Requirements for a valid claim • Definition of Insurance Contract : • Life Insurance is a contract providing for payment of a sum of money to the person assured or, failing him, to the person entitled to receive the same, on the happening of certain event dependent on the duration of human life in consideration of smaller payment (premium) • Definition of Insurance Claim : • A claim is the demand that the Insurer should redeem the promise made in the contract. • Insurer’s Role : • Satisfying himself that all conditions are fulfilled and requirements have been complied. • Settle the claim.
TYPES OF CLAIMS a) Maturity Claims : Payable on date of completion of the term of the policy. b) Survival Benefit Claims : Payable on survival of the Life Assured up to a particular date, during the currency of the policy. c) Death claims : Payable on death of the Life Assured. d) Accident & Disability Claims : - Accident claim is payable on death of life assured due to accident. -Disability claim is payable when total and permanent disability occurs as a result of an accident.
MATURITY CLAIMS • Payment on maturity date, i.e., on completion of contract (term of policy). • Amount payable = (Sum Assured+Bonus-outstanding premiums-outstanding loan and loan interest, if any) • Advance intimation is sent to the policyholder by them the Insurer (about 90 days in advance) • Post dated cheques are issued provided all necessary requirements are received from the Life Assured.
MATURITY CLAIMS (Contd..) • Insurer has to satisfy himself about following facts: - No assignment exists, - Identity of policyholder, - Age admission, - Premium position, - Receipt of original Policy and discharge voucher. • Precautions must be taken if original policy is reported to be lost (eg: ask for Indemnity Bond, Newspaper advertisement).
MATURITY CLAIMS (Contd..) Special Considerations : 1. If policy is issued under Married Womans Property Act then the claim is paid to the official trustees only. However, if there is no trustee then claim may be paid directly to the beneficiaries provided the beneficiaries are competent to contract. Policy monies under such policies cannot be attached by the creditors of the policyholder.
MATURITY CLAIMS (Contd..) 2. Assignment can be of two types: a) Absolute assignment - Claim paid to assignee b) Conditional assignment – Payment as per conditions given at the time of assignment. 3. Some claims are payable later than the maturity date or in instalments. Eg: Under LIC’s Educational Annuity/Marriage Endowment Plan, the sum assured is payable at the end of selected term either in lumpsum or in 10 half-yearly instalments
SURVIVAL BENEFIT CLAIMS • Paid during currency of the policy, normally after fixed periods of time. • Procedures for settlement of claim are similar to maturity claim settlement • If original policy is lost, a duplicate must be issued and endorsements of Survival Benefit settlement made thereon. • Survival benefit is not paid to the nominee. Only death claim will be paid to the nominee.
SURVIVAL BENEFIT CLAIMS (Contd…) Ex : Under LIC’s Money Back Plan (93-25) for a sum assured of Rs.1,00,000/- survival benefits will be payable as follows : • Rs.15,000/- on survival to the end of 5 years. • Rs.15,000/- on survival to the end of 10 years • Rs.15,000/- on survival to the end of 15 years • Rs.15,000/- on survival to the end of 20 years • Rs.40,000/- +Bonus on survival to the end of 25 years.
DEATH CLAIMS • More complex procedure of settlement as facts relating to death and identities of claimants to be established by the insurer. • Intimation of death may be sent to insurer by the nominee, assignee, relatives, employer or agent. Insurer himself can begin action by taking notice of obituary columns or newspaper reports provided identity of deceased is established. • Additional requirements from claimants (death certificate, certificate of burial or cremation, legal evidence of title, etc).
EARLY DEATH CLAIMS • Death claim within 3 years from date of commencement or revival of the policy. • Additional requirements called by the insurer to satisfy that there was no suppression of material facts: 1. Statement from last medical attendant 2. Statement from hospital, if admitted (These statements reveal whether Life Assured had any old illness which was not disclosed in the proposal).
EARLY DEATH CLAIMS (Contd..) 3. Statement from person who has attended the funeral and seen the dead body (to confirm genuineness of the circumstances of death of the policyholder). 4. Statement from Life Assured’s employer, showing leave details (Medical certificates collected if leave was availed on sick grounds). 5. Additional requirements in case of unnatural death such as accident, suicide, murder (Panchnama, Police First Information Report & final report, chemical analyser’s report, post mortem report, Court judgement, if any).
EARLY DEATH CLAIMS (Contd..) 6. If no valid nomination or assignment exists, claimant will have to prove his title. This requirement may be waived for small claim amounts and claim settled on basis of affidavits and indemnity bonds. 7. Revival decision is taken on the basis of evidence of good health. Therefore, if claim is within 3 years of revival, insurer should check for suppression of material facts in personal statement of Good Health submitted by the life assured.
EARLY DEATH CLAIMS (Contd..) If claim is repudiated, claimants may appeal to Consumer Forum, Office of Insurance Ombudsman or Court of Law. In such cases Insurer must prove beyond any doubt that : 1. Suppression is of material facts (the facts suppressed should affect underwriting decision) 2. Proposer had knowledge of the facts at the time of proposal 3. Suppression was deliberate on the part of the proposer (Section 45 of Insurance Act quoted in next slide).
SECTION 45 • Section 45 of the Insurance Act, 1938 provides that no policy can be called in question after a period of two years from the date of its issue on the ground that any statement in the proposal or a related document was false or inaccurate (making the policy indisputable). • This provision is not applicable if the Corporation can prove that misrepresentation or non-disclosure was on a material fact and was fraudulently made and that the policyholder knew at the time that the statement he made was false.
