Claims
CHAPTER-11
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 :
1) Rs.15,000/- on survival to the end of 5 years.
2) Rs.15,000/- on survival to the end of 10 years
3) Rs.15,000/- on survival to the end of 15 years
4) Rs.15,000/- on survival to the end of 20 years
5) 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 :
a)
b)
c)
Accident caused by outward, violent and visible
means.
Death/disability is result of injuries caused by
accident.
Occurrence of death/disability should be within 180
days of accident.
ACCIDENT & DISABILITY CLAIMS
(Contd..)
Exclusions :
•
Intentional self-injury, attempted
immortality, intoxication.
suicide,
insanity,
•
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
arises within
premium.
b) At least 5
arises within
premium.
years premiums are paid and death claim
6 months from the date of first unpaid
years premiums are paid and death claim
12 months from the date of first unpaid
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
1.
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.
2.
If Life Assured or claimant has recovered from mental
disorder, insist on medical certificate to that effect.
3.
Orders received from Court
are not to be contested by
orders are not appropriate,
vacated (Eg: Attachment
issued under MWP Act).
4.
Claim payments to non-residents are governed by the
foreign exchange control regulations.
or other judicial authority
the Insurer. However, if
the claimant must get it
order in case of policy
OTHER PRECAUTIONS (Contd..)
5.
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.
6.
If Policies are financed through a Hindu Undivided
Family, then claim is payable to the Karta of the HUF.
7.
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: