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Life Insurance Claims

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Title: 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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