Claim Management in Life Insurance

Claim Management in Life Insurance
CHAPTER-1 INTRODUCTION TO INSURANCE
I) WHAT IS INSURANCE?
The business of insurance is related to the protection of the economic values of assets. Every asset has a value. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefits from it. The benefit may be an income or some thing else. It is a benefit because it meets some of his needs. In the case of a factory or a cow, the product generated by is sold and income generated. In the case of a motor car, it provides comfort and convenience in transportation. There is no direct income. Every asset is expected to last for a. certain period of time during which it will perform. After that, the benefit may not be available. There is a life-time for a machine in a factory or a cow or a motor car. None of them will last for ever; the owner is aware of this and he can so manage his affairs that by the end of that period or life-time, a substitute is made available. Thus, he makes sure that the value or income is not lost However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it nonfunctional. In that case, the owner and those deriving benefits there from, would be deprived of the benefit and the planned substitute would not have been ready. There is an adverse or unpleasant situation. Insurance is an Indians that helps to reduce the effect of such adverse situations.
II) DEFINFITION: Insurance is a contract between two parties where in the insurer agrees to pay insured a certain sum of money for a valuable consideration on happening of an uncertain event.
III) WHAT IS LIFE INSURANCE?

Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person
entitled to receive the same) on the happening of the event insured by the contract.
Usually the insurance contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death if it occurs earlier. Obviously, there is a price to be paid for this benefit. Among other things, the contract also provides for the payment of premiums by the assured. Life Insurance is universally acknowledged as a tool to eliminate risk, substitute certainty or uncertainty and ensure timely aid of the family in the unfortunate event of the death of the breadwinner. It is sometimes called as the civilized world's partial solution to the problems caused by death. In a nutshell, life insurance helps in two ways: premature death, which leaves dependent families to fend for itself and old age without visible means of support.
IV) LIFE INSURANCE AND CLAIM:

Life insurance helps to ensure that the family is protected against financial difficulties in the event of a premature death. Combined with investment, retirement and estate planning, life insurance is the fundamental part of a sound financial plan. Settlement of claims in life insurance is a prominent phase as it requires more attention and expertise. Every claim has to a dealt with separately depending upon the nature of the policy and the nature of the claimant and the policyholder.
INTRODUCTION TO CLAIM MANAGEMENT

Claims management is an expert system which generates the rules and regulations for the assessment of general damages using the key information contained in medical reports, surveyor reports, loss assessor's reports, claimant's petition and the procedures or conditions and warranties contained in the policy document. The claims management regulates the payment of general damages and also payment of the loss of future earnings. The claims managers, actuaries and underwriters form the claims management group.
An appraisal of a claim is an evaluation or an attempt to establish the value of .in item. To estimate means to calculate approximately the amount or extent of something. In the context of claims management it means the amount of damage sustained by property that is the subject of an insurance claim, the claims management department is responsible to interpret the policy and advice the company as to its meaning any time or when the loss occurs. It also plans and suggests the methods to reduce the gap between the claimants and insurers when there is a huge difference in the valuation of damages. Claims handling and settlement are characterized by active care management, transparency, objectivity, precision, thoroughness, efficiency, skills and expertise. The payment of claim and claim management requires the scrutiny of the policy document, the time period of the policy, commencement of insurance cover, payment of the premium, including and excluding clauses available in the policy and other terms and conditions of the insurance contract. The payment of claim and assessment of the loss depends upon various factors and differs from insurance to insurance. A claim in life insurance differs from that of claims in general insurance. However, in all the cases the payment of the claim discharges the insurer from the obligations of the insurance contract. If the insured is not satisfied with the claim received, he may knock the doors of the judicial authority for pronouncement of additional award on the petition. Payment of claim is an obligation of the insurer under the insurance contract. It is the consideration of the contract. The consideration of the insurance contract from the angle of the insurer is the promise to compensate the insured from the loss suffered on payment of a certain amount known as the premium. A simple promise of the insurer does not create the cause for the payment of compensation. Further to the promise both parties of the contract should perform some actions and fulfill some condition of the contract. The insured has to pay the premium and the insure has to prepare the policy document as a token of acceptance of the contract and deliver the same to the insured. In some contracts of insurance, the insurer delivers the cover note in place of the insurance policy. Thus, it is essential that both the parties should perform the formalities before the promise becomes effective. Payments of
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consideration, and the premium, create a legal relationship between the insured and insurer and a set of rights and duties are created. And promising to pay the compensation gratuitously will not create the legal relationship but only moral obligation.
CHAPTER-2
ORGANISATION STRUCTURE AND CLAIM DEPARTMENT: ORGANISATION STRUCTURE:
The organization is the form having independent or coordinated parts for unit action for the accomplishment of common objectives. As such the organization relating to insurance business is a form having different functional divisions units with the ultimate aim of providing effective services to the customers consumers of the insurance products. An effective organization is essential to share information and effectively execute the managerial decisions. The organizational structure differs for different types of business. The organization structure is based on the objectives or mission of the business organization. It may have a division based on the functions of the organization or the division of work areas of business. It may also execute the division of work or duties with a chain command and control. The internal grouping and management hierarchy will for the benefit of the organization and not for delaying decisions. The organization should be structured with an aim to coordinate, not only with internal managers or groups, but also with the external world, the customers, authorities and other persons directly or indirectly interested in it.
The insurance business is concerned with the functions of marketing of insurance products and its related functions like premium collections and premium fixings, accepting the insurance proposals, issuing policy documents, maintain records relating to the policies issued everyday in chronological order, and also payment of claims. The marketing department is associated with the department that provides the premium fixings, premium calculations, issue of the policy document and the notice to the organizations on happening of event. Thus, the second part of marketing is underwriting of the policy. The claims department is associated with the receipt of claims and arrangement of claims investigations. After it is decided whether to make payment to the assured or to defer it, the insurance company may seek guidance from the panel advocates. The investigation part may be assigned to an external or internal group. The insurance company needs to protect the company from the claims litigations of the clients by defending the claims in the courts and supervise other
alternative dispute resolutions. It also has to look after the investment of the funds for better profits. Thus the insurance organization is associated with the marketing of policies, underwriting of policies, claims payments, claims defending and staff matters. The organizational structure is also concerned with the fixing and allocating the duties to units of working at each level to find out the effective results. Any unit of work without proper contribution to the benefit of the organization is of no use. The delegation of duties to each unit with well-defined limitations, responsibilities and decision-making are all related to the organizational structure and management.
Today, most of functions, nearly 90%, related to the marketing and other relative activities of the insurance consumers are dealt and handled at the branch level. The branch office, depending upon its business, is headed by a Manager and each function of insurance business like marketing, underwriting of policies, accounts, claims payments, staff and administration matters are identified as departments of the branch office with responsible officials such as Administration and Accounts Officers. These are second line officers reporting to the Manager and directly related to the consumers in their work. Each official handles a separate function and is responsible for it. The AAOs are assisted by, other clerical staff of the organization. The managerial decisions are based on the information supplied by the AAO, the functional head at root level. All the functions of claims will be settled at the branch' level. The AAO of life insurance business will deal with the maturity claims and death claims. If the branch is smaller, all the types of claims will be dealt by one AAO and if the branch is bigger with good number of claims, they will be settled by, separate officials. At the branch level, these officials have to maintain cordial relations and establish a system of sharing information with the other departments , relating to the policy documents, payment of premium and using the staff or the agents for the amicable settlement of claims disputed. The branches maintain records relating to the claims payment and claims rejections. They will submit the reports to the Zonal Officer, who in turn will forward it to the Head Office or Corporate Office. The branches are reportable to their respective divisional office. If any branch gets a claim and has a greater variance of terms and conditions, and there is a problem in identifying the correct claimant among the claimants, or otherwise, a
dispute of risk crops up, which will be forward to the divisional office with its comments. The divisional office after receiving the papers, verifies them, applies legal knowledge and skills, or seeks advice from skilled persons and tries to solve the problem, as every problem has a solution. The divisional office will have a department to settle such claims. Thus the divisional office has the second important place in controlling the claims payments and reporting the information to the zonal office, which in turn will forward the same to the head office. The branch is responsible to report to the divisional office. The divisional office is responsible to settle the claims referred by the branch off ice-and also report the same to the zonal office, which in turn will consolidate the data and submit the same as required by the statute or otherwise under any law to the government. The government will put the same for the approval of the both the houses.
At the division office level, the claims department generally deals with the claims, which are pending with the branches because of some disputes, or some claims which are of high value. The investment portfolio and establishment and maintenance of reserves for the purpose of claims payment or otherwise required under the law is the important function of the central office. The new product, before being introduced into the market, should be approved by, the IRDA and Central Government.
Depending on the quantum of business, agents or officials deal directly with the branch manager, divisional manager or the zonal manager of the area. Thus the organizational structure of the insurance business is most flexible and decided, based on the above said factors.
CLAIM MANAGEMENT DEPERTMENT:

The claims department is one of the key departments in an insurance company. The other departments in an insurance company are underwriting, accounting and investment. The claims department has the following functions to perform: To provide the customers of insurance and reinsurance companies with I high quality of service. This role gives a long-term edge to the company and hence is referred to as the strategic role. To monitor the claims and see that whether the benefits of insurance exceed the costs of claims. This role is referred to as the cost-monitoring role of the claims department. To see that the expectations of the customers are met with regard to speed, manner and efficiency of the service. This is called the customer service role of the claims department. To meet the standard of service, to keep up to the customers' expectations and still operate within the budget. This is the managerial role of the claims department. Both the quality of the service and cost of claims is the responsibility of the claims department. The department has to look after the proper mix of the two. The cost of claims must not exceed a given level in trying to render a very good service to the customer. So the claims department should work with due diligence to balance the two parameters. The department must be able to find out the difference between fake and genuine claims. In trying to create a good public image, the cost of claims should not be overshot. The importance of cost of claims in the insurance industry cannot be undermined. At any point of time the cost of claims should not exceed the available resources to pay the liabilities. If such a situation arises then the insurance company is technically insolvent. So estimation of future liabilities is just as important as control over the claim payments. As the claims department is in direct touch with the customer, it has to ensure the quality of service.
The claims department has the sole responsibility of managing claims. Claims management by far is the most complex issue in an insurance company. It involves a variety of specialized tasks, which only specialized people can perform. Various disciplines
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involved are marketing and sales, study of human behavior, finance, control systems and business strategy making. The management of so many disciplines into a single department makes the job more difficult. The presence of so many specialized people in a single department will obviously lead to formation of groups. A healthy relationship within the groups is required. The people in the claim department should have good interpersonal skills. If they are not able to irk in harmony the customers will not receive quality service. There should be sufficient number of people as managers so as to simplify job and proper human resource systems in place so that such persons are recruited whose philosophy goes with the mission and vision of the organization. It has become imperative for the claims department to provide quality service to the customers so that the corporate goals are achieved. The claims department, in effect, acts as an interface between the customer service quality and insurance company's objectives. It has to be given the proper weight age and motivation so that the business as a whole functions well.
CHAPTER-3 SYSTEMS OF CLAIM MANAGEMENT I) INTRODUCTION:

Claims management means and includes all the managerial decisions processes concerning the settlement and payment of claims in accordance with the terms of insurance contract. It includes carrying out the entire claims process with a particular emphasis on monitoring and lowering the claims costs. The important elements of claims management are claims preparation, claims philosophy, claim processing and claims settlement. The claims philosophy is defined procedure or specified approach to settle the claims. It contains the claims management principles and also claims handling methods or procedures. The claims philosophy includes the preparation of guidelines regarding the receipt of claims from the| insurers or claimants, analysis of the claims, consideration of the possible decision on the particular issues and disputes, evaluating the impact of the claims cost and expenses, relation of claims to the consumer satisfaction, monitoring the claim payment and improving the efficiency of the claims settlement and payment systems and finally the plans for improving the quality of services and avoiding unnecessary disputes of claims. The claims process includes the basic claims procedure and handling of claims. The handling of claims includes the monitoring of situations or events, which cause the loss to the insured subject matter and give a cause to the insured to make a claim. The claims process contains two fold procedures, or the process to be followed by the insurer and insured. From the point of view of the insured, it includes the suffering of loss or the damage, understanding and identifying the cause of action, information or giving the notice of claim or loss to the insurer, providing sufficient proof of loss to the insurer or his agent or the loss assessor and surveyors. The insurer, on receipt of the claim from the insured, has to take certain immediate precautions and also proceed on methods such as verifying the claim, reviewing the claim application, respond to the claimant, carry out claim investigation, claims negotiation, claim settlement and claims payment.
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II) STAGES OF CLAIM SYSTEM:

The claims system is the system of payment of claims. It contains two stages: Claims management Claims handling The claims handling is the integrated part of the claims management and execution of the decisions made by the claims management machinery of an insurance company. The claims system is associated with the organizational structure, claims philosophy, performance of the organization in relation with its missionary and performance of the claims machinery in the settlement of claims.
III) PARTS OF CLAIM SYSTEM

The claims system also contains two parts: The first part being the claims in the hands of the insured and Second being the claims in the hands of the insurer. The insured has a right to claim when he suffers damages or losses due to the happening of event of insurance. The insurer is under an obligation to handle the claims received by it from a number of clients of the organization or the insurance company. The integration of claims handling with the management decisions and payment of claims as per the decisions or rejection of claims and communicating the same to the insured is the function of the claims.
IV) Claims Management and Claims Handling

Though claims management and claims handling, are generally the same externally, they are different in nature. Claims Management is a managerial function in which the insurer has a definite role to play in analysis of data, processing of application, decision-making, budget planning, and business
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control and funds management. It is subjective and objective, whereas the claims handling is the procedural way of processing a claims application. In claims management, the attention is on making principles and guidelines for smooth and profitable settlement of claims in the hands of the insurer. Claims handling involves utilization of the laid down principles as yardsticks and the measuring methods in settling the issues before it. Claims management includes the entire process of claims handling and claims payment. This includes review of the claims performance, monitoring of claims expenses, legal costs, settlement costs, compromises and planning for future payments and avoiding the delay and disputes in payment of claims. It is a control system that has an important place in the claims management. It also includes risk management techniques, loss assessment, and business forecasting and planning. Claims handling is a traditional form of managing the claims settlements. It includes handling of various stages of the insurance claims. It is functional in nature such as claims review, investigation and undertaking the negotiating process. It does not include any managerial outlook such as risk management, policy making and decision making. It is concerned with the processing of application of claim, identifying and comparing the causes of the event or risk happening, quantifying the loss and comparing with the terms of policy documents, verifying and scrutinizing the warranties and conditions of the policy document and interpreting with the claims application and also applying to the presented claim. Thus, it is concerned with the procedural methods and also interpretations of the claims philosophy. Claims handling may change from case to case depending on the merits of the claim, but it will not drastically change every moment. It is a flexible as well as a rigid way of handling the issues having interest of the insurer in mind. It is a systematic way of receiving the claims and following other procedures required for quicker and efficient payment of the claims. It involves consistency and also the willingness to compromise to settle the issues. Every insurer has a standardized way of claims handling which will improve quality and customer service. The people who do the work should be instrumental in
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developing standards. The insurers commitment to the service of the customer is a part of the claims management.
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CHAPTER-4 TYPES OF CLAIM

Claim management has two intimations such as:
Maturity claim Death claim
MATURITY CLAIM:
Maturity claims are payable as per the terms of the policy. These policies are generally endowment polices including money back policies. The amount payable at the time of maturity includes sum assured and bonuses/incentives. The insurer normally sends advance intimations to the insured. The insurer has to satisfy that : The life assured is the holder of the policy and his identity is proved .The age stands admitted. The premiums are all paid, The original policy is handed in together with a completed discharge voucher before making payment. The insurance company is expected to make payment on the maturity date. Post-dated cheques are normally set in advance.
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I) Payment of Claims in Maturity

The payment of claims in case of life insurance policies arises upon maturity or on the happening of the event insured. Payment of maturity claims is the easiest to manage. Maturity payment also includes the payments made during the period of assurance called 'survival benefits' under certain types of policies popularly known as 'money back' policies. Payment in these cases is easy without much litigation because of the presence of terms and conditions of the policy as there is no need on the part of the policyholder to prove the happening of the event. The policyholder is alive so proof of title does not pose any problem a n d the insurance company need not await any claim from the policyholder b ut take initiative to settle the claims expeditiously. II) Procedure for a Settlement of Maturity Claim The procedure for filing a claim for a life insurance policy in case of maturity is simple and there are no hassles as are normally witnessed with the cases of premature payments. The procedure for making a claim application and the subsequent action by the insurer in such claims is simple and is as follows The policy document must be submitted by the insured to the insurer. If the age is not endorsed, a proof of age is required to be sent by the assured to the insurer. If there has been assignment or reassignment, the original deed of assignment or reassignment is to be submitted by the insurer. Other documents, such as receipt of payment and policy document or acknowledgement of assignments and transfers or other endorsements of the policy, if any, made or as asked by the insurer to be submitted by the insured.
A discharge form is supplied by the insurer which is to be signed, stamped and attested. This form is an acknowledgement of the receipt of money and should
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bear a paisa revenue stamp. The assured should get it attested by any witness. The insurer upon the receipt of the claim form will act in the following manner The insurer will send an acknowledgement to the effect that the claim form has been received and the aforesaid document will also state that the insurer is in the process of checking all the necessary items and will get back to the claimant shortly. The insurer upon receipt of the claim prepares a list of maturity claims, that is, those claims, which have been claimed upon maturity or which have been due or are about to be due near that date. This is an exercise which helps the insurer get an account of his liabilities which have either matured or are on the verge of maturing. The insurer then verifies the dues that have been outstanding. This is a c ou nt e r verification exercise which helps the insurer to ve ri f y and authenticate the amount of the claim made by the insured. After the verification of the dues payable to the insurer, the insurer arrives at the final amount that has to be paid to the claimant and then prepares a cheque or such mode of payment as has been agreed upon in the policy or between the claimant and the insurer. The cheque is then sent to the insured/claimant
III) Beneficiaries under maturity claim

The claimant in life insurance policies at the time of payment of maturity claims of life insurance policies can be the policyholder or the assignee to whom the holder of the policy has transferred the policy. The persons entitled to claim under these policies can be The assured himself. The payee, whose name appears in the benefit schedule of the policy as a party interested.
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The creditor who has been properly assigned and nominated to receive the payment under the policy.
IV) Amount payable

The amount payable upon the maturity of the policy, that is, nonhappening of the event is the sum assured plus profits and/or bonus that accrues with the policy. The profits are paid pro rata, that is, in the proportion of the premium paid and declared are bonuses. The payment of profits is a condition inserted as a clause in the policy itself and it becomes an obligation on the insurer to pay the amount of such profit as may be accrued to the insured. There are policies which do not have the clause of payment of profits upon maturity. In India, generally the clause of payment of profits is found on whole life policies. There are whole life policies with both the clauses of payment and non-payment of profits.
V) Disputes in payment of maturity claims

The disputes arising in such cases are general may be restricted to the proof of age if the age is not admitted at the time of issuing the policy document and about the good title of the claimant on the policy. In cases of maturity, disputes relating to the amount of payment seldom arise. Incase of the insurer shrugging off his liability to make the payment of profits which are accrued to the insured upon maturity and in case the payment of profit is as per the contract, the insurer has every right to move to the court and to claim for such payment. The policy document and scheme of the policy contains the details of the payment and the payment made accordingly may not drag the parties into litigations.
II) DEATH CLAIM

The procedure of consideration of a Death Claim comes into operation on receipt of written intimation of death of the Policyholder. (Sometimes death is intimated by telegram but as it may not contain necessary particulars as required it is preferable to
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call for written intimation of death). Such intimation of death is usually received from the Assignee or Nominee under the Policy or from a person representing such Assignee or Nominee. Where there is no Assignee or Nominee, a Policy-holder's death is usually intimated by his nearest legal heir such as his widow or son. Where a Policy is assigned to a creditor or a Bank for valuable consideration, intimation of death may be received from such Assignee. In cases where it is found that any third person who apparently is not concerned with the claim, intimates death of a Policyholder and claims Policy moneys, a reference should be made to find out whether he has any bonafide interest in the Policy and it should be established that and kin. No correspondence should be entered into with such a person with regard to requirements for consideration of the claim unless it is shown that he has right, title or interest in the Policy on the strength of some legal instrument in his favor, such as a transfer or mortgage deed, etc. This precaution has to be taken to avoid unnecessary trouble in future for having entered into correspondence with a person who has interest in the Policy. In short, an intimation of Policyholders is received from the proper person entitled to receive the Policy amount as aforesaid. While intimating a Policyholders death, the Claimant (meaning person legally entitle to receive the Policy amount) would state (1) the number/s of the Policy/is (2) The name of Me Policyholder, (3) The date of death (4) The cause of death and (5) His or her relationship with the deceased, etc. If therefore on receipt of an intimation of death it is found that any of these particular are wanting a reference should be made to the claimant calling from them by using the Form No. 3782 unless from such particulars as are furnished in the Claimant's letter it is possible to establish the identity of the Policy.
I) Payment of Claims upon Death

Life insurance is basically for providing financial security to the families
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of deceased policyholders. Death claim settlement naturally assumes great importance in the total operations of many life insurance policies. Despite several problems encountered, life insurance companies still struggle to attend to this function efficiently and effectively. Unlike in maturity and survival benefit claims, the policyholder in this case is not alive. This it poses an array of problems. Broadly, the problems in the settlement of death claims are Obtaining satisfactory proof of death, Obtaining satisfactory proof of title, and
Regarding the amount of claim. These requirements are independent of each other. It is necessary for an
insurance company to decide first whether any liability lies in a death claim. It not only depends on the proof of the happening of the event i.e., death, but also on the status of the policy as on the date of death. It is necessary to verify whether the policy in question is in force or in a reduced paid-up condition. In these cases, some money becomes payable. But there may be cases where the policy had lapsed without acquiring any value. It is also necessary on the part of insurance company to verify whether any claims concessions or administrative concessions are applicable or whether the claim can be considered on ex-gratia basis. Cause of death also assumes importance. If it is a suicide, it is to be considered whether it is within one year from the date of the policy. If it is an accident, it is to be verified whether accident benefit becomes payable. Once liability is admitted, the office should have to verify the position of the title to policy monies and arrange payment to the persons legally entitled to receive the same.
II) Procedure for Claim Settlement in Death

The initial procedure of filing the claim with the insurance company in this case is as much the same, with the initial burden of giving the proof of death and the proof of age, in cases where the proof of age is not provided by the assured. The life insurance company is not expected to know about the death of a policyholder unless the same is intimated by the claimants. Any action can therefore be initiated only after receipt of such intimation. The letter of intimation or the notice of death should contain the following particulars -
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Policy number and name of the life assured. These two should match, otherwise the policy number or the name of claimant must be wrong. Date of death, on which depends the status of the policy and amount payable. Name and address of the claimant as requirements are to be called from them. Usually, the death intimation should be sent by the nominee or assignee or some one near and dear to the deceased life assured. If the intimation is received from a stranger, the office should be careful to verify as to why a stranger should be interested in the policy monies. Once a notice of event is received, the insurer will verify to find out information relating to:
Any dues pending under the policy. Whether the policy is in operation or in lapsed status. Whether the premiums are paid or any dues of premiums are pending. Exclusion and inclusion conditions and conditions precedent to filing a claim are fulfilled.
Whether any nominations or assignments of the policies or transfers of the policies are effected.
It usually depends on the status of the policy on the date of death. The procedure that an insurer follows is: The insurer sends a receipt of acknowledgement that the claim application has been received. The insurer looks at his liabilities and prepares for the payment of claim. The insurer before making- the payment of the claim verifies the identity of the claimant, and checks whether the person who has made the claim holds a good title to the proceeds under the policy or not. The insurer before making the payment ensures that dues have been
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verified, and the correct and exact amount passes to the claimant. After such a diligent exercise, the insurer hands over the amount as payable as per the policy to the claimant, in the form and mode as agreed upon or as per the terms of the policy. In considering a death claim, it becomes necessary to verify the duration of the policy i.e., the time elapsed from the date of commencement of risk under the policy (or date of revival of a lapsed policy) tell the date of death. Normally, if the duration is of two years or less, such a claim is considered as an 'early claim'. If the duration is more than two years, such a claim is considered as a 'non-early claim'. The Life Insurance Corporation of India calls for the following requirements in cases of death claims Death certificate: Originally issued by
municipality/Corporation/Revenue Officials in the form prescribed by the Government. Claimant's statement: Here the claimant furnishes information about 1. The deceased life assured, his/her age, date of death, cause of death, place of death, if hospitalized during a period of three years earlier to death, details of the same; 2. Details of the claimant - name, address, how is he/she related to the life assured, in what capacity claim is being made and 3. Details of any other policy/policies of the life assured so that all claims can be considered together. Statements from the hospital/nursing home where the life assured had treatment for terminal illness in which the hospital/nursing home authorities furnish information about the life assured, address, date of admission, date of discharge/date of death, time of death, reasons for admission, primary cause of death, secondary causes, duration of illness, whether treated in the same hospital/nursing home at any time earlier for any ailment, if so
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details; whether treated by any other doctor earlier, if so details, etc. Statement from the Doctor who attended to the diseased life assured; the identification of the life assured, how long the doctor treated, for what ailments, whether the doctor is the usual medical attendant of the life assured and if so, for what ailments he treated him, etc. Statement by a person having reputation, who is not related to the deceased life assured and who is not interested in the policy monies, who has attended the burial/cremation of the deceased life assured particulars of the life assured, any relationship, when did he last see him alive, date, time and place of death, cause of death, whether the body was cremated or buried, date, time and place of cremation/burial, etc. If the deceased life assured was an employee of any organization, a statement from the employer furnishing the details of the life assured, date of joining service, designation, date last attended duty, date of death, details of any leave availed on grounds of sickness (for periods of a week or more at a time) during the period of three years earlier to the date of commencement of risk up to date of death, medical benefit facilities, if any, availed by the deceased life assured - copies of leave letters, medical certificates submitted for sanction of sick leave, copies of medical prescriptions and bills produced for settlement of medical benefits, etc. In case of death due to unnatural causes like accidents, suicide, etc., the following records are called for: First Information Report of the' Police. Panchanama Report/Police Inquest Report. Post Mortem Report.
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Chemical Analysis/ForeVisic Report in cases where post mortem is not conclusive about the cause of death. In very rare cases, Police Final Investigation Report.
A few cases arise where it may not be possible for the claimants to obtain and submit the original death certificate issued by the concerned authorities. In such cases, alternative proofs also are considered. Here are a few examples Death in an air crash - where there are no survivors, the list of passengers as per the records of the airlines company can be accepted as an alternate proof of death. Disappearance on board a ship - the log book maintained showing the list of passengers on board the ship when it sailed off a particular port and similar list after it reached the next port - if the name of the passenger (who was the life assured under the policy) appeared in the former register but not in the latter, it should be presumed that he fell into the sea and drowned as there can be no other way of explaining the disappearance. Presumption of death - as per Section 108 of the Indian Evidence Act, 1872, if a person has not been heard of for seven years by those who would naturally have heard of him had he been alive, there is presumption of law that he is dead. Here also, what is presumed is death of the life assured but not the date of death? Hence, the date of the order of the court declaring presumption of death is taken as date of death. On receipt of the requirements, the insurance office decides whether there is any liability or not. In cases where the office could obtain documentary evidence of suppression of material facts by the deceased life assured at the time of taking the policy or at the time of revival of the lapsed policy, the liability is repudiated. Where the liability is admitted, the office proceeds to the next step
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viz., verifying the title to the policy monies.
III) Beneficiaries under Death Claim

The claimants or the beneficiaries under the life insurance policies, paid on the h happening of the event which is death of the assured, are as follows: The legal heirs of the policyholder. The nominees, assignees and transferees. The wife and children of the assured under the Married Women's property Act. The creditor in whose name the policy has been endorsed. It is normally observed that in case there is an explicit nomination of 'a life policy in favor of wife and child, the policy is not assignable for any other reason. This is because the nomination in favor of wife and child creates a trust and is, a property of the wife and children under the Married Women's Property Act.
IV) Amount Payable

Amounts that can be paid under a life insurance policy are as follows The amount insured or the face value of the policy.
Bonus if declared by the company, which is recoverable as an insurance amount.
The share of profits in case of participation policy. Surrender value, where the policy lapses due to non-payment of the premium or where the assured surrenders the policy, the insurance company may pay a percentage of the premium paid according to the rules of the company.
The insurance amount payable is the sum assured plus any profits or bonus amount that accrues to the policy till the date of happening of the event. In case of death occurred by accident, the amount payable under the policy will be
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the sum assured plus the amount payable under the accident rider, if the assured has, at the time of entering into the contract, taken an accident rider.
CHAPTER-5 CLAIM SETTLEMENTS

The important aspects of the claim management are claims settlement and claim payment to the beneficiary or the claimant under the insurance contract. When the insured or the claimant has complied with the requirements of claim procedures such as notice, submission of supporting information of the claim and evidence of loss and assessment of the loss, the other part of the duty is shifted on to the insurance company. The duty involves two important elements such as claim handling and claim decision. Claim handling is concerned with the adoption of the procedure to settle claims whereas claims decision is a managerial function. It includes consideration of various inputs available such as the information given by the insured, information available in the records and policy documents, information available in the manual of claim payment or the procedures laid down by the company, availability of the resources such as the claims budget, reserve, allocation, estimation and payment. The decision for the payment is also associated with the managerial decision regarding the compensation payable, the actual loss, loss as stated by the insured, loss as reported by the loss assessors or the amount of insurance as stated in the policy. The payment of a claim is made an ex-gratia, as a compulsory liability, as an indemnity or otherwise as per the orders of the claims settlement machinery. The claims settlement is generally and in strict sense associated with the claim settlements procedures and implementation of the claims management decision. The claims settlement is also associated with managerial, legal and accounting functions. The managerial functions include analysis of the information, making a decision, allocation of budget payment of the claim and verification of feedback. The legal function includes the verification of contents of the claims application comparison with the provisions of the policy document and verification of legalities of the insurable interests and complexities expected on non-payment or rejection of the claims. Thus the function of claims handling includes selection of the procedure to be adopted for the settlement of claim,
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verifying the genuineness of the documents submitted along with the claim application including the policy document, verifying the clauses-exclusive or inclusive, incorporated in the policy verification of the declarations made by the insured, verification of conditions and warranties associated with the class of the insurance and type of the insurance policy, assessing the excesses of variance of terms and considering other factors effecting the claims payment such as insurable interest, third party liabilities negligence, role of frauds and concealment. The claims settlement is the most complex subject as there are different classed of insurances like personal insurances and property insurances. The personal insurance includes the life insurance and health insurances. It also deals with the volume of the business and ever increasing number of the insurance policies and claims, the intentions of claimants and other beneficiaries related to the insurance policies. The fraudulent intentions or misrepresentations further make the system of claims settlement a complex one. Sometimes the claimants submit the exaggerated claims, which have no relevance to the policy or the terms of the contract. Non-submission of the timely information may also hinder the settlement of the claim. It is an agreed fact that the claims are to be settled quickly, efficiently, and without giving scope for any future litigation. It should be aimed at reducing the costs of claim and procedure should be shorter and simpler. The information required for claims settlement is about the contract of insurances, the event, which caused the loss, claim estimation and availability of outstanding claims reserve funds. The claims manager has to verify the following documents to assess the validity of claim: Claim Application Form Policy Document Submission of Evidences A Report of the licensed Surveyors and Los Assessors Verification of Documents
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Conditions and Warranties
1) Claim Application Form:

The insured is under an obligation to give a notice of loss of the subject insured within a reasonable time. The 'reasonable time' is a relative question as regards the incident and gravity of the event. When the notice is received by the insurance company the insurer should immediately take all precautions to save the insured from further loss and the preliminary investigation has to be conducted by the official of the company or by the licensed loss assessor. The claim form contains information relating to the insurance policy, insurance subject and insured. It contains a declaration made by the insured relating to the facts mentioned there to be true. The information given in the claim application form should not be contrary in itself stating different information at different places, which make the insurer to doubt the claim. The application form should be supported with documentary proof of the loss. The policy document should be attached with the claim application form. The contents of the claim application and the policy should be similar. The risk as stated in the application and in the policy document should tally, if not, a thorough investigation of the facts can be made by the insurer. The application form has to be verified to know if any column to be filled-in is left unfilled, which may affect the decision-making. In such a case, the insurance claims manager can request the claimant for the unfilled information in the application. The claims manager can utilize the services of agents or staff members to verify the facts of the lease or information stated in the application form. The application of claim or claim application form is an important document in claim settlement as it provides ill the information relating to the insured subject and event of loss. It differs from lone insurance claim to another.
2) Policy Document: The policy document is another important document in the claim settlement. It is a document issued by the insurer as proof of conclusion of the insurance contract. It contains all the information relating to the insured subject, the insurer,
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the risks covered, premium paid, date of expiry of the contract, warranties and conditions, clauses relating to arbitration, giving notice of loss, time limits, exclusion and Inclusion clauses and also extra risks covered on payment of extra premium. The claimant should submit the discharged original policy document along with the claims form. The information stated in the application should be within the scope of the information stated in the policy document. If the risk stated in the application is different from that, which is mentioned in the policy document, or the causes which result in the loss are expressly excluded, or some preconditions intended to be followed before notifying the loss or effecting the policy have not been performed as per the requirements, the claim may be rejected and a conflict of interests may arise in the insurance payments. The claims manager is under an obligation to verify whether any material changes are made to the policy document; if so, any authentication is made by the insurer or not and the same is not in the office records. The claims manager is to verify the eligibility and identity of the claimant based upon information stated in the claims form and available in the policy documents. The age of the persons, whether age is admitted or not, can be verified from the contents of the policy documents. The policy also helps the insurer to cross check the clauses of exclusions and inclusions and applicability of clauses in relation to the claims applications. Though, in practice, the policy document is to be submitted along with the claims application form, it is not compulsory. If the insured has lost the policy document, the claimant should satisfy the bonafide nature of the claim and undoubted proof of identification of the claimant and rights of the claimants. A duplicate policy is issued in place of the lost or destroyed original policy and can be submitted along with the claims application. Presentation of original document by other claimant will make the claims payment decision critical and the resulting dispute is to be settled cautiously.
3) Submission of Evidence:The claimant has to submit the documents in support of his identity, age, in case of death of the policyholder-the proof of death, if it is a accident-the proof
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of accident and police report, basis of loss assessment-actual total loss, partial loss and information relating to the salvage and its valuation. The identity of the claimant relates to physical identity and also the legal right to the claim or the presence of insurable interest in the subject matter. If the claimant is a legal heir, he has to submit the legal heir certificate, if the claimant has the will then,-the probate and if there is no will or otherwise, sufficient proof of his relation with the policyholder incase of the death claim, if the policyholder is alive, the interest in the policy-as creditor, or mortgager or assignee of the policy as a proof. The evidence presented by the claimant should establish the interest of the claimant beyond any doubt. The insurer should not have any doubt in paying the amount to the claimant. The insurer has every right to demand the identity of the claimant. The claimant can use the driving license, or proof of residence or an identification card issued by the election officer or any recognized and government organization. The identity lean is proved by submitting the statement of two important well-known persons of the area where the claimant is living.
The other important document is the proof of age of the insured. The following documents can be presented as proof of the age. This particular proof is required in the case of the life insurance policies if the age is not admitted at the time of issuing the policy or there is a dispute of age due to contrary information available in the claims form and policy document. Birth registers extract from municipal or other authentic public record High School Certificate Certificate of Baptism Passport Horoscope prepared at the time of birth Declaration of an elderly person having knowledge of the date of birth sworn before a magistrate. Domicile Certificate
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Marriage Certificate Extract from service register in case of government servants or employees of other authorized institutions. In case of death of a person the following documents are to be submitted: Death Certificate issued by the Municipality or the local authority or the Government Hospital where the claimant has expired stating the cause of the death. Claimant's statement relating to death of the policyholder mentioning the details of the death such as place, time and cause of the death. Statement of doctors if the death is due to some ailments, statement related to burial grounds, statement of reputed persons of the place, where the policyholder lived during his last days.
In case the death is accidental or unnatural the following documents off the statements will prove the death and its causes. First Information Report of the Police. Panchanama Report/Police Inquest Report. Postmortem Report. Chemical Analysis/Forensic Report in cases where postmortem is no conclusive about the cause of death. In very rare cases, Police Final Investigation Report
In case of death due to earthquake, air crash or train accident or otherwise the following are the sources to decide upon the death of a person.
The list published by the airport authorities. A list published by the government of the place of accident.
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Newspaper coverage and list stated by authorized or responsible media networks. Statements issued by the local authorities including revenue authorities. The log books of ships. The above documents state the proof of death. If the persons are not traceable the law presumes that they are dead and the process of insurance can be initiated and the insurer has to take ample care while dealing with similar cases. The other important documents required are the proof of the loss and proof of the event. In life insurance the event is the maturity of the policy and the death. in case of the maturity of the claim, the claimant is the policyholder himself and the date of maturity is mentioned in the policy and well-known to the insurer and insured in advance as such there will not be any dispute relating to the payment In case of death, the claimant is to submit the proof of death to help the insurer settle the claim.
4) A Report of the licensed Surveyors and Loss Assessors:
The report of surveyors and assessors will be the authentic report. The re contains the investigations and results of the investigations and recommendation assessments of the surveyor. The surveyors will state the causes of the loss whether remote or direct, the extent of actual total loss, insurance policy amount, sing of average clause, value of salvage and assessment of payment of claim. The report of the loss assessors will be a solid ground to settle the claim. If the insurer is of the opinion that the loss assessor or the surveyor has acted under some personal interests then the insurer may decide to re-investigate the matter and on receiving he report can decide the claims payment.
Whereas in the general insurance, the insurance relates to the property of the assured and the loss to the assured is due to the loss of asset and a proof of the loss of asset and extent of loss of the asset has to be proved beyond the doubt of the claimant. If it is loss due to the accident, the FIR of the police, if the loss is due to
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fire-the report of the fire brigade or the local authorities, if the loss is due to floodthe reports of local authorities and if the loss is due to theft or dacoit or robbery-the FIR or the complaint made to the police and panchanama of the authorities are to be submitted to prove the happening of the event. 5) Verification of Documents:The documents or the reports submitted are to be verified for the following information. Description of the risk in the policy document, office records and description of the risks stated in the documents of evidence are to be verified and compared. If the risk insured and the actual risk are similar, the claim has to be paid and if there is deviation in the risk defined and the risk that actually caused the loss, the percentage of the deviation and related applicability of the actual with the risk insured have to be analyzed with and given leeway. The courts and other machinery will have sympathy towards the insured while considering the facts relating to the risk and will try to help the distressed person.
The information supporting the cause of the risk or the loss assessment has to be used cautiously while making the decision of the claims settlement. The documentation part of the policy and discharge of the insurer from the liability of claim payment are to be recorded and verified to avoid future litigations. The documents, which are not properly executed, will have no effect of discharge and the liability will continue. The documents are to be properly and adequately stamped to avoid future penalties and punishments from the concerned authorities. The validity of the policy should be verified particularly if it was in force at the time of the event and covering the risk or not. If the policy is not renewed and the event happens after the policy lapsed then the risk will not be covered and no payment will be made. The amount of claim mentioned by the claimant has to be compared with the amount of claim recommended by the surveyors or with the amount stated in the policy document. If the actual loss is less than the policy
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amount and the amount stated by the surveyors, the same may be paid. If the amount is more, then the amount payable will be the least of the amounts stated in the policy and as recommended by the surveyors. The actual loss, loss of income, loss of real wages, and other expenses are to be considered within the purview and with reason. If the asset is subject to multiple insurances the total payment should not be more than the face value of the policy or the value of the asset. In no circumstances is the insured allowed to make gains out of the insurance policy. The main objective of insurance is to provide compensation to the insured and keep him in a similar position as before the happening of event. No excess amount will be paid. If amount paid is in excess, its recovery will be a disputed item. The dues from the insured, either as penalties, interests or as premiums, are to be recovered from the claims amount before payment is made to the insured.
6) Condition and Warranties:Conditions are the provisions inserted in an insurance contract that qualify or place limitations on the insurers' promise to perform. Warranties are the stipulations, collateral to the main purpose of the contract. Breach of warranties and conditions will lead to avoidance of the payment of insurance claim. The warranties and conditions have a direct relation with the payment of the claim. These warranties' and conditions may be precedent to the contract where their performance or fulfillment is essential to initiate the claim or avail benefits under the contract of insurance. These warranties maybe implied or express, precedent or of future. The warranties may be materially relevant or may be needed to be performed before filing the claim. The warranty or condition of giving notice to the insurer relating to the loss suffered or the occurrence of event is an example of the mandatory nature. In case of any breach of the duty of warranty or performing the acts as per the conditions laid down, the other party loses the benefit under the policy. The policy contains some regular clauses such as a clause promising to adhere to the rules and regulations of the business, a clause to pay extra amounts
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for extra risks covered, a clause containing the promise to inform the changes in the constitution of the organization and circumstances of the risk, change in the address of the organization or any material change that takes place and other related matters concerning the payment of claims. The policy also contains the clauses stating the frights and duties of the assured and also the insurer. Some clauses may be included as special clauses depending upon the class of the insurance contract and the subject matter insured. Some clauses may exclude some responsibilities of the insurer and are known as exclusive clauses. All the clauses are relevant to the claims settlement.
After the claim application is received by the insurer, the important duty of the insurer is to verify the clauses included in the policy and check for the presence of special clauses. The information submitted by the claimant in the claim application has to be compared with the warranties, conditions and clauses available in the policy document. If the claimant fails to perform or fulfill the conditions and ' warranties, due verifications have to be made for the delay in the submission of the claim or giving notice of the claim. The other conditions are to be verified with reference to the clauses mentioned in the policy document as well as the claims application form. Any variance may be excused provided it is not prejudicial to the insurer. The degree of variances, if increased, may avoid the claim settlement. The claim may be rejected for not following strictly the terms mentioned in the policy document. The claim may be avoided on the ground of breach of warranty and insurers are relieved from the duty of claim payment if they prove that the warranty, which was not performed, is of material importance to the claims payment and insurance contract. The insurers are privileged to avoid the payment of claim even when the breach of warranty is partial. The breach of warranty can be excused only when it is rendered unlawful by subsequent law. The insurer has a right to waive the performance of warranties. The waiver may be expressed in words or may be implied. Once the insurer waives the performance of warranty he cannot claim or demand its performance later.
All the words of the warranty or the conditions of the policy are very important
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particularly the forfeiture clauses of the policy should not be ambiguous. If the conditions and warranties are not clear they are to be interpreted for the benefit of the assured. If the insurer wants to avoid the claim with a plea of breach of warranty, the onus to prove the breach to the satisfaction of the court is on the insurer. The burden is on the company to prove that the error or omission is willful and in the nature of fraud. Declarations made by the insured relating to the health, age, family history in the case of life policies and answers given to the questions in other polices like fire policy, or marine policies are binding upon the insured for the performance. If the misrepresentations are made with an intention to deceive or are not in good faith then the insurer has the right to disown the insurance contract and reject the same.
I) Factors Effecting the Claims Settlement

The factors effecting the claims settlement are as follows: The policy should be in force on the date of the event. The risk and cause of event should be covered by the policy. The cause of loss or the event should be directly related to the loss. Too remote a cause has no place in the settlement. The loss should not have been caused with an intention to gain from the situation. The preconditions or warranties have to be complied with. When conditions to be fulfilled before affecting the cover of the policy, are not performed, the cover of insurance will not come into effect even though the premium is paid and accepted by the insurance company. Presence of insurable interest, in case of the property insurances, at least at the time of happening of event or loss sufferings. Without having the insurable interest in the subject matter, no person can get benefit or compensation. The insurable interest is created out of legal relation or pecuniary relation of the insured subject. The assured should suffer loss, actual or constructive, to get compensation. The assured should riot make benefits or gains out of the insurance contract as
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the insurance contract is of indemnity in nature. It only makes good the loss suffered by the assured and is not a source of gains. Sufficient documentary evidence of loss should be presented along with the application form.
The fraudulent claims, claims with fraudulent intention should not be made as they are against the principle of good faith, which is the life-blood of an insurance contract.
Multiple claims and reciprocal claims will be settled as per the terms of the contract of insurance.
Right to appeal or file a petition with the tribunal or the courts cannot be withdrawn. If the terms of the policy insist upon arbitration, it is not the end of justice for the insurer or the assured.
These are some of the factors related claims settlement. The insurer may sometimes, depending upon the circumstances of the individual cases, waive some of the procedures required to be followed by the insured and some warranties, which are not reasonable and impossible to form can be waived and excused by the insurer.
The insurer, after verifying the documents and facts of the claim, should make a decision either to pay the claim or to reject it. The rejection of claim will lead to the dispute and the assured can challenge the decision taken by the insured. As such, decision-making is the most important function of claims management. The insured may opt for the following alternatives while settling the claims.
Pay the claim as reported by the surveyor or the claim made by the insured whichever is less. Take help of the agent or some other persons and compromise or to come to an agreement with the assured in case of a disputed claim. If the claim is rejected be prepared for the litigation. The litigation will cost
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the insurer more, as the insurer has to pay the interest for the amount due if he loses the litigation. The costs of the litigation will also increase the burden in addition to the payment of insurance amount and interest. Pay ex-gratia, if the claim is totally baseless and non-acceptable, on humanitarian grounds and to avoid complications in future. Arrange to replace the asset either by repairing the same or by purchasing a similar asset from the market. Repair the asset to provide the similar type of services as provided before the happening of event.
Above were the factors that effect in claim settlement but, than so following table shows how the life insurance corporation of India handles or cover the claim settlement.
CLAIMS SETTLEMENT OPERATIONS Claims Intimated

YEAR Claims Settled During the Year (including claims written back) Claims Outstanding at the End of the Year Amount (Rs. in crore) 191.49 173.91 176.86
Number (in Amount (Rs. Number Amount (Rs. Number lakh) in crore) (in lakh) in crore) -tin lakh) 16953.95 19596.11 23563.62 96.91 103.53 114.91 17035.81 19607.20 23560.66 0.22 0.15 0.14
2002-2003 96.53 2003-2004 103.46 2004-2005 114.90
II) Delay in Claims Settlement