CLAIM INVESTIGATIONS • Are necessary in early claim cases to prevent fraudulent claims as such payments amount to undue advantage to the claimant at the cost of other policyholders. • Provide sustainable evidence to repudiate a claim. Suspicion, however strong, is not enough. • Provide data to tighten underwriting standards. • Highlight agents & regions prone to early claims.
ACCIDENT & DISABILITY CLAIMS • These are conditional benefits or riders allowed on payment of additional premium. In order to claim these benefits, all eligibility conditions should be satisfied and exclusions should not apply. Eligibility Conditions : • Accident caused by outward, violent and visible means. • Death/disability is result of injuries caused by accident. c) Occurrence of death/disability should be within 180 days of accident.
ACCIDENT & DISABILITY CLAIMS (Contd..) Exclusions : • Intentional self-injury, attempted suicide, insanity, immortality, intoxication. • Accident while on duty in civil aviation or aeronautics • Injuries from riots, civil commotion, etc. Accident Benefit: If death occurs due to an accident then normally additional sum assured is payable besides the death claim. If claim is payable at a later date, then future premiums may be waived.
DISABILITY BENEFIT Definition : Disability must be the result of an accident and must be total & permanent and such that there is neither then nor at any time thereafter any work, occupation or profession that the life assured can ever sufficiently do or follow to earn or obtain any wages, compensation or profit. Accidental injuries which independently of all other causes and within 180 days from the happening of such accident, result in irrevocable loss of the entire sight of both eyes or in the amputation of both hands at or above the wrists, or in the amputation of both feet at or above ankles, or in the amputation of one hand at or above the wrist and one foot at or above the ankle, shall be deemed to constitute such disability.
DISABILITY BENEFIT (Contd..) Eligibility Conditions : • Disability occurs due to accident within 180 days. • Policy is in full force on date of accident/disability. • Age of life assured is less than 70 years on date of accident. Benefits Payable : • Waiver of future premiums. • Additional amount equal to sum assured paid in monthly instalments spread over 10 years. • If claim arises before expiry of the above said 10 years, then remaining instalments of disability will be paid alongwith the claim amount.
CLAIMS CONCESSION • Claims (not always full amount) are paid on lapsed policies, if policy has acquired paid up value before lapsation. • LIC pays full claim after deducting outstanding premiums with interest in the following cases : a) At least 3 years premiums are paid and death claim arises within 6 months from the date of first unpaid premium. b) At least 5 years premiums are paid and death claim arises within 12 months from the date of first unpaid premium.
CLAIMS CONCESSION (Contd..) • The above concessions are guided by the consideration that had the policyholder not died, he could have revived the policy in the above situations by just paying arrears of premium with interest and without proof of good health. • Full claim is paid where arrangements are made to advance the premiums from surrender value.
PRESUMPTION OF DEATH • Proof of death is must. Evidence of Death collected in the form of Death Certificate and certificate of burial and cremation. • In case of accidents on sea, in air and in natural calamities, dead bodies may not be found. Obtain statement from Competent Authority. • Indian Evidence Act provides for presumption of death, if a person has not been seen or heard of for seven years.
PRESUMPTION OF DEATH (Contd..) • Where a person is presumed to be dead, insurer should insist on decree from Competent Court. • This requirement may waived if reasonably strong evidence exists to show that the life assured could not have survived a fatal accident or hazard. • Premium to be paid under the policy till Court decrees presumption of death so that the policy does not lapse during this period.
OTHER PRECAUTIONS • If the Life Assured or claimant is a lunatic, only the guardian appointed by the Court of Law as per Indian Lunacy Act should sign the discharge voucher. • If Life Assured or claimant has recovered from mental disorder, insist on medical certificate to that effect. • Orders received from Court or other judicial authority are not to be contested by the Insurer. However, if orders are not appropriate, the claimant must get it vacated (Eg: Attachment order in case of policy issued under MWP Act). • Claim payments to non-residents are governed by the foreign exchange control regulations.
OTHER PRECAUTIONS (Contd..) • If Life Assured dies even one day before maturity date, treat it as death claim. If Life Assured dies after maturity date, but before receiving policy monies, treat it as maturity claim only and pay amount to legal heirs. • If Policies are financed through a Hindu Undivided Family, then claim is payable to the Karta of the HUF. • If Death intimation is received 3 years after death, then undertake thorough investigation to rule out fraud. Plea of “time barred” can be taken if reasons for delay in intimation are not satisfactory.
FACTS TO BE CHECKED BY INSURER • Occurrence of insured event (eg: expiry of term, survival up to a date, death, accident, etc.) • Obligations assumed under the contract (payment of Sum Assured, Bonus, Sum Assured in instalments, waiver of premium, etc) • Policyholders performance of his role (i.e., policy status regarding premium position, age admission, outstanding loan & interest, submission of policy bond, discharge voucher, legal requirements, police reports, investigation report, if necessary). • Confirmation of identity of the person entitled to the claim (eg: nomination, assignment, prohibitory orders issued by the Court or other Judiciary Authority, Income Tax attachment, etc.)
IRDA REGULATIONS • In case of death claim, all requirements to be called at one time and not in piecemeal. • Decision of claim to be taken within 30 days of receipt of requirements from the claimant. • Investigation to be completed within 6 months. • Interest at 2% over bank rate payable for delay in settling death claims. • Interest at Savings Bank rate payable, if the delay is on the part of claimant.
Why a claim may be invalid • The policy is not in force • Excluded conditions apply • The claim is fraudulent: