Claims Management

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Claims Management

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Title: Claims Management

1
Claim Management

PRESENTED BY
Dr. tariq Abdulsalam Omer

2
By the end of this course you will know

The role of claims in insurance and their
importance.
The legal principles of insurance
The difference between health, life, and
non-life claims
The Claim submission
Keeping Control of claims
Acquiring Knowledge
Managing Fraudulent and Malingering Claims

3
Insurance is about being insured and being able
to claim
4
Steps involved in taking out insurance

Decide what risks you want covered. (ask a
broker)
Fill out proposal form.
Pay your premium.
File your policy in a safe place.

5
Steps involved in making a claim.

Contact guards ins. co.
Obtain estimates of lost/stolen items.
Fill out claim form.
Talk to assessor and agree on compensation.

6
Importance of claims

Payment of claims is primary service in insurance
to the public. Proper settlement of claims
requires a sound knowledge of the law, principles
and practices governing insurance contracts and
thorough knowledge of policy terms and conditions.

7
TheFundamental Legal Principles of Insurance
Contracts
8
Fundamental Legal Principles of Insurance
Contracts

1. Principle of insurable interest
2. Principle of indemnity
3. Principle of utmost good faith
4. Principle of subrogation
5. Principle of contribution
6. Principle of proximate cause

9
Principle of Insurable Interest

The insured must be in a position to financially
suffer if a loss occurs.
Why?
To prevent gambling
Insurance on a property and wait for a loss to
occur.
To reduce moral hazard
Issue a life insurance policy on a person and
cause his/her or just pray for his/her death for
insurance proceeds.
In order not to indemnify more than an insureds
financial interest
It supports the principle of indemnity.

10
Principle of Indemnity

The insurer agrees to pay no more than the actual
amount of the loss suffered by the insured.
Why?
The purpose of the insurance contract is to
restore the insured to the same economic position
as before the loss.
The insured should not profit from a loss.
It reduces the moral hazard by eliminates the
profit incentive.

11
Principle of Indemnity

To support the principal of indemnity an
insurance contact uses Actual Cash Value (ACV)
method
Replacement cost (RC) less depreciation
RC current cost of restoring the damaged
property with new materials of like kind and
quality.
Fair market value
The price of a wiling buyer would pay a willing
seller in a free market.
Broad evidence rule
The determination of ACV should include all
relevant factors an experts would be required to
determine the value of the property.

12
Principle of Indemnity

To support the principal of indemnity insurance
contact includes Other Insurance Provisions.
Escape clause
The policy (or insurance) would not apply if the
insured was covered by another policy.
Primary-Excess
It (or This insurance) is excess insurance over
any other valid and collectible insurance.
Pro-rata provision
Proration by face amounts
Proration by amounts otherwise payable
Contribution by equal shares

13
Contribution

If a risk is insured with two insurance companies
each will pay half of the compensation.
Eg A ring insured with two ins. co.s. for
AED5000
Each will settle
AED2500 only

14
Principle of Indemnity

Pro-rata by Face Amounts
It limits an insurers maximum obligation to the
proportion of the loss that the insurers policy
limit bears to the sum of all applicable policy
limits.
Assume that there are three polices covering the
same loss and the loss amount is 150,000.

Insurer A Insurer B Insurer C
Policy Limit 100,000 200,000 300,000
Share 1/6 2/6 3/6
Payment 25,000 50,000 75,000
15
Principle of Indemnity

Exceptions to the Principle of Indemnity
Valued policy (or agreed value)
Pays face value of insurance if a total loss
occurs
Life insurance, disability insurance, fine arts,
antiques
Ex.) Value of a fine art is agreed at 250,000.
Valued policy law
A law that requires payment of the face amount of
insurance to the insured if a total loss to real
property occurs from a covered peril, regardless
of the propertys ACV.
Replacement cost
No deduction for depreciation in determining the
amount paid for a loss.

16
Principle of Utmost Good Faith

A higher degree of honesty is imposed on an
insurance contract than is imposed on other
contracts
Honesty is mainly imposed on the insurance
applicants.
It is supported by three legal doctrines
Representation
Concealment
Warranty

17
Principle of Utmost Good Faith

Representation
Statements made by an applicant
Insurance is voidable at the insurers option.
Concealment
Intentional failure to disclose a material fact
Warranty
A statement of fact or a promise made by the
insured, which is part of the insurance contract
and must be true if the insurer is to be liable
under the contract.
In exchange for a reduced premium, a store owner
warrants that a burglar alarm will be always on.

18
Principle of Subrogation

Substitution of the insurer in place of the
insured for the purpose of claiming indemnity
from a third party wrongdoer for a loss paid by
the insurer.
Why?
To prevent collecting twice
To hold the negligent party responsible
To hold down insurance rates

19
Principle of Subrogation

The insurer is entitled only to the amount it has
paid under the policy.
What if the insurer collects more, from the
negligent party, than the amount the insurer paid
to its insured?
The insured cannot impair the insurers
subrogation rights.
Subrogation does not apply to life insurance and
to individual health insurance contracts.
The insurer cannot subrogate against its own
insured.

20
Proximate Cause

The efficient cause which brings about a loss
with no other intervening cause which breaks the
chain of events.
ExampleFiremen remove undamaged stock from a
burning building to avoid its involvement in the
fire. It is stacked in the open yard and
subsequently damaged by rain.
Question
Was the proximate cause of the damage the fire or
the rain ?

21
Proximate Cause

Answer
If the rain damage occurred before the Insured
had an opportunity to protect it then the
proximate cause of the damage would be the fire
and fire is covered under a fire policy. However,
if the stock was left unprotected for an
unreasonably long period, the rain would be a new
and independent cause of damage and damage caused
by rain may not be covered under a policy.

22
Health Insurance Claims
23
Health Insurance
Employer
Health insurance - provides money to pay for
health care
Government
Individual
If dollars are limited, health insurance is
extremely important to protect against high
medical bills
Mental health treatment
Hospital bills
Preventative care
Vision care
Prescription drugs
Doctors visits
Medical procedures
Dental care
24
Rejection of claims

The main reasons for claim not being passed in
full are
Insured has pre-existing disease and it was
already mentioned in policy document as an
exclusion.
The specific disease is not covered under the
policy
Disease is a pre-existing disease and it was not
revealed by the insured at the time of issue of
policy.
The main reasons for claim being passed in part
are
Some of the tests conducted/treatment were not
relevant to the disease for which patient was
admitted.
Some costs like consumables are not payable by
the insurance company

25
Life Insurance Claims
26
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27
MATURITY CLAIM

Payable as per the terms of contract- at the end
of the term
Insurers inform the policyholder well in advance
about the maturity date
Insurers send the form of discharge which is duly
signed, and returned with-
Original Policy document
proof of age- to prove the identity
Document of assignment- if executed on a separate
stamped paper
Gross amount includes basic sum assured, bonus
etc
Deductions include loan amount, unpaid premium
etc.
Circumstances like settling the claim on the
basis of indemnity bond require more caution (in
case original policy is not found)

28
Death claim

Intimation of death by a proper person and proof
of death
Premature/early claim insured dies within 3
years of taking out of policy
statement from the last medical attendant giving
details of last illness and treatment
Statement from the hospital
Statement from the employer
Other claim insured dies after 3 years of
taking out of policy
Policy number and Name of life assured
Date and Cause of death
Claimants relationship
Death certificate
Deeds of assignment

In case of unnatural death accident, suicide, or
unknown cause etc
Police inquest report
Panchanama
Post mortem report
Chemical examination report
Under the some countries Evidence Act for
example, a person is presumed to be dead if he is
disappeared for 7 years
Upon the death of the life insured the amount is
payable to the nominee given in the proposal form

30
Survival benefits claim

Some policies entitled for the survival benefit
before the expiry of the full term of the policy
Settlement is easier than maturity claim
Insurer sends advance intimation and the
discharge voucher which is returned with
necessary documents
Proof of identity
Original policy
Document of assignment

31
steps followed in the processing of Insurance
Claim involves -

The policy holder or the beneficiary calls up the
insurer claiming the insurance asking about all
the minute details of the process of claiming the
same along with the documents required
The insurance company asks for the details of the
loss and the relevant documents in support of the
Claim
A notice has to be issued by the policy holder
for claiming the same with utmost urgency
mentioning all the possible details (namely, name
of the policy holder, names of the persons
associated with the accident, witness
particulars, their addresses, etc).

The insurance company would make all the possible
queries and inspections by the company
representatives or consultants
They have the right to inspect all the relevant
properties related with the loss along with
police verifications and determination of the
policy holder's liability structure
The processing period is mentioned in the
contract document, which is the approximate time
required for verification of the genuineness of
the Insurance Claim
On agreement of claim amount between the insured
and the insurer, the claim is settled
Claim form

33
Disputes in Claims

Identifying the person to whom the payment is to
be made
Whether the payment is within the terms of policy
Whether the amount claimed is reasonable
Proof of Death
Identification of assignee, nominee or the legal
heir to whom the payment is to be made

34
Preliminary Procedure

As claims manager you are iexpected to follow
through the following procedure at the start
Whether the policy is in active state?
Whether the policyholder has performed his part?
The policy status with regard to payment of
premium, age admission, outstanding loan
interest, if any, legal restrictions such as
under MWP Act, Foreign Exchange Regulations,
report of investigation, police report, if any.
Whether insured event has taken place?
What are the obligations assumed under the
contract, which are required to be performed like
payment of bonus, survival benefits, payment of
SA in instalments, waiver of future premiums,
etc?

Who are persons entitled to demand performance?
Submission of Claim Form,
Submission of Primary level documents.

36
MATURITY CLAIMS

Under endowment policies, the SA is to be paid
when the term of the policy is over. The amount
payable on maturity is the SA, less any debts
like loan and interest or outstanding premiums.
If it is a with-profit policy, the bonuses, as
applicable, would be added.
Advance intimation is sent to the insured
informing him about the maturity and requesting
for submission of discharge voucher and policy
document.
As claims manager you have to satisfy that
there are no assignments
the identity of the policyholder is proved
the age stands admitted
all the premiums are paid
the original policy is submitted
the discharge voucher duly completed is received

Once the documents are received, you send a
post-dated cheque few days in advance. In case,
the original policy is reported to be lost, the
matter is examined in detail to ascertain the
genuineness of claim and is settled on the basis
of indemnity and public notification, if found
genuine.

Under MWP Act polices (Married Women's Property
Act), the proceeds of the policy will be paid to
the trustees. If there are no trustees, the
official trustee will step in. But if the
beneficiaries are major and competent to
contract, payment can be made directly to them
without intervention of trustees. The
policyholder is not expected to sign the
discharge.

In case of absolute assignment, the payment will
be made to the assignee. If the assignment is
conditional, reverting to the life assured on
maturity, payment can be made to the assured
himself. However, it will be prudent to check
that the assignee has no outstanding claims.
Some maturity claims may be payable not on the
date of maturity, but later in instalments. In
such cases, while the decision to settle may be
taken on the date of maturity, the settlement
process will continue for few years.

40
SURVIVAL BENEFIT CLAIMS
Money During Policy Period
41

A survival benefit is paid during the currency of
the policy, before the date of maturity. The
procedure will be similar to payment of maturity
claims.
The insured sends advance intimation and
discharge voucher and the life assured is
required to return the same duly stamped, signed,
witnessed and send the original policy document
also for necessary endorsement. Thereafter post
dated cheques will be sent in advance.

If the policy is reported to be lost,
Insurers are unlikely to settle on the basis of
an indemnity, as is done in case of a maturity
claim. Because after payment of survival benefit,
the policy remains in force. Hence, the insured
is advised to obtain a duplicate policy.
If the insured dies after the date when the
survival benefit was due, but before it is
settled,
The survival benefit will not be paid to the
nominee. Only the death claim will be paid to the
nominee.

The procedures in settling a death claim are more
complex than in the case of maturity claims. This
is mainly because, the facts relating to death
have to be studied and the identities of
claimants have to be established.
The death claim action is initiated with the
receipt of intimation from nominee/assignee/relati
ve of life assured/the employer
/agent/development officer.
The insurer need not wait till the receipt of
intimation. They may even take note of the
information received from newspaper reports/media
provided identity of the deceased is established.

The following will be necessary before
settlement of a death claim
Policy documents
Deeds of assignments/ reassignments
Proof of age, if not already admitted
Certificate of death
Legal evidence of title, if the policy is not
assigned or nominated
Form of discharge executed and witnessed

If the death occurres within three years from
the commencement of policy, or from revival,
following additional requirements may be asked to
verify the possibility of suppression of material
facts at time of proposal
Statement from the last medical attendant giving
details of last illness and treatment
Statement from the hospital, if the deceased was
admitted to a hospital
Statement from the person, who had attended last
rites and had seen the dead body
Statement from the employer, if the deceased was
employed, showing the details of leave

If the life assured had an unnatural death, such
as accident, suicide or unknown causes, police
inquest report, panchnama, chemical analyzers
report/ post mortem report, coroners report etc.
would also be asked and examined. Depending on
preliminary data, a special enquiry may be
ordered.
In case a claim is repudiated, it is quite likely
that the matter may go to court which tend to be
sympathetic to the claimant because they are the
weaker party. Hence the insurer has to prove
beyond any doubt that there has been suppression
of material facts duly supported by necessary
evidences.

In many cases, the insurer may not be able to
garner enough evidence to repudiate the claim,
despite strong suspicion and even after extensive
enquiries.
Ultimately such claims have to be paid. But still
the insurers go through the process of enquiries
in case of early death claims which enable them
to improve the underwriting standards and also
identify the agents and regions, which are prone
to more early claims.
In case there is no nomination or assignment, the
claimant would have to prove his title through
legal process under relevant law of succession.

Death claims occurring within 2 years from the
date of commencement of the policy, or from the
date of revival of the policy is called Very
Early Claim.
Death claims occurring and between 2 to 3 years
from the date of commencement of policy or from
the date of revival is classified as Early
claim.
In all cases of early claims and very early
claims, investigation will be done by the insurer
to make sure that the claim is genuine.

49
ACCIDENT AND DISABILITY INSURANCE
50

These benefits are conditional on conclusive
evidence, that all the eligibility conditions are
satisfied and that the exclusions do not apply.
The conditions are that
the accident must be caused by external, violent
means, not self inflicted
the death must be as a result of injuries caused
by that accident
the death must occur within 120 days or such
other period as may be specified

The exclusions are
Intentional self injury, attempted suicide,
insanity, immortality, intoxication
Accident while engaged in civil aviation or
aeronautics, other than as a passenger
Injuries resulting from riots, civil commotion
etc.

52
CLAIM CONCESSION

There are situations when, though the policy has
lapsed and nothing is payable, yet the insurer
pays the death claim.
The L.I.C. pays claim in full in the following
circumstances, after deducting the outstanding
premium with interest. In both the cases, the
policy could have been revived by just paying the
arrears of premium and no proof of good health
would have been necessary
After three years, if death claim arises within
six months from the date of lapse
After five years, if the death claim arises
within twelve months from the date of lapse

If premiums have been paid for a period of 3
years but less than 5 years and in case of death
of policyholder within 6 months from the date of
First unpaid premium (FUP), the full sum assured
is paid to the beneficiaries. This is called
claims concession.
If the premiums have been paid for 5 years and
above, the claim concession is extended for a
period 12 months. This is called Extended claims
concession.
In both the above cases, unpaid premium that has
fallen due/will be falling due in the policy year
of death will be recovered.

54
PRESUMPTION OF DEATH
55

Sometimes a person is reported missing without
any information about his whereabouts. some
countries Evidence Act provides for presumption
of death in such cases, if he has not been heard
for seven years. If the nominee or heirs claim
that the life insured is missing and must be
presumed to be dead, insurers insist on a decree
from a competent court.
It is necessary that the premium should be paid
till the court decrees presumption of death. In
special circumstances, the insurer may act on its
own provided there is strong circumstantial
evidence to show that the life assured could not
have survived a fatal accident or hazard.
Insurers as a matter of concession waive the
premiums during the seven year period.

56
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57
PRECAUTIONS

As per the some countries Lunacy Act, if a person
is mentally deranged, a court of law is required
to appoint a person to act as a guardian to
manage the properties of the lunatic. Wherever
required, the discharge will be signed by the
guardian only. If the person has recovered from
mental disorder, a medical certificate to that
effect, would be necessary.
Any order from a court or other judicial
authority with reference to the policy moneys has
to be respected.

58
Other Precautions.

If the life assured is reported to have died
before the maturity date, the claim has to be
treated as a death claim and processed
accordingly. But if the insured is reported to
have died after the date of maturity but before
the receipt is discharged, the claim is to be
treated as a maturity claim and paid to legal
heirs.
Payment of claim amount to non-residents are
governed by the FEMA and regulations made there
under.
If a policy is financed by HUF, the policy
belongs to HUF and policy moneys would be payable
to the Karta of HUF.
If the intimation of death, is received in three
years, after the date of policy issue, there is
reason to be suspicious. The matter can be
decided only after detailed investigations.

59
NON-LIFE INSURANCE CLAIMS
60

Claims can be categorized as Standard,
Non-Standard and Ex-gratia.
While standard claims clearly fall within the
scope of policy and settled to full extent,
The non-standard claims involve breach of some
policy condition or warranty and their settlement
would depend upon rules and regulations of the
concerned insurer.
Ex-gratia payments are the losses which fall
outside the scope of policy and hence not
payable.
However, in very special cases, to avoid hardship
to the insured, settlement of these losses is
considered as a matter of grace. In such cases
only certain percentage of the claim is paid and
that too without precedent.

61
PRELIMINARY PROCEDURE

It involves immediate intimation of loss to the
insurer so that necessary steps for inspection,
investigation and loss minimization are taken by
insurers.
In case of losses involving criminal act, police
should also be informed.
In case of transit claims, notice should also be
given to the carriers/ bailees.
After verification of policy validity and
coverage, the claim is registered with the help
of claim form.