The time value for the settlement of a claim is of importance. All claim papers have to be submitted within a limited period mentioned in the policy document or otherwise stated in the Act. In some cases, the death of a person or the accident of" vehicle has to be intimated immediately either orally or in person, either by the
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policyholder or the claimant or by the representative of the claimant. The formal application has to be made within 14 days of the death of a person. Giving notice of the event is different from submitting the claim papers. The event has to be reported immediately to the insurer so as to enable him to conduct preliminary investigation to find out the actual loss and the cause of action leading to the event and whether the said cause is remote or direct. When the papers are submitted to the insurer, in the life insurances policies and if no dispute is traced out, the claims are to be paid within 30 days from the date of receipt of the claim form. If any further information is required or some more claims are presented for the same cause of action or the policy the same may be informed to all the claimants of the policy. If the conflict of opinion is found in the claim papers or the insurer decides to reject the claim or defer the payment, the same may be intimated to the claimant the insurer may direct the assured to be present before the arbitrator provided the insurance policy contains the arbitration clause. If the insurer, incase of life insurance polices, is not able to identify the correct claimant or if multiple claim are presented by different claimants claiming the insurance amount of one policy no one presents sufficient proof of their eligibility, the insurer's liability will be discharged when the insurer pays the amount in the court within nine months after the maturity of the policy.
The time element is very important in the claims payment for the following reasons. The delay in the claims settlement will have an adverse impact on the goodwill and marketing of the insurance. The cost of claims will increase with the extension of time. The insurer may be asked to pay the interest on the unpaid insurance amount because of the delay. The court may direct the insurer to pay the costs of the case to the assured, which results in mounting up of costs. The delay in payment may lead to litigation, which is expensive. Unproductive use of manpower to defend, expenses incurred and waste of time on litigations will be an extra burden on the insurer.
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Litigations will affect on the productive areas of the business particularly in the marketing of the insurance business.
The delay also leads to the increasing number of cases with consumer protection councils.
Thus the delay in the settlement of the claims will have an impact on the present and future business of the insurance along with the cost burden. As such it is essential to have quicker claim settlements. The delay in claims settlement may be due to the following reasons:
Late Submission of Claim Forms: The claim forms may be submitted late because of the ignorance or lack of knowledge of the existence of the insurance policies against the lives of the persons who face the event or no information is given to the beneficiaries or no nominations are made to the policy.
Innocence and Illiteracy of the Assured: The assured or the claimant may fail to file the papers due to lack of knowledge, to file the insurance claims within a certain period or of the claims procedure. Not Submitting the Claims Forms in Full : If the claim forms are not properly filled, they will fail to provide the required information to settle the claims and as a result the claim settlement will be delayed for want of information. If sufficient proof or supporting documents are not submitted along with the claim form to facilitate claim assessor to know the date of the event or the cause of the event, claim settlement may be delayed. The insurers may not get the cooperation of the insured or the claimant to finalize the claim or arrive at some compromise. Destroying the evidences, with or without intention, this could have otherwise facilitated the estimation of the loss payable under the claim. Not providing information about the changes in the constitution of the organization or the changed address of the insured or the claimant or any other information required to make a claims settlement.
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The delay on the part of the insurer may be intentional or due to the pressure of work. The increasing number of insurance policies and quantum of business in relation to the staff of the insurer. Lack of motivation, lack of knowledge of importance of the claims settlement, lack of awareness among the staff of the organizations or defective supervision or organizational structure. The delay in submission of claims or settlements can be avoided by making the assured aware of the facts and importance of the insurance and procedure of claims. The insurers can take the help of the agent or local staff to arrive at a compromise with the claimants when the cases are of complex nature. The organization should be so designed to avoid holding of papers at one or two places. The staff should be trained and the importance of the claims management should be driven into their minds. Use of latest technology to assess the losses and recruitment of able field staff will speed up claims settlement.
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CHAPTER-6
ROLE OF AGENTS IN CLAIM SETTLEMENT AS WELL AS PAYMENT OF CLAIM IN COURTS I) Role of agent in claim settlement:
The insurance company, being a corporate structure, does not deal directly with the customers to promote the insurance business. It avails the help of middlemen to undertake the promotion such on its behalf and the agents are middlemen or intermediaries. Section 40 of insurance Act 1938 authorizes the payment of the remuneration to the agents for the services. Section 42 of the Act .enumerates the essential qualifications for their appointment and issuing of licenses. The appointment of agents to procure policies of insurance is a general practice among insurance companies all over the world. The insurance company is the principal and the person to whom the license is given to undertake the marketing of insurance product is the agent and provisions of law of agency are applicable to the procedure of appointment of agents and to their rights and liabilities. The agents are allowed to market the insurance business but not allowed to issue the policies. The agent has no right to conclude the insurance contract and the final approval or rejection of contract proposal is vested with the insurer, the principal. But, in promoting the insurance business, the agent binds the principal to all activities such as receipt of premium, enquiries and publishing of information ' of the insurance contracts and products. The Insurance Act, 1938 and IRDA Regulations, 2000 enumerate the essential qualifications of agents and other requirements. The Act and regulations also define the code of conduct to be followed by the agents during the discharge of their duties, i.e., marketing of insurance products. The important duty or the function of the agent is procuring the business of general insurance and life insurance, to maintain the confidentiality of the business and to avoid unhealthy competitions, in the insurance business market. While undertaking the business, as a part of duty, the agent is The risk to be covered and the nature of its under obligation to enquire into the facts of the insurance subject or insured properties and the genuineness of the insured. exposure are known to the agents and the insured accepts the information stated by the
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insurance agents with confidence while processing the proposal for. The agent collects premium from the insured and remits it to the insurer. Passing of information to the insurance agent relating to the happening of risk or event is akin to informing the insurer. The agent is bound by duty and responsibility to convey the message to the insurer. But, giving the information to the agent does not bind the insurer as the agent is appointed only to promote the insurance business. However, informing the fact of loss is binding on the insurer as per the practice and the judgments of courts. The insurance agents are under an obligation to provide services to the insured during the currency of the insurance policy and help the insured in filling up the proposal forms and the claim forms. Thus, the agent, though legally not bound, is under the moral obligation to help the; insured in filing the insurance claim with the insurance company. He provides the claims form, filling the proof of the incidents and date of birth or the cause of death, to the insurers satisfaction. In times of dispute, the agent is under an obligation to settle the issue of claims by way of negotiations and mediations to retain the customer.
II) Payments of Claim in Courts

By paying the claim in the court the life insurance company is discharged of its obligation to pay the insurance claim. This device is not applicable to the transactions of the general insurance contracts. When the insurance company is not able to resolve the dispute relating to the identity of genuine or eligible identity of the real claimant from a number of claimants who have applied to receive the same claim, it may shift the burden of identification to the court by following a certain procedure mentioned in Section 47 of the Insurance Act, 1938. By paying the claim amount in the court, the intention of the insurance company to settle the issue can be established. The duty to identify the claimant and conduct the proceedings rests with the court and filing a petition and payment of the amount in the court discharges the insurer from the liability.
The procedure laid down in the Section 47 of the Insurance Act, which is to be
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owed by the insurance company before depositing the amount into the court is follows: The insurer has to file a petition for permission to pay in the court on when all the efforts to identify the claimant are exhausted by the insurer The insurer should submit all the details and report of its trials and effort to identify the eligible claimant out of a number of claimants present I it. The insurer has to file a petition within nine months from the date of maturity of the policy but after six months. The insurer has to file the petition in the court that has the jurisdiction. The petition of the insurer should contain details of the claimants. He should provide information such as name of the insured person an address, date, and place of death of the insured, the nature of the and amount secured by it, the name and address of each claimant so as I serve the notices to them, the reason why the satisfactory discharge car be obtained and the address of the insurer for the purpose of serving him with notices of proceedings under this section. The court after examining the facts mentioned in the petition permits I insurer to pay the insurance amount in the court. The payment of amount in the court will discharge the insurer of 1 obligation. The court after receiving the insurance amount summons the claimants as per the records available with the petition filed by the insurer , undertakes the process of hearing the matter. After examining the details of the proofs before it, relating to the insurance claimants the court identifies and makes a declaration relating to eligibility to claim the insurance amount. The court pays the amount to the claimant identified from the multiple claimants. Thus, the payment of the insurance amount in the court is a part of claim settlement and claims payment and the insurance company is discharged by the payment of insurance into the court.
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CHAPTER-7 IMPACT OF CLAIMS ON UNDERWRITING

Claims settlement has a direct impact upon underwriting. If claims of certain insurance products are frequently received they have an impact upon the claims reserves and warrant review of the product and take decision either to modify the terms or continue. Addition or deletions of the clauses, changing the time span of the insurance product or other changes, are discussed upon the frequency of claims and quantum of amount paid. Thus the underwriter fixes the premium of the product considering various factors such as cost of risk, administration expenses, brokerage or marketing expenditure, claim settlement expenses and budgeted profit. The premium is the present value of the future risk. The cost of premium excluding the profit should meet the break-even point of expenses of product. The underwriting department and claim management are related in sharing the information of the claim to find out the current weaknesses, strengths and the possible improvements. The flow of properly recorded information of claims will help calculate the average costs, average cost of the product and cost of the claim, market conditions I competition of the markets to prepare an insurance premium. Thus the claims payment and information relating to the claims settlement will be directly helpful to the underwriting departments either to modify the present product or to consider the information for the future new products.
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CHAPTER-8 FRAUDS AND MISREPRESENTATION IN CLAIMS

