Life Insurance Claims

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Life Insurance Claims
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Introduction

• A claim is the payment made by the insurer to the
  insured or claimant on the occurrence of the
  event specified in the contract, in return for
  the premiums paid for the insured.
• A claim is the demand that the insurer should
  redeem the promise made in the contract. The
  insurer has then to perform his part of the
  contract i.e. settle the claim, after satisfying
  himself that all the conditions and requirements
  for settlement of claim have been complied.

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Preliminary Procedure

• Insurer is expected 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?

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

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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.
• The insurer has 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

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• Once the documents are received, the insurer
  sends 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, 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.

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• 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.

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SURVIVAL BENEFIT CLAIMS
Money During Policy Period
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• 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.

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• 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.

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DEATH CLAIM
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• 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.

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• 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

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• If the death has 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

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• 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.

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• 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.

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• 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.

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ACCIDENT AND DISABILITY INSURANCE
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• 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

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• 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.

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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

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• 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.

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PRESUMPTION OF DEATH
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• Sometimes a person is reported missing without
  any information about his whereabouts. Indian
  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.

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PRECAUTIONS

• As per the Indian 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.

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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.

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NON-LIFE INSURANCE CLAIMS
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• 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.
• The settlement of claims involves examination of
  the loss in relation to coverage under the policy
  and compliance with policy terms and conditions
  and warranties. Doctrine of proximate cause
  provides guidelines to decide whether the loss is
  caused by an insured peril or an excepted peril.

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• The burden or onus of proof that the loss is
  within the scope of policy is upon the insured.
  However if the loss is caused by an excluded
  peril the onus is on the insurer.
• Compliance with conditions precedent to liability
  has to be confirmed. The survey report will
  indicate whether or not the warranties have been
  complied with. Observance of utmost good faith by
  the insured is to be verified.
• After the verifications, the amount payable has
  to be worked out which would depend on the sum
  insured, extent of insurable interest, value of
  the salvage, application of conditions of
  average, contribution and subrogation.

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• 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.

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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.

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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

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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)

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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

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• 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

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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

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• 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.

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• 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

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• 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

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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

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Loss Minimization Methods

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

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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.

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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

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• 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.

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