62
MOTOR Claim-Preliminary Process

Giving the intimation
Be ready with Documents Registration certificate
(photocopy original), Driving License
(photocopy original), Insurance Policy/Cover
note, Claim form duly filled signed by the
insured if firm then duly stamped.
Appointment of surveyors
Assessment of the loss

63
FIRE Insurance Claim-Preliminary Process

Individuals/ corporate must inform insurer as
early as possible, in no case later than 24 hours
Provide relevant information to the
surveyor/claim representative appointed by the
insurer
The surveyor then analyzes the extent/ value of
loss or damage
Variety of documents are needed (True copy of the
policy along with schedule, Report of fire
brigade, Claim Form, Photographs, Past claims
experience Forensic Departments report, if
applicable, Original Repair/ Replacement Bills
with receipt)

64
Marine Insurance Claim-Preliminary Process

In Marine Insurance claims, all the documents of
the claim is to be submitted to the insurance
company
The documents should be submitted in original
Wherever original documents are not available
second copy may be accepted, but photocopies are
not acceptable
The documents are to be submitted preferably in
one lot and within reasonable time limit of
occurrence of the claim and under all
circumstances before claim becomes time barred
against carrier etc

Plenty of documents are required for claims
processing -
Claim Form duly filled in signed, Original
Policy/Certificate, Short Landing
Certificate/Landed But Missing Cargo/Damage
Certificate (as applicable), Suppliers Invoice,
Packing List, Quadruplicate copy of Bill of
Entry, Steamer Survey report in original, Copy of
Claim Notice served on Carrier/Port authorities
along with postal acknowledgement card

66
Notice of Loss

Timely and prompt notice
Immediate information Practically
If contract is silent about reporting time of
loss Act as prudent person
Dont presume that Insurer will get the
information on its own Loss of right to claim
Fire Marine Immediate notice is utmost
required
Motor Insurance Inform before displacement of
damaged vehicle
Liability Insurance Involvement of third party
as claimant

Notice should contain
Details of Insurance Policy
Date of incident
Full details of the accident/incident
Place of occurrence
Nature of loss
Expected causes of loss
Estimated financial loss
Proof of loss
After giving the notice of loss, claimant should
submit the claim form in the prescribed format,
with utmost good faith.

Notice will facilitate the insurer in following
areas
To undertake investigation To know the causes
circumstances of the loss( for present and future
claims)
For taking decision about stand in negotiation,
compromise or ex-gratia claims
To safeguard the remaining assets
For recovery of goods, under subrogation
Planning for amount of claim payable

To identify the suitable surveyors and loss
assessors having expertise in that area
Notice is a recorded proof, which can be used in
future disputes
Notice should be given to specified Branch of
insurer as mentioned in the policy document. In
absentia Notice may be given to registered
office of the insurer
Notice given to an authorized agent, if nothing
contrary has been stated in the policy, also
fulfills the requirement

70
Loss Minimization

Common Law Duty on Insured to maintain good
faith especially in situation of loss
To bring the legal position pointedly clear,
conditions are incorporated in the policy to
establish the duty on the insured
For ex- Motor Insurance In the event of an
accident or breakdown the motor car shall not be
left unattended without proper precautions
Marine Insurance Sue labour clause- To
prevent or minimize the losses On occurrence of
insured peril

71
Loss Minimization Methods

Protection of property after loss
Methods of salvage disposal
Methods of storage and segregation of damaged
goods

72
Procedural

On receipt of intimation of loss of damage
insurers checks that whether
The policy is force on the date of occurrence of
the loss or damage
The loss or damage is by a peril insured by the
policy
The subject matter affected by the loss is the
same, as insured in the policy
Notice of loss has been received without undue
delay
After the checkup a number has been alloted to
loss and entered in claims register.
A separate file is opened for claim with a copy
of the policy, or relevant extracts thereof.
Therefore a claim form is issued to the insured.

73
Claim Forms

Format varies with each class of Insurance
Generally requires information regarding
Circumstances of losses
Date of loss
Time of loss
Extent of loss
Other questions vary in accordance with different
classes of Insurance
For Ex-
Motor Claim Form Rough sketch of the accident
Burglary Claim Form Notification to the police
Asset Insurance Valuation of the property

Questions related to other policies are asked, in
relation to same subject matter of insurance
Involvement/ responsibility of any third party
Issue of claim form does not constitute an
admission of liability on the part of the
insurers Insurers put this remark on the claim
form
All letters sent to insured carry the remark
Without Prejudice To clarify, although the
insurers are involved in correspondence, But the
question of liability under the policy is left
open.

75
Average Clause