Fraud means and includes any act either by the insurer or the insured or by any agent of the parties with an intention to induce the other party to enter into the contract of insurance. The act may be express or implied. The implied acts include maintaining silence when there is a duty to talk, make some actions, which influence.
THE
other party to take some decisions. The express acts include knowingly making
wrong suggestions to the party. Promises made with no intention to perform them treated as a fraud. misrepresentation is the innocent or unconscious presentation of wrong facts by one party taken into account by the other party before entering into a contract. The person making such a misrepresentation honestly believes that such statement is true.
The insurance contracts are of good faith, which is the life-blood of the insurance contract. As such any fraud made by the insured or the insurer in concluding the insurance contract or the claims settlement, makes the entire contract voidable at the option of the person on whom the fraud is played. The fraudulent claims may be of two category-in the first category, the cause or the claim itself is fraudulent and in the second category the claim is genuine but the method of calculation or the evidences: or the information submitted may be of fraudulent nature. If the claim and cause of the claim is genuine, the overestimation with the intention to receive more money and the creation of the documentary proof of fraudulent nature amount to fraudulent claims. Whereas in the first case, there will not be any loss or the cause resulting in loss may not be related to the insurance subject, representation is made as if the same is the cause for the loss and based on the statements and estimations a claim is presented. The other case is filing of genuine claims by the fraudulent persons. Creating forged documents such as wills, legal heir certificates, assignments of the policies and other papers to support their claim, deliberate destruction of the insured subject with an intention to get the policy amount all constitute different types of fraud. Sometimes the fraud may also result from gross negligence or forbearance to use reasonable exertions and means at hand.
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The fraudulent claim by the assured will deprive him the right to claim as the insurer has the right to reject it. If the payment is made by the insurer because of fraud, the insurer can recover the amount paid by him. Thus the frauds played in filing claim form, inducing the insurer to pay the claim have the adverse effect on claims payment and settlement. But, over-valuation of the property and undue enrichment do not form part of the fraud, as the valuation of the property is the opinion of the person valuing the property. Some facts about frauds in the claims management can be summarized as below:
The fraud may be by the assured filing the claim and by the insurer while rejecting the claim.
The fraud may be for inducing the claim payment or for over-estimation of the loss. The fraud may be making a wrong claim or relating some incident or event to the present event of insurance with an intention to gain profit. The fraud may be of evidence of loss, title to the policy or claim,
happening of event itself. The insurer has the right to reject a fraudulent claim. Thus, the insurance contracts and payment of claims are contracts of good faith any non-compliance of principle may lead to avoidance of the contract of insurance.
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CASE STUDIES CASE STUDY-1 Seelam Ramanamma Vs District Manager, LIC of India, Machilipatnam Dispute in Claims Payment
In this case, there is a legal dispute relating to the payment of the compensation under the life insurance policy issued by the District Manager, LIC of India, and Machilipatnam Branch of Andhra Pradesh. The life insurance policy was purchased by the deceased by filling a proposal form in which he has stated his age which is not true and also made a declaration relating to his health as 'not suffering from any disease'. And based on the declaration made by the policy purchaser and medical report submitted by the doctor, the LIC of India issued a policy in favor of the deceased. But, within a short period after two years, the policyholder has expired and the claim is filed by the widow of the deceased and the insurance company has repudiated the contract on a plea that the deceased has misrepresented the facts relating to his health and age. It also proved that the age stated in the proposal form, claim application and claim petition differs with one another. The claimant took plea that under Section 45 of the Insurance Act 1938, no policy of life insurance can be disputed on the grounds of the mis-statement after o years of the policy. The concept of the indisputability has no value if the policy is disputed after two years of its issue. The Life Insurance Corporation of India has taken a stand of fraud and stated that the deceased has purchased the policy by making all the false statements and suppressed the facts relating to his health and age which forms the core of the doctrine of good faith on which all the insurance contracts are based. When the foundation of the policy is very much defective, the policy cannot have any hold or stand on its own. Any suppression and non-disclosure thereto would have far aching effect on the contract. The age and physical conditions are relevant for e premiums to be fixed and the insurability of the policyholder particularly for a person of middle age.
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These two facts have material affect on the insurance policy and claims settlement. As such it is decided that the repudiation made by the insurance company and nonpayment of the claim is justified basing upon the prime factors of insurance contract 'the doctrine of uberrimae fides (good faith). The section 45 is applicable for those contracts of insurance contract, which are entered with the good faith and having the insurable interest in the policy.
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CASE STUDY-2 Miss Veena Arora Vs Life Insurance Corporation of India and another (Rajasthan)
The petitioner's father Mr. Mahendra Nath was working in the University and the University has arranged group insurance facility to all the members including Mr.Mahendra Nath. Mr. Mahendra Nath has expired in the firing of forces deployed by the Government to save the Babri Masjid. The Life Insurance Corporation has paid the insurance amount to the legal heirs of the policyholder under the group insurance scheme. But, the claimants insisted for the payment of policy amount as they are entitled to the sum double of the insured amount and as the amount is not paid, the claimants have filed a petition in the court for passing a direction or order directing the LIC of India to pay double the amount insurance amount as the death of the deceased is an accident. The respondent - the Life Insurance Corporation of India has presented their arguments stating that the policyholder has expired in a firing and firing is not an accident. The particular circumstance clearly explains that the policyholder wantedly and intentionally faced the firing to show his commitment to the cause of Ayodhya for which purpose he has traveled from a long distance and joined the mob. On the day of the death, there was a curfew in Ayodhya. The forces also warned the mob to go away from that place before opening the fire. Before opening the fire, they have tried all the efforts to avoid the firing. Even though there was sufficient time to avert the firing, the said policyholder along with others have come to face the firing which amounts to the suicide and suicide is not accident. As such, the policyholder is not eligible to get compensation double to the insurance amount under the accident scheme. As such, the issue to be settled is that whether the petitioner's father has taken the law in his own hand and tried .to violate the curfew by becoming a member of the unlawful assembly which demolished the Babri Mosque in police firing or can be held to have died in accidental death to attract the benefit of the accidental benefit of the group insurance scheme. Ordinarily, the accident means an event which takes place without ones foresight or expectations. It is something which could not be foreseen and the expression applies both to the unexpected result of natural act or to the natural result of an expected fortuitous act. The word accident has a very wide significance in its ordinary sense. But, in the present case, with the circumstantial evidences, it is clear that
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the death of the deceased is not the result of the accident but, it is an intentional and committed act, knowingly the consequences of whatever he is doing does not amount to the accident, but can be treated as a suicidal attempt. And as such, the benefit of the accident under the group insurance cannot be awarded and appeal is dismissed.
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CASE STUDY-3 Life Insurance Corporation of India Vs Lily Rani Roy (National consumer Disputes Redressal Commission, New Delhi (1998)
The petitioner has purchased a life insurance policy from the appellate and premiums were paid regularly. The maturity of the said policy was in 1978. Because of some personal reasons the claim was not filed. The petitioner has filed the claim after 13 years of its maturity. The LIC of India rejected the payment on a plea that & claim is time barred claim and as such the claim will not be paid.
The petitioner has filed a complaint with Consumer Council with a request to Direct the LIC for the payment of the maturity claim as the policyholder had paid the entire premium till the date of the maturity and has the right to receive the claim amount. Assured held LIC guilty under Consumer Protection Act, 1986 Section I) (g) for deficiency in service
But, the LIC of India pleaded that the Corporation will be maintaining the records for a period of five years only and the Corporation has received the claim notice from the petitioner in 1990, which is far beyond the time. The LIC also produced a photocopy of the maturity claims payment register showing the payment of the complainant's money.
After examining all the facts, the State forum has declared that the petitioners cannot claim the payment of policy, as it is already time barred. On the decision of the State Commission, the petitioners have filed a petition with the National Commission.
The National Commission, after verifying the terms of the policy, has opined that though the payment of claim is time barred, the insurance company should have given notice to that effect or should include a clause in the policy document stating
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that the time barred maturity claims will not be paid. As the Corporation' has failed to bring this information to the notice of the policyholder or failed to create the awareness among the policyholders, it has failed in its duties and as such it is liable to pay the claim to the petitioners. Thus, the National Commission has ordered the payment of time barred maturity claim.
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CONCLUSION
The insurance business is major service oriented business in the world. The service offered by the insurance industry is well recognized and utilized by the general public and commercial sector of the world. The life insurance business has covered nearly 40% of the population of the world. Some of the countries have made legislation for providing health insurance as a mandatory obligation.
In the context of claim management, it involves the storage, processing and transmission of information relating to settlement of insurance claim. IT plays an important role in the present insurance and reinsurance business scenario.
While success of a claim management depends on the satisfaction of the customers. The customers who may be attracted to the insurance company by its state of art claim service. Therefore, before designing an IT system for claim management, customers expectations are to be taking in to account. In commercial and personal customers, their needs, knowledge of how the market works, and what they want thats make it all the more important for insurance companies to serve them in a better manner through better technology.
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ANNEXURE
Q1) What is claim management? Q2) How claim management works? Q3) What are the types of claim? Q4) How claims are settled? Q5) How claims are settled in courts? Q6) What is the procedure for maturity and death claim? Q7) What are the documents are required in maturity and death claim? Q8) What are systems that claim department follow? Q9) What is the role of agent in settlement of claim? Q10) How fraud claims are settlement? Q11) How many claims are settled during the year? Q12) According to you, how to take benefit from maturity and death claim.
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Bibliography/ Reference
Books:
Claim management vol I, II & V BOARD OF EDITORS ICFAI UNIVERSITY PRESS
Insurance and risk managementDr.P.K GUPTA
REFERENCES: www.google.co.in www.irdaindia.org www.fool.com www.icici.com
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Claim Management in Life Insurance

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Claim Management in Life Insurance

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Claim Management in Life Insurance

CHAPTER-1 INTRODUCTION TO INSURANCE

III) WHAT IS LIFE INSURANCE?