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Claims Management in Life Insurance Corporation of India
INTRODUCTION TO INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again.
Tracing the developments in the Indian insurance sector reveals the 360-degree
turn witnessed over a period of almost two centuries.
Today Insurance Companies in India have grown manifold. The
insurance sector in India has shown immense growth potential. Even today a
giant share of Indian population nearly 80% is not under life insurance
coverage, let alone health and non-life insurance policies. This clearly indicates
the potential for insurance companies to grow their market in India.
In simple terms it is a contract between the person who buys Insurance
and an Insurance company who sold the Policy. By entering into contract the
Insurance Company agrees to pay the Policy holder or his family members a
predetermined sum of money in case of any unfortunate event for a
predetermined fixed sum payable which is in normal term called Insurance
Premiums.
Insurance is basically a protection against a financial loss which can arise
on the happening of an unexpected event. Insurance companies collect
premiums to provide for this protection. By paying a very small sum of money a
person can safeguard himself and his family financially from an unfortunate
event.
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Claims Management in Life Insurance Corporation of India
ROLE OF AGENTS IN AN INSURANCE COMPANY
Full information must be provided to the proponent at the point of sale to
enable him to decide on the best cover or plan to minimize instances of
cooling off by the proponents.
An agent should be well versed in all the plans, the selling points and also
be equipped to assess the needs of the clients.
Adherence to the prescribed Code of Conduct for agents is of crucial
importance. Agents must, therefore, familiarize themselves with
provisions of the Code of Conduct.
Agents must provide the office with the accurate information about the
prospect for a fair assessment of the risk involved. The agents
confidential report must, therefore, be completed very carefully.
Agents must also possess adequate knowledge of policy servicing and
claim settlement procedures so that the policyholders can be guided
correctly.
Submission of proposal forms and proposal deposit to the branch office
immediately to avoid delays and to enable the office to take timely
decisions.
A leaflet or brochure containing relevant features of the plan that is being
sold should be available with the agents.
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Claims Management in Life Insurance Corporation of India
If the agents are well conversant with the claim settlement procedure and
assist the claimants in completing the necessary requirements, it would not only
quicken the process of claim settlement and enhance their professional status
but also help the organization to improve upon their outstanding claim ratio.
This, while further boosting the image of the organization may provide them an
overflowing fountain for further business in those families. The performance of
agents will now depend on not how many hours he works but the quality of
service, his attitude to customers and the image that he will create for the entire
life insurance business. Thus the agent under the changing economic scenario
can achieve their objectives by practicing psycho-marketing strategies. Their
objectives are survival and growth. Maximization of business is an end to
achieve these objectives.
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Claims Management in Life Insurance Corporation of India
BRIEF HISTORY OF THE INSURANCE SECTOR
The business of life insurance in India in its existing form started in India
in the year 1818 with the establishment of the Oriental Life Insurance Company
in Calcutta.
Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance
Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over
by the central government and nationalized. LIC formed by an Act of
Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore
from the Government of India.
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Claims Management in Life Insurance Corporation of India
INTRODUCTION TO LIFE INSURANCE
Human life is subject to risks of death and disability due to natural and
accidental causes. When human life is lost or a person is disabled permanently
or temporarily, there is a loss of income to the household. The family is put to
hardship. Sometimes, survival itself is at stake for the dependants. Risks are
unpredictable. Death/disability may occur when one least expects it. An
individual can protect himself or herself against such contingencies through life
insurance.
Though Human life cannot be valued, a monetary sum could be determined
which is based on loss of income in future years. Hence in life insurance, the
Sum Assured (or the amount guaranteed to be paid in the event of a loss) is by
way of a ‘benefit’ in the case of life insurance.
It is the uncertainty that is risk, which gives rise to the necessity for some
form of protection against the financial loss arising from death. Insurance
substitutes this uncertainty by certainty. The primary purpose of life insurance is
the protection of the family. Insurance in its various forms protects against such
misfortunes by having the losses of the unfortunate few paid by the contribution
of the many that are exposed to the same risk. This is the essence of insurance –
the sharing of losses and substitution of certainty for uncertainty.
There are a variety of life insurance products to suit to the needs of various
categories of people—children, youth, women, middle-aged persons, old
people; and also rural people, etc. Life insurance products could be purchased
from registered life insurers notified by the IRDA. Insurers appoint insurance
agents to sell their products. Public who are interested to buy life insurance
products should receive proper advice from insurance agents/insurer so that a
right product could be chosen to suit particular financial needs.
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Claims Management in Life Insurance Corporation of India
CLAIMS IN INSURANCE
An insurance claim is the actual application for benefits provided by an
insurance company. Policy holders must first
file an insurance claim before any money can
be disbursed to the hospital or repair shop or
other contracted service. The insurance
company may or may not approve the claim,
based on their own assessment of the
circumstances. Individuals who take out home,
life, health, or automobile insurance policies
must maintain regular payments called
premiums to the insurers. Most of the time
these premiums are used to settle another person's insurance claim or to build up
the available assets of the insurance company.
When claims are filed, the insured has to observe the settled rules and
procedures and the insurer has also to reciprocate in a similar manner by
undertaking appropriate steps for speedy disposal of claims. It is true that claims
settlement is complex in nature, but it is the driving force to plant confidence in
the hearts of people, in general and beneficiaries in specific. Insurance claim is
a right of insured under a contract of insurance. Insurance contract is a contract
by which one party called the insurer promises to save the other party, the
insured on payment of consideration known as the premium. The insurer
promises to save the insured are nominees/assignees of the insured on
happening of event or risk insured. Disputes crop up in the payment of claim
when the insurer and the insured understand the process of claims payment in a
different way. Claims settlement is an integral part of the insurance business
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Definition of claims:
Claim is a right of insured to receive the amount secured under the policy of insurance contract promised by Insurer.
Claims Management in Life Insurance Corporation of India
which is a service industry and its growth is interwoven with the people, the
customers and consumers of service. It is inevitable for the insurance company
to protect and guard the interests of the policyholders. An insurance claim is the
only way to officially apply for benefits under an insurance policy, but until the
insurance company has assessed the situation it will remain only a claim, not a
pay-out.
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Claims Management in Life Insurance Corporation of India
CLAIMS MANAGEMENT
Many insurers have recognized the need to improve the efficiency of their
claims management process. They have streamlined processes, eliminated
paper-based forms and redistributed work to match the demands to skills. The
objective of their efforts is to lower costs, while also increasing overall
throughput. Efficiency improvements make tasks quicker and less costly to
execute. However, to realize even greater improvements in the claims handling
process, insurers must also focus on the effectiveness of their claims decisions.
Claims handling costs typically represent 10% to 15% of net earned
premium; in contrast, claims payouts represent 40% to 65%. Insurers that
expand their focus to include effective as well as efficient claims processing
will find a far larger pool of savings opportunities. Technology can play a
significant role by providing integrated channels for communication and
collaboration. This would help the insurance company increase employee
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Claims Management in Life Insurance Corporation of India
productivity by reducing cycle time and defect rate and also increase employee
participation and compliance.
Claims Processing sometimes involves collating and sharing large amounts
of information among multiple parties involved in a claim, from body shops to
adjusters to investigators to lawyers and doctors to claimants and regulators.
And it involves the knowledge of experienced adjusters to determine the fair
and appropriate outcome of a claim. In fact, losses and loss expenses absorb
80% of premium collected by carriers.
Service representatives and claims adjusters need to access data from
multiple sources when processing or assessing a claim, which delays settlement
time and increases costs. Manual steps reduce transparency of the claims
process and raise the risk of fraud, manipulation or simply human error.
Customer retention is also a challenge – experts say that 75 percent of
customers leave their insurer due to claims issues.
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Claims Management in Life Insurance Corporation of India
SYSTEM OF CLAIMS MANAGEMENT
Basis of claims management:
Claims management means and includes all the managerial decisