitution of certainty for uncertainty.


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There are a variety of life insurance products to suit to the needs of various

categories of peoplechildren, youth, women, middle-aged persons, old

people; and also rural people, etc. Life insurance products could be purchased

from registered life insurers notified by the IRDA. Insurers appoint insurance

agents to sell their products. Public who are interested to buy life insurance

products should receive proper advice from insurance agents/insurer so that a right

product could be chosen to suit particular financial needs.

Claims in Insurance

An insurance claim is the actual application for benefits provided by an

insurance company. Policy holders must first file an insurance claim before any

money can be disbursed to the hospital or repair shop or other contracted service.

The insurance company may or may not approve the claim, based on their

own assessment of the circumstances. Individuals who take out home, life,

health, or automobile insurance policies must maintain regular payments called

premiums to the insurers.

Most of the time these premiums are used to settle another persons

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 thehearts 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


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the insured are nominees/assignees of the insured on happening of event or risk

insured. Disputes crop up in the payment of claim when the insurer and the insured

understand the process of claims payment in a different way. Claims settlement is

an integral part of the insurance business which is a service industry and its growth

is interwoven with the people, the customers and consumers of service. It is

inevitable for the insurance company to protect and guard the interests of the

policyholders. An insurance claim is the only way to officially apply for benefits

under an insurance policy, but until the insurance company has assessed the

situation it will remain only a claim, not a pay-out.


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CHAPTER 2

CLAIMS MANAGEMENT

Claims Management:

Many insurers have recognized the need to improve the efficiency of their

claims management process. They have streamlined processes, eliminated 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.

Claims handling costs typically represent 10% to 15% of net earned

premium; in contrast, claims payouts represent 40% to 65%.Insurers that

expand their focus to include effective as well as efficient claims processing will

find a far larger pool of savings opportunities.Technology can play a significant

role by providing integrated channels for communication and collaboration. This

would help the insurance company increase employee productivity by reducing

cycle time and defect rate and also increase employee participation and

compliance.

Claims Processing sometimes involves collating and sharing large amounts

of information among multiple parties involved in a claim, from body shops to

adjusters to investigators to lawyers and doctors to claimants and regulators.

And it involves the knowledge of experienced adjusters to determine the fair and

appropriate outcome of a claim. Infect, losses and loss expenses absorb 80% of

premium collected by carriers.


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Service representatives and claims adjusters need to access data from multiple

sources when processing or assessing a claim, which delays settlement time

and increases costs. Manual steps reduce transparency of the claims

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

Customer retention is also challenged experts say that 75 percent of

customers leave their insurer due to claims issues.

System of claims management

Basis of claims management:

Claims management means and includes all the managerial decisions and

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

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, claims processing and claims settlement.

The claims philosophy is defined as procedure or specified approach to

settle the claims. It contains the claims management principles and also

claims handling methods and procedures. The claims philosophy includes the

preparation of guidelines regarding the receipt of claims from the insurers or

claimants, analysis of the claims, consideration of the possible decision

on the particular issues and disputes, evaluating the impact of the claims cost

and expenses, relation of claims to the consumer satisfaction, monitoring the claim

payment and improving the efficiency of the claims settlement and payment

systems and avoiding unnecessary disputes of claims.


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The claims process includes the basic claims procedure and handling of

claims. The handling of claims includes the monitoring of situation or events,

which cause the loss to the insured subject matter and give a cause to the insured to

make a claim. The claims process contains two fold procedures to be followed by

the insurer and insured. From the point of view of the insured, it includes the

suffering of loss or the damage, understanding and identifying the cause of action,

information or giving notice of claim or loss to the insurer, providing sufficient

proof of loss to the insurer or his agent or the loss assessor and surveyors. The

insurer, on the receipt of the claim from the insured, has to take certain immediate

precautions such as verifying the claims, reviewing the claim application, respond

to the claimant, and carry out claims investigation, claims negotiation, claim

settlement and claim payment.

Stages in claims system:

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

the decisions made by the claims management machinery of an insurance

company. Though claims management and claims handling are generally the same

externally, they are different in nature.

Claims management:

Claims management is a managerial function in which the insurer has a

definite role to play in analysis of data, processing of application, decision-

making, budget planning, and business control and fund management. It is a

subjective concept. In claims management, the attention is on making

principles and guidelines for smooth and profitable settlement of claims in the

hands of the insurer.


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Claims management includes the entire process of claims handling and

claims payment. This includes review of the claims performance, monitoring of

claims expenses, legal costs, settlement costs, compromises and planning for

future payments and avoiding the delay and disputes in payment of claims. It is a

control system that has an important place in the claims management. It also

includes risk management techniques, loss assessment, and business forecasting

and planning.

Claims handling:

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

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

measuring methods in settling the issues before it occurs. Claims handling is

a traditional form of managing the claims settlements. It includes handling of

various stages of the insurance claims. It is functional in nature such as claims

review, investigation and understanding the negotiating process. It does not

include any managerial outlook such as risk management, policy making and

decision making.

Thus, it is concerned with the procedural methods and also interpretations of the

claims philosophy. Claims handling may change from case to case depending on

the merits of the claim, but it will not drastically change every moment. It is a

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

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

procedures required for quicker and efficient payment of the claims. Every insurer

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

customer service. The insurers commitment to the service of the customer is a part

of the claims management.


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NEED TO HAVE A CLAIMS MANAGEMENT SYSTEM

The following elements express the need of effective claims management system:-

a) Sharing of data and information within the organization by different departments

like underwriting staff, premium collection staff, and claims management staff,

claims payment staff and others.

b) The claimant, requirement for information, the extent of processing of their

claims, information regarding particular policy can all be fulfilled only if a proper

claims management system exists.

c) It also helps to reduce fraudulent claims, exaggerate and repeated claims and

hence helps to avert frauds at the initial stage

d) This system is necessary to updated information, and for proper analysis and for

decision making.

ESSENTIAL ELEMENTS OF CLAIMS

1. The payment of insurance amount is based on the principles of good faith. An

insurance contract embodies an implied covenant of good faith and fair dealing.

The claim contract must contain following important elements.

2. The claimant should have an insurable interest on the subject matter, which is

lost and for which claims is made.

3. There should be loss or damage to the subject matter.

4. The subject matter of the insurance policy should suffer loss due to risk

mentioned in the contract.

5. The insured and insurer have to show their efforts to mitigate the loss and the

intension to save the other.

6. The disclosure should have concerned with subject matter and contract of

insurance.

7. The loss suffered should be actual but not constructive.


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CHAPTER 3

Life Insurance Corporation of India

The Life Insurance Corporation (LIC) was established about 44years ago

with a view to provide an insurance cover against various risks in life. A monolith

then, the corporation, enjoyed a monopoly status and became synonymous with life

insurance. Its main asset is its staff strength of 1.24 laky employees and 2,048

branches and over six laky agency force.

LIC has hundred divisional offices and has established extensive training

facilities at all levels. At the apex, is the Management Development

Institute, seven Zonal Training Centers and 35 Sale straining Centers.LIC of

India is one of Indias leading financial institutions, offering complete

financial solutions that encompass every sphere of life. From commercial banking

to stock broking to mutual funds to life insurance to investment banking, the groupcaters to the financials needs of individuals and corporate. The LIC has a net of

overs 1,800 cores. With a presence in 82cities in India and it services customer

base of over 20, 00,000.


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At the industry level, along with the Government and the GIC, it has helped

establish the National Insurance Academy. It presently transacts individual

life insurance businesses, group insurance businesses, social security schemes and

pensions, grants housing loans through its subsidiary; and markets savings and

investment products through its mutual fund. It pays off about Rs 6,000 core

annually to 5.6 million policyholders.

It has been started with the objectives of spreading Life Insurance widely

and in particular to the rural areas, meets the various life insurance needs of the

community that would arise in the changing social and economic environment.

Organizational Structure of LIC

The organization is the form having independent or co-ordinate parts for unit

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

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

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

insurance products. An effective organization is essential to share information and

effectively execute the managerial decisions. The organizational structure differs

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

objectives omission of the business organization. The organization should

be structured with an aim to coordinate, not only with internal managers or groups,

but also with the external world, the customers, authorities other persons directlyor indirectly interested in it.

The insurance business is concerned with the functions of

marketing of insurance products and its related functions like premium collections


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and premium fixings, accepting the insurance proposals, issuing policy

documents, maintain records relating t the policies issued everyday in

chronological order, and also payment of claims. The claims department is

associated with the receipt of claims and arrangement of claims investigations.

After it is decided whether to make payment to the assured or to defer it, the

insurance company may seek guidance from the panel of advocates. 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 alternative dispute

resolutions. Thus the insurance organization is associated with the

marketing of policies, underwriting of policies, claims payment, claims

defending and staff matters. The delegation of duties to each unit with

well-defined limitations, responsibilities and decision making are all related to the

organizational structure and management.

Basic structure of LIC

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

related activities of the insurance consumers are dealt and handled at the branch

level. The branch office, depending upon its business, is headed by a manager and

each function of insurance business like marketing, underwriting of policies,

accounts, claims payments, staff and administration matters are identified as

departments of the branch office with responsible officials such as Administration

and Accounts Officers.

The managerial decisions are based on the information supplied byte AAO,

the functional head at root level. All the functions of claims will be settled at the

branch level. The AAO of life insurance business will deal with maturity and death

claims. If the branch is smaller, all the types of claims will be dealt by one AAO


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and if the branch is bigger with good number of claims, they will be settled by,

separate officials. At branch level, these officials have to maintain cordial

relations and establish a system of sharing information with the other

departments, relating to the policy documents, payment of premium and using the

staffer the agents for the settlement of claims disputes. The branches maintain

records relating to the claims payment and claims rejections. They will submit the

reports to the Zonal Officer, who in turn will forward it to the Head Office or

Corporate Office.

The branches report to their respective divisional office. If any branch gets a

claim and there is a problem in identifying the correct claimant among the

claimants, or otherwise, a dispute of risk crops up, which will be forwarded to the

divisional office with its comments. The divisional office after receiving the

papers, verifies them, applies legal knowledge and skills, or seeks advice from

skilled persons and tries to solve the problems. The divisional office is

responsible to settle the claims referred by the branch office and also report the

same to the zonal office, which in turn will consolidate the data and submit thesame 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 otherwiserequired under the law is the important function of the central office. Thus the

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

based on the above said factors.


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Claims Management Department

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

company. The claims department has the following functions to perform:

To provide the customers of insurance and reinsurance companies with high

quality of service. This role gives a long-term edge to the company and

hence is referred to as the strategic role.

To monitor the claims and see that whether the benefits of

insurance exceed the costs of claims. This role is referred to as the 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

role of the claims department.

To meet the standard of service, to keep up to the customers expectations

and still operate within the budget. This is the managerial role of the

claims department.

Both the quality of the service and cost of claims is the responsibility of the claims

department. The department has to look after the proper mix of the two. The cost

of claims must not exceed a given level in trying to render a very good service to

the customer. So the claims department should work with due diligence to balance

the two parameters. The estimation of future liabilities is just as important as

control over the claim payments. As the claims department is in direct touch with

the customer, it has to ensure the quality of service.

The claims department has the sole responsibility of managing claims.

Claims management by far is the most complex issue in an insurance company.


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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 companys objectives. It has to be given the proper weight age and

motivation so that the business as a whole functions well.

Types of claims

Understanding the requirements for various life insurance benefits (claims) is

important for the customers. The overriding condition on claims is the payment

of premiums i.e. Claims are only payable if premiums are paid up to date. Thereare various types of claims under life policies. The most common claims include:

The general requirements for each of these claims are briefly explained below.

Death Claims:

This is a claim paid when then the person insured dies. For a death claim to

be paid the following basic conditions must be fulfilled.

The policy document, original death certificate, burial permit copy of the

ID of the deceased must be provided to the insurance company.


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A report from the doctor who treated the deceased must be

presented to the insurance company.

Claim forms must be completed

A report from the doctor who last treated the deceased person may be

required.

A police abstract report may be required where death occurs through an

accident.

The documentation required for payment of death claims is easily available

and claimants need to immediately inform the insurance company

where problems are encountered in securing the documents. The documents

are usually required so as to reduce on the possibility of paying fraudulent

claims or paying the wrong claimants. Many insurance companies will

frequently waive certain requirements under certain special

circumstances.

Maturity Claims:

A maturity claim is paid out mostly on endowment and education insurance

policies whose duration has expired. For example in an insurance policy

with duration of 15 years, the maturity value will be paid on the 15anniversary

after affecting the policy. Payment of a maturity the claim is a straightforward

affair where the customer returns the original policy document and signs adischarge form. The claim cherub is usually released in a period of about two

weeks once all required conditions are fulfilled.


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Partial Maturity Claims:

Most endowment and education policies provide for payment of partial maturities

after a given duration. The partial maturity is normally paid on set dates in the

policy document. A typical education policy of 10years provides for payment of

20% of the sum insured after four years and every year thereafter until the expiry

of the policy. The life insurance company usually prepares partial maturity

cherubs in an automated manner and the customer does not have to claim. The

cheque is either sent directly to the customer or the nearest branch office for ease

of collection.

Surrender Value Claims:

When a customer is unable to continue with the payment of premiums due

to unplanned events like retrenchment or dismissal he haste option of encasing the

policy to receive the surrender value so long as the policy has been in force for

more than 3 years. The procedure for lodging this type of claim is very simple and

is similar to the maturity claim whereby the customer returns the policy document

and signs a discharge form. The claim cheque is then paid to the customer within

two weeks.

Policy Loans:

This is strictly not a claim but a benefit given out by life companies for life policies

that have been in force for at least three years. To receive policy loan directly from

a life company entails 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:

This will arise in life policies where the customer purchases personal accidentpolicy rider as an additional benefit. Disability claims are payable subject to

sufficient medical evidence being provided as proof of disablement. Guidelines for

claims settlement by IRDA.

Guidelines for claims settlement by IRDA

Proposal for insurance:

I. Except in cases of a marine insurance cover, where current market practices

do not insist on a written proposal form, in all cases, a proposal for grant of a

cover, either for life business or for general business, must be evidenced by a

written document. It is the duty of an insurer to furnish to the insured frees

of charge, within 30 days of the acceptance of a proposal, a copy of the

proposal form. Forms and documents used in the grant of cover may,

depending upon the circumstances of each case, be made available

in languages recognized under the Constitution of India.

II. In filling the form of proposal, the prospect is to be guided by the provisions

of Section 45 of the Act. Any proposal from seeking information for grant of

life cover may prominently state there in the requirements of Section 45 of

the Act. Where a proposal form is not used, the insurer shall record the

III.

Information obtained orally or in writing, and confirms it within a period of

15 days thereof with the proposer and incorporates the information in its


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cover note or policy. The onus of proof shall rest with the insurer in respect

of any information not so recorded, where the insurer claims that the

proposer suppressed any material information or provided misleading or

false information on any matter material to the grant of a cover. Wherever

the benefit of nomination is available to the proposer, in

IV.

Terms of the Act or the conditions of policy, the insurer shall draw the

attention of the proposer to it and encourage the prospect to avail the facility.

V.

Proposals shall be processed by the insurer with speed and

efficiency and all decisions thereof shall be communicated by it in writing

within a reasonable period not exceeding 15 days from receipt of proposals

by the insurer.

Matters to be stated in life insurance policy:

A life insurance policy shall clearly state:

1. the name of the plan governing the policy, its terms and conditions;

2. whether it is participating in profits or not;

3. the basis of participation in profits such as cash bonus, deferred bonus,

simple or compound reversionary bonus;

4.

the benefits payable and the contingencies upon which these are payableand the other terms and conditions of the insurance contract;

5. the details of the riders attaching to the main policy;


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6.

the date of commencement of risk and the date of maturity or date(s) on

which the benefits are payable;

7. The premiums payable, periodicity of payment, grace period allowed for

payment of the premium, the date the last installment of premium, the

implication of discontinuing the payment of an installment(s) of

premium and also the provisions of a guaranteed surrender value.

8.

the age at entry and whether the same has been admitted;

9.

the policy requirements for (a) conversion of the policy into paid up

policy, (b) surrender (c) non-forfeiture and (d)revival of lapsed

policies;

10.contingencies excluded from the scope of the cover, both in respect of the

main policy and the riders;

11.the provisions for nomination, assignment, and loans in security of the

policy and a statement that the rate of interest payable on such loan amount

shall be as prescribed by the insurer at the time of taking the loan;

12.

any special clauses or conditions, such as, first pregnancy clause, suicide

clause etc.; and

13.

The address of the insurer to which all communications in respect of the

policy shall be sent.

14.

The documents that are normally required to be submitted by a claimant in

support of a claim under the policy.

While acting under regulation 6(1) in forwarding the policy to the insured,

the insurer shall inform by the letter forwarding the policy that he has a


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period of 15 days from the date of receipt of the policy document to review

the terms and conditions of the policy and where the insured disagrees

to any of those terms or conditions, he has the option to return the

policy stating the reasons for his objection, when he shall be entitled to a

refund of the premium paid, subject only to a deduction of a proportionate

risk premium for the period on cover and the expenses incurred by the

insurer on medical examination of the proposer and stamp duty charges.

In respect of a unit linked policy, in addition to the deductions under sub-

regulation (2) of this regulation, the insurer shall also be entitled to

repurchase the unit at the price of the units on the date of cancellation.

In respect of a cover, where premium charged is dependent on age, the

insurer shall ensure that the age is admitted as far as possible before issuance

of the policy document. In case where age has not been admitted by the time

the policy is issued, the insurer shall make efforts to obtain proof of age and

admit the same as soon as possible.

Claims procedure in respect of a life insurance policy:

1) A life insurance policy shall state the primary documents which are normally

required to be submitted by a claimant in support of a claim. A life insurance

company, upon receiving a claim, shall process the

2) Claim without delay. Any queries or requirement of additional documents,

to the extent possible,shall be raised all at once and not in a piece-meal manner,

within a period of 15 days of the receipt of the claim. A claim under a life policy

shall be paid or be disputed giving all


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3) The relevant reasons, within 30 days from the date of receipt of all relevant

papers and clarifications required. However, where the circumstances of a claim

warrant an investigation in the opinion of the insurance company, it shall

initiate and complete such investigation at the earliest. Where in the opinion of

the insurance company the circumstances of a claim warrant an investigation, it

shall initiate and complete such investigation at the earliest, in any case not later

than 6 months from the time of lodging the claim.

