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Life Insurance Claims. 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.
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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.
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?
Who are persons entitled to demand performance? • Submission of Claim Form, • Submission of Primary level documents.
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
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.
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.
SURVIVAL BENEFIT CLAIMS Money During Policy Period
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/relative 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 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
If the life assured had an unnatural death, such as accident, suicide or unknown causes, police inquest report, panchnama, chemical analyzer’s report/ post mortem report, coroner’s 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.
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.
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.
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.
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.
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.
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.
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.
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”.
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.
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
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)
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]
Notice of Loss • Timely and prompt notice • Immediate information – Practically • If contract is silent about reporting time of loss – Act as prudent person • Don’t 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
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
Loss Minimization Methods • Protection of property after loss • Methods of salvage disposal • Methods of storage and segregation of damaged goods
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.
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.