4) Subject to the provisions of section 47 of the Act, where a claim is ready for

payment but the payment cannot be made due to any reasons of a proper

identification of the payee, the life insurer shall hold the amount for the benefit of

the payee and such an amount shall earn interest at the rate applicable to a savings

bank account

With a scheduled bank (effective from 30 days following the submission of all

papers and information).

5) Where there is a delay on the part of the insurer in processing acclaim for a

reason other than the one covered by sub-regulation (4), the life insurance

company shall pay interest on the claim amount at a rate which is 2% above

the bank rate prevalent at the beginning of the financial year in which the

claim is reviewed bit.

Procedure for settlement of claims:

1.Settlement of maturity claims:

Under LIC, claims can arise on maturity of policy of the

policyholder. The processing of claims by maturity is normally

undertaken by Divisional Office of LIC about two months before the date of


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maturity. The LIC sends intimation before the maturity date. If the. Notice of

maturity is not received and the date of maturity is known to the policyholder, then

the policyholder can take the necessary steps to get the due Maturity amount. The

Corporation sends Maturity Intimation along with the discharge forms to the

policyholder informing him about the requirements for the settlement of claim.

1.

In case the maturity intimation is not received by the policyholder till around

2 months before the date on which the policy matures, he should contact the

concerned Divisional Office and obtain copy of the maturity intimation.

2. Policy Document (if not in the custody of LIC as security for loan): On

receipt of the maturity intimation, the policyholder should send the

original policy document along with the last receipt of insurance

premium paid. The policy document needs tube submitted in original unless

it is in custody of LIC as security for loan.

3. Age proof document (if age has not been 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.

4. L.I.C. accepts following documents as valid age proofs:

Horoscope of the assured

Certificate relating to the baptism ceremony among Christians

Birth certificate from the Municipal Corporation

High School Certificate


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Service book.

5.

Discharge Form No. 3825 duly stamped & signed, attested by witness:

The form of Discharge (Form 3825) should then be properly filled, signed andsent to the Office of LIC from which it was issued. The signature must be on a

revenue stamp and must be attested by a witness.

6. Assignment / Reassignment Deed, if any: In case the policy or any

Deed of Assignment or Re-assignment is lost by the policyholder,

he has to submit an indemnity bond along with a reliable surety of

sound financial Standing acceptable to LIC. The indemnity bond has to be in

a particular format (Form 3815). In such a case the claim is settled in the

absence of the policy document.

7. Existence certificates in case of childrens Deferred Assurance &Pure

Endowment Policies.

8. In due course, LIC sends a cheque to the policyholder for the money due to

him as per the terms of the policy.

LIC upon the receipt of the claim form will act in the following manner:

LIC will send an acknowledgement to the effect that the claim form has

been received and the aforesaid document will also state that the insurer

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

the claimant shortly.

Then the insurer will ask for necessary documents that are required for

settlement of claims. The claimant has to provide all the necessary

documents that are being asked by the insurer.


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After verification, the insurer arrives at the final amount that has tube

paid to the claimant and then prepares a cherub or such mode of payment

as has been agreed upon in the policy or between the claimant and the

insured.

2.Settlement of Death claims:

The death claim amount is payable in case of policies where premiums are paid

up-to-date or where the death occurs within the days of grace. The following is the

process of settlement of claims in case of death claims:

1) Intimation of death:

The first requirement of the Corporation in the case of death claim is that an

"intimation of death" should be sent to the branch office of the LIC from where

the policy was issued. The intimation needs to be sent by the person who is entitled

to get the proceeds of the policy.

It may be:

I. the nominee or

ii. The assignee of the policy or

iii. The deceasedpolicyholders nearest relative.

The letter of intimation of death should contain the following

information:

I. name of the life assured

ii. A statement that the life assured is dead;


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iii. The date of death;

iv. The cause of death;

V. the place of death; and

vi. Policy number / s

vii. Claimantsrelationship with the assured or his status (nominee, assignee, etc.).

Soon after the receipt of the intimation of the death, the branch office sends the

necessary claim forms along with instructions regarding the procedure to be

followed by the claimant.

2) Submission of Proof of Death:

The proof of death required to be submitted is a certificate by Municipal

Death Registry or by a Public Record Office which maintains the records of births

and deaths in the locality. Besides this some other Statements or certificates are

also required to be given in the prescribed Claim forms:

Statement from the doctor who attended the deceased

policyholders last illness.

Certificate of treatment in the hospital where the policyholder died or was

treated by the hospital authorities.

Certificate of burial or cremation to be given by an independent person who

attended the funeral and has seen the dead body.

Certificate from the employer if the policyholder was in

employment at the time of death.


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3) Submission of Proof of Age:

The claimant should submit age proof of the policyholder to LIC in case it has not

already been submitted.

L.I.C. accepts following documents as valid age proofs:

(I) Horoscope of the assured

(ii) Certificate relating to the baptism ceremony among Christians

(iii) Birth certificate from the Municipal Corporation

(iv) High School Certificate

(v) Service book.

4) Certificate of Ownership:

When the policy is validly assigned, or a nominee has been designated in the

policy, no further proof of title is necessary. In any other case, the certificate of

title is necessary. In such a case the corporation would require legal evidence of

title such as Succession Certificate or Letters of 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:

The nominee, in case nomination was made under the policy;

The assignee, in case the policy was validity and unconditionally assigned;


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The legal representative or successor.

In due course, LIC sends the cheque for the amount due to the person entitled to

receive the same.

6) Early death claims:

If death occurs in less than three years from the date of the policy, following

requirements must be complied with:

I. Policy Document

Ii. Discharge Form 3801

iii. Assignment / Re-assignment Deed, if any

Iv. Age Proof Document (if age has not been admitted earlier)

v. Certificate of treatment issued by the hospital authorities where the deceased

policyholder was treated last, on Claim Form B1 (FNo. 3816)

vi. Certificate by the employer if the deceased was an employee, on the Claim

Form E (F No. 3787 revised)

vii. Certificate of Death

viii. Legal Evidence of Title (if policy is not assigned / nominated)

ix. Claim Form A (F No. 3783)

x. Statement from the Doctor who attended last the deceased

policyholder, on Claim Form B (Form No. 3784 revised)

xi. Certificate of Identity and burial by a person who attended the funeral on Claim

Form C (F No. 3785 revised)


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7) Non early claims:

If death occurs exactly or after 3 years from the date of the policy the following

requirements must be complied with:

I. Policy Document

Ii. Discharge Form 3801

Iii. Legal Evidence of Title

Iv. Death Certificate

v. Claim Form No. 3783A

vi. Assignment / Re-assignment Deed, if any (if policy not assigned /nominated)

vii. Age Proof Document (if age has not been admitted earlier)

8) Ex-gratia Settlement of Death Claims

Ex-gratia Settlement of Death Claims are not a right claim but on grounds of

humanity presently LIC is giving such claim amount for the policies which are not

in force but

If Death occurred after the expiry of grace period of premium due date then

Full Sum Assured along with the bonus will be payable as Ex-gratia

settlement

If Death occurred after three months but less than six months after the expiry

of first unpaid premium date half of the Sum Assured without bonus will be

paid as Ex-gratia.


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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.

Important terms in claims:

Maturity claims

Beneficiaries in claims:

The claimant in life insurance policies at the time of payment of maturity claimsof life insurance policies can be the policyholder or the assignee to which the

holder of the policy has transferred the policy. The persons entitled to claim under

these policies can be:

The assured himself.

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

party interested.

The creditor who has been properly assigned and nominated to receive the

payment under the policy.

Amount payable:

The amount payable upon the maturity of the policy, i.e., non-happening of the

event is the sum assured plus profits and bonus that accrues with the policy. The

profits are paid on pro-rata basis, i.e., in the proportion of the premium paid and

declared are bonuses. The payment of profits is a condition inserted as a clause in


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the policy itself and it becomes an Obligation on the insurer to pay the amount of

such profit as may be accrued to the insured.

Dispute in payment of maturity claims:

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

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

the good title of the claimant on the policy. In case of the insurer shrugging off his

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

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

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

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

payment made accordingly may not drag the parties into litigations.

Death claims:

Beneficiaries:

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

happening of the events which is death of the assured, are as follows:

The legal heirs of the policyholder.

The nominees, assignees and transferees

The wife and children of the assured under the Married Womens propertyAct

The creditor in whose name the policy has been endorsed


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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 companymay pay a percentage of the premium paid according to the rules of the

company.

Factors affecting the claims settlement

The factors that affect the claims settlement are as follows:

The policy should be in force on the date of the event.

The risk and cause of event should be covered by the policy.

The cause of loss or the event should be directly related to the loss. A remote

cause has no place in the settlement.

The loss should not have been caused with an intention to gain from the

situation.

The preconditions or warranties have to be compiled with. When conditions

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


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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 assured should suffer loss, actual or constructive, to get

compensation. The assured should riot make benefits or gains out of the

insurance contract as the insurance contract is of indemnity in nature. It only

makes good the loss suffered by the assured and is not a source of gains.

Sufficient documentary evidence of loss should be presented along with the

application form.

Multiple claims and reciprocal claims will be settled as per the 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.

The insured may opt for the following alternatives while settling the claims:

Pay the claims as reported by the surveyor or the claims made by the insurer

whichever is less.

Take help of the agent or some other persons and compromise or to come to

an agreement with the assured in case of a disputed claim.


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If the claim is rejected there may be litigation on the insurer. The litigation

will cost the insurer more, as the insurer has to pay the interest for the

amount due if he loses the litigation.

Pay ex-gratia, if the claim is totally baseless and non-acceptable, on

humanitarian grounds and to avoid complications in future.

Arrange to replace the asset either by repairing the same or by purchasing a

similar asset from the market.

Repair the asset to provide the similar type of services as provided before the

happening of event.


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CHAPTER 4

Elements in claim and Delay in Claims Settlement

ELEMENTS OF CLAIMS MANAGEMENT

Claims management means and includes all the managerial decisions and

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

term of insurance contract. It includes carrying out the entire claim process with a

particular emphasis on monitoring and lowering the claims costs.

The important elements of claims management are:-

A. Claims Philosophy

B. Claims Processing

C. Claims Settlement.

A) The claims philosophy:-

It is a method or a document or a defined procedure or a specified approach to

settle the claims. It contains the claims management principles and also claims

handling methods or procedures. The claims philosophy includes the preparation ofguide-lines regarding the receipt of claims from the insurers or claimants, analysis

of the claims, consideration of the possible decision on the particular issues and

disputes, evaluating the impact of the claims cost and expenses, relation of claims

to the consumer satisfaction, monitoring the claims payment and improving the


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

improving the quality of services and avoiding unnecessary disputes of claims

In India, the concept of claims philosophy has not grown to the extent required.

The claims philosophy has external and internal advantages. It will impress the

consumers of insurance business and help business to develop. Internally a detailed

systematic claims process is created and delay in settlement of the claims can be

avoided. The claims philosophy has a relation with the terms of service promotion,

prices and people concerning insurance. It influences the nature of claims that are

received by the insurance company, time period taken by the company to settle the

claims or process them and the extent to which the claims are cost and service

effective.

B) The claims process:-

It includes the basic claims procedure and handling of claims. The handling of

claims includes the monitoring of situations or events, which cause the loss to the

insured subject matter and give a cause to the insured to make a claim. The claims

process contains two fold procedures, or the process to be followed by the insurer

and insured. From the point of view of the insured, it includes the suffering of loss

or the damage, understanding and identifying the cause of action, information or

giving the notice of claim or loss to the insurer, providing sufficient proof of the

loss to the insurer or his agent or the loss assessor and surveyors. The insurer, on

receipt of the claim from the insured, has taken certain immediate precautions and

also proceeds on methods such as verifying the claim, reviewing the claim

application, respond to the claimant, and carry out claim investigation, claims

negotiation, claim settlement and claims payment.


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c) Claims settlement

Claims settlement is the mission of the insurance company. Every insurer wants

that the claims be settled and honored in accordance with the terms and conditions

of the insurance policy document. The insurer never wants to get in to a dispute by

rejecting the claims if they are filed by the insured along with sufficient proof of

the loss or the damage. The quality of services in the claims settlement will reflect

on the business of the insurer. The claims settlement is also claims handling and

has two phases.

The first phase is in the hands of the insured and the second phase is in the hands

of the insurer. The first phase of the claims settlement or claims process starts from

the date of happening of event or from the date of maturity in case of life insurance

policies. On the day of happening of risk or the event, if the insured subject matter

suffers damages and the insured has lost the economic use of the asset and is under

economic loss of income generation, the insured initiates the process of the claims

settlement.

The second phase of the insurance settlement is in the hands of the insurer. As

soon as the application or claim form is received by the insurer from the claimant,

he should acknowledge its receipt and quickly respond to the claim and arrange the

payment if there is no hitch or if the claim is in accordance with the terms of the

contracts and the insured has already submitted the required data.

Immediate settlement of claim and a satisfied consumer are the tools of insurance

business and marketing. The other option available to the insurer apart from the

payment of claim is rejection of the claim, which results in claims disputes. On

appeal, the insurer may reconsider the appeal and the claim may be settled by way

of a compromise or negotiation. If the claimant refuses to compromise or

negotiate, the option of filing a suit is available to the insured.


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Delay in Claim Settlement:

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

have to be submitted within a limited period mentioned in the policy document orotherwise stated in the Act. In some cases, the death of a person or the

accident of vehicle has to be intimated immediately either orally or in

person, either by the policyholder or the claimant or by the representative of the

claimant.

The time element is very important in the claims payment for the following

reasons:

The delay in the claims settlement will have an adverse impact on the

goodwill and marketing of the insurance.

The cost of claims will increase with the extension of time.

The insurer may be asked to pay the interest on the unpaid insurance amount

because of the delay. The court may direct the insurer to pay the costs of thecase to the assured, which results in mounting up of costs.

The delay in payment may lead to litigation which is expensive.

Unproductive use of manpower to defend, expenses incurred and waste of

time on litigations will be an extra burden on the insurer.

Litigations will affect on the productive areas of the business particularly in

the marketing of the insurance business.

The delay also leads to the increasing number of cases with consumer

protection councils.


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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.

The delay in claims settlement may be due to the following reasons:

Late submission of claim form: The claim forms may be submitted late

because of the ignorance or lack of knowledge of the existence of the

insurance policies against the lives of the persons who face the event or no

information is given to the beneficiaries or no nominations are made to the

policy.

Innocence and illiteracy of the assured: The assured or the claimant may fail

to file the papers due to lack of knowledge, to file the insurance claims

within a certain period or of the claims procedure.

Not submitting the claims forms in full: If the claim forms are not properly

filled, they will fail to provide the required information to settle the claims

and as a result the claim settlement will be delayed for want of information.

If sufficient proof or 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 insurer may not get the cooperation of the insured or the claimant to

finalize the claim or arrive at some compromise.

Destroying the evidences, with or without intention, that could have

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


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Not providing information about the changes in the constitution of the

organization or the changed address of the insured or the claimant or

any other information required to make a claim settlement.

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

of work.

Lack of motivation, lack of knowledge of importance of the claims

settlement, lack of awareness among the staff of the organizations or

defective supervision or organizational structure.

The delay in submission of claims or settlements can be avoided by making the

assured aware of the facts and importance of the insurance and procedure of

claims. The insurers can take the help of the agent or local staff to arrive at a

compromise with the claimants when the cases are of complex nature. The

organization should be so designed to avoid holding of papers at one or two places.

The staff should be trained and the importance of the claims management should

be driven into their minds. Use of latest technology to assess the losses and

recruitment of able staff will speed up claims settlement.


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CHAPTER 5

Role of Surveyors and Agent in Claim settlement

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 themtheir job,

their duties & responsibilities, their role vis--vis insurers and insureds, and

the insureds rights and duties vis--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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Duties and responsibilities of surveyors:

A surveyor and loss assessor shall, for a major part of the working time,

investigate, manage, quantify, validate and deal with losses (whether insured or

not) arising from any contingency, and report thereon, and carry out the work with

competence, objectivity and professional integrity by strictly adhering to the code

of conduct expected of such surveyor and loss assessor.

The following are their duties:

a)

declaring whether he has any interest in the subject-matter in question or

whether it pertains to any of his relatives, business partners or through

material shareholding.

b) Maintaining confidentiality and neutrality without jeopardizing the liability

of the insurer and claim of the insured;

c) examining, inquiring, investigating, verifying and checking upon the causes

and the circumstances of the loss in question including extent of loss, nature

of ownership and insurable interest;

d)

Conducting spot and final surveys, as and when necessary and comment

upon franchise, excess/under insurance and any other related matter;

e) surveying and assessing the loss on behalf of insurer or insured;

f)

Assessing liability under the contract of insurance;

g)

Pointing out discrepancy, if any, in the policy wordings;

h)

Satisfying queries of the insured/insurer and of persons connected thereto in

respect of the claim/loss;


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i)

Giving reasons for repudiation of claim, in case the claim is not covered by

policy terms and conditions;

j) taking expert opinion, wherever required;

k) A surveyor or loss assessor shall submit his report to the insurer as

expeditiously as possible, as but not later than 30 days of his appointment.

Provided that in exceptional cases, the afore- mentioned period can be

extended with the consent of the insured and the insurer.

Surveyors and Loss assessors Report:

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

report contains the investigations and results of the investigations,

recommendation and assessments of the surveyor and assessor. The surveyors

will state the causes of the loss whether remote or direct, the extent of actual total

loss, insurance policy amount, value of salvage and assessment of payment of

claims. The report of the loss assessors will be a solid ground to settle the claims.

If the insurer is of the opinion that the loss assessor or the surveyor has acted under

some personal interests then the insurer may decide to re-investigate the matter and

on receiving the report can decide the claims payment.

Role of agents in claims settlement:

An agent is a primary source for procurement of insurance business and as

such his role is the corner stone for building a solid edifice of any life insurance

organization. To effect a good quality of life insurance sale, an agent must be


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equipped with technical aspects of insurance knowledge, he must possess

analytical ability to analyze human needs, he must be abreast with up to date

knowledge of merits or demerits of other instruments of investment available in the

financial market, he must be endowed with a burning desire of social service and

over and above all this, he must possess and develop an undeterred determination

to succeed as a Life Insurance Salesman. In short he must be an agent

with professional approach in life insurance salesmanship. Such an agency force is

expected to be helpful not only in proper field underwriting but also after sales.

Servicing. Concomitant and essential elements for higher retention of business

The insurance company, being a corporate structure, does not deal directly

with the customers to promote the insurance business. It avails the help of

middlemen to undertake the promotion such on its behalf and the agents are

middlemen or intermediaries. Section 40 of Insurance Act 1938 authorizes the

payment of the remuneration to the agents for the services. Section 42 of the Act

enumerates the essential qualifications for their appointment and issuing of

licenses. The appointment of agents to procure policies of insurance is ageneral practice among insurance companies all over the world. The agents are

allowed to market the insurance business but not allowed to issue the policies. The

agent has no right to conclude the insurance contract and the final approval or

rejection of contract proposal is vested with the insurer, the principal. But, in

promoting the insurance business, the agent binds the principal to all activities

such as receipt of premium, enquiries and publishing of information of the

insurance contracts and products.

The agent is bound by duty and responsibility to convey the message to the

insurer. But, giving the information to the agent does not bind the insurer as the

agent is appointed only to promote the insurance Business. In times of disputes, the


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agent is under an obligation to settle the issue of claims by way of negotiations and

mediations to retain the customer.

Role of agents in an Insurance company:

a) Full information must be provided to the proponent at the point of sale to

enable him to decide on the best cover or plan to minimize instances of

cooling off by the proponents.

b)

An agent should be well versed in all the plans, the selling points and also be

equipped to assess the needs of the clients.

c)

Adherence to the prescribed Code of Conduct for agents is of crucial

importance. Agents must, therefore, familiarize themselves with provisions

of the Code of Conduct.

d) Agents must provide the office with the accurate information about the

prospect for a fair assessment of the risk involved. The agents confidential

report must, therefore, be completed very carefully.

e)

Agents must also possess adequate knowledge of policy servicing and claim

settlement procedures so that the policyholders can be guided correctly.

f)

Submission of proposal forms and proposal deposit to the branch office

immediately to avoid delays and to enable the office to take timely

decisions.

g) A leaflet or brochure containing relevant features of the plan that is being

sold should be available with the agents.


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If the agents are well conversant with the claim settlement procedure and

assist the claimants in completing the necessary requirements, it would not only

quicken the process of claim settlement and enhance their professional status but

also help the organization to improve upon their outstanding claim ratio. This,

while further boosting the image of the Organization may provide them an

overflowing fountain for further business in those families. The performance of

agents will now depend on not how many hours he works but the quality of

service, his attitude to customers and the image that he will create for the entire life

insurance business. Thus the agent under the changing economic scenario can

achieve their objectives by practicing psycho-marketing strategies. Their objectives

are survival and growth. Maximization of business is an end to achieve these

objectives.


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CHAPTER 6

Data Analysis on LIC

The outcomes of survey taken of 20 policy holder

The researcher asks eight questions to each policy holder through questioner

method. The following are outcome of question to policy holder

1) The 85% of the policyholders are satisfied with services of LIC while 15% of

the policyholders were not satisfied with its services while Claim Settlement

2) The 60% of the policyholders did not face any problem while claim settlement

&40% of the policyholders faced problems in claim settlement.

3) The 90% of the policyholders claim was settled within the 30 days of receipt of

the relevant documents as per

IRDAs guideline while 10% policyholders claim was not settled within 30 days.

4) The 80% of the policyholders felt that LIC maintained transparency & secrecy

while claim settlement while 20% policyholders felt that it had not maintained

proper transparency & secrecy.5) The 40% of the policyholder faced documentation problem at the time of

maturity & death claim settlement while 60% of the policyholder did not face

documentation problem at the time of claim settlement.

6) The 90% felt that there was not any unnecessary delay mad at the time of claim

settlement process 10% felt that there was unnecessary delay mad at the time of

claim settlement process.

7) The 75% policyholders felt that investigation mechanism of LIC was efficient at

the time of claim settlement process 25% policyholders felt that investigation

mechanism of LIC was not so efficient at the time of claim settlement process.


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Findings

The Policyholders are satisfied with the services of LIC of Claim Settlement.

Some of the policyholders faceproblems while Claim Settlement.

The Claim is settled within 30 days on the receipt of document as per IRDA

guideline.

The LIC has maintained the adequate transparency & secrecy while Claim

Settlement.

There is no unnecessary delay made at the time of Claim Settlement.

Death Claim Settlement Ratio has shown constant improvement every year due to

efficient investigation mechanism.


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Data Analysis & interpretation

The claim settlement scenario in insurance industry

Life Insurance Corporation of India (LIC) has continued its good performance

against private players when it comes to claim settlement. According to the IRDA

annual report FY 2010-2011.

Claims Report for Year 2009-10 & 2010-11

Name of

Company

2009-10 2010-11

Claims

Rejected

Claims

Settled

Claims

Pending

Claims

Rejected

Claims

Settled

Claims

Pending

LIC 1.21 96.53 1.41 1.09 97.50 1.47

ICICI Prudential 3.27 90.17 6.56 2.80 94.40 2.60

HDFC Life 4.67 91.14 4.20 3.97 96.03 0.61

Aviva Life 9.75 87.11 3.14 4.10 87.11 3.14

Birla Sun Life 10.62 89.09 5.82 4.99 94.66 0.35

India First Life 7.69 53.85 38.46 9.40 90.558 0.03

Max New York

Life

12.31 65.71 7.14 14.85 78.01 7.14

SBI Life 14.75 83.27 1.96 16.74 82.24 1.03

IDBI Federal Life 23.81 49.52 26.67 21.00 65.00 14.00


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The above table shows details about claim rejected, claim settled & claims pending

of all insurance companies for year 2009-10 & 2010-11. The LIC is best insurance

company among all companies regarding claim settlement ratio.


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CHAPTER 7

Frauds in claims settlement

Insurance fraud is any deliberate deception/dishonesty committed against or

by an insurance company, insurance agent, or consumer for unjustified financial

gain. It occurs and may be committed at different points in the transaction by

different parties such as policy owners, third-party claimants, intermediaries and

professionals who provide services to claimants. The nature of these frauds may

vary from an inflated/exaggerated value of a legitimate claim to a completely

fabricated or bogus claim where losses never really occurred. Promises made with

no intention to perform them can be treated as a fraud.

The essential components of an insurance fraud are:-

Intent to deceive

Desire to induce insurance company to pay more than it otherwise would.

The fraudulent claims may be of two categories:


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The cause or the claim itself is fraudulent

The claim may be genuine but the method of calculation or the evidences, or

the information submitted may be fraudulent in nature.

As such any fraud made by the insured or the insurer in concluding the insurance

contract or the claims settlement, makes the entire contract violable at the

option of the person on whom the fraud is played. Creating forged

documents such as wills, legal heir certificates, assignments of the policies

and other papers to support their claim, deliberate destruction of the insured

subject with an intention to get the policy amount all constitute different types of

frauds. Sometimes the frauds may also result from gross negligence or

forbearance to use reasonable exertions and means at hand. The fraudulent

claim by the assured will deprive him the right to claim as the insurer has the right

to reject it.

Examples of insurance fraud:

A.

Creating a fraudulent claim

B.Overstating amount of loss

C.

Misrepresenting facts to receive payment

D.

Bogus agents/Sale of forged cover notes

How to protect yourself from a fraud:

a) Be wary of unregistered insurance agents. Before purchasing

insurance, contact your insurance company to ensure the agent is an

authorized agent.


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b)

Avoid paying premiums in cash. Opt to pay for premiums by cherub or

money order. Made payable to the insurance company instead of the agent.

c) Make sure you receive a written policy after payment of your first premium.

d) Immediately examine your insurance policy to ensure the coverage is what

you have requested for and ensure that the premium amount paid is

reflected in the cover note/policy. Request for a receipt as evidence of

payment of premium.

e)

Do not sign a blank insurance application, or insurance claim form.

f)

be suspicious if the price of insurance seems suspiciously low from other

insurance companies.

g)

If you meet with an accident, be careful of strangers who offer you quick

cash or urge you to deal with specific workshops, medical clinic or law firm.

They could be part of a fraud syndicate.

h)

Insist on detailed bills for repairs and medical services rendered and checkfor accuracy.

i) Discreetly contact your insurance company or the police if you are being

defrauded or have been/are being persuaded to take part in a fraud. Provide

as many details as possible about the incident -name of the individual(s)

involved, amount, date(s), and type of fraud.


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CHAPTER 8

Case study & Limitation

1.Case Study

(1)

Life Insurance Corporation of India v/s Mrs. Sunanda Kanthale

According to complainant Sunanda Kanthale, her husband

Manoharrao Kanthale who worked as a stores superintendent with the Amravati

branch of Maharashtra State Corporation, purchased an insurance policy for

Rs 20,000 on November 28, 1992. The policy which was a non-medical one, was

scheduled to mature on November 24, 2004, she said. Unfortunately Manoharrao

passed away on October 22, 1993, 10 months and 25 days from the date of

purchasing the instrument.

Being the nominee in the policy, she asked for her claim for an amount of Rs

40,000 (under double benefit provision in accident cases) and made an application

to the Akola Branch Manager of LIC. The senior manager of LIC (Amravati

Division) however refused to settle the claim vide his letter dated August 4, 1994.

As the policy was a non-medical one, the reason given by the official for not

settling the claim was also a bogus one, she alleged. Sunanda then wrote to the

area manager of LIC, Mumbai, justifying her claim. The Mumbai office too (vide

letter dated April 20, 1995) refused to settle the claim, Kanthale added.

She then lodged a complaint with Akola District Consumers Grievances

redressal forum. In the complaint, she appealed to the forum to issue the Necessary

directives to the LIC for paying Rs 40,000 along with 18 per cent interest, a


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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,


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considering the troubles she had to face in the last four years for settlement of

claim; the company should pay her Rs 10,000 towards compensation.

(2)

Life Insurance Corporation of India v/s Lily Rani Roy

The petitioner has purchased a life insurance policy from the appellate and

premiums were paid regularly. The maturity of the said policy was in 1978.

Because of some personal reasons the claim was not filed. The petitioner had filed

the claim after 13 years of its maturity. The LIC of India rejected the payment on a

plea that claim is time barred claim and as such the claim will not be paid.

The petitioner had filed a complaint with Consumer Council with a request

to direct the LIC for the payment of the maturity claim as the policyholder had paid

the entire premium till the date of the maturity and has the right to receive the

claim amount. Assured held LIC guilty under Consumer Protection Act, 1986

Section (I) (g) for deficiency in service.

But, the LIC of India pleaded that the Corporation will be

maintaining the records for a period of five years only and the

Corporation has received the claim notice from the petitioner in 1990 which is far

beyond the time. The LIC also produced a photo copy of the Maturity claims

payment register showing the payment of the complainants money.

After examining all the facts, the State forum has declared that the

petitioners cannot claim the payment of policy as it is already time barred. On the

decision of the State Commission, the petitioners have filed a petition with the

National Commission.


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The National Commission, after verifying the terms of the policy, has opined

that though the payment of claim is time barred, the insurance company should

have given notice to that effect or should include a clause in the policy document

stating that the time barred maturity claims will not be paid. As the Corporation

has filed to bring this information to the notice of the policyholder or failed to

create the awareness among the policyholders, it has failed in its duties and as such

it is liable to pay the claim to the petitioners. Thus, the National Commission has

ordered the payment of time barred maturity claims.


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2.Limitations

Before concluding, it should be useful to point out some of the potential limitations

of the study. There was a lack of numeric data or statistics related to this research

question, nothing of what is needed is available. Even the data was collected from

various financial related web sites & books, but the data is not really enough useful

or enough relevant to be used in this research.

Qualification requirement used in the project may differ from investor to

investors.

The data taken during the project study may not represent the realistic

picture. Hence there may be margin of error.

Small sample size taken at convenience might have affected the result of the

study.

Existence of biases in the respondent mind.

Most of authorized people working in the security market are afraid to

disclose their strategies in investing in hybrid instrument.


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CHAPTER 9

CONCLUSION, BIBLIOGRAPHY& WEBLIOGRAPHY

1. CONCLUSION

The easy & timely settlement of valid claim is an important function of an

insurance company & Claim Settlement is the integral part of Claim Management.

It is yardstick to judge the insurance companys efficiency. There are different

types of claims mainly divided into Deat

Documents

CLAIM Managment in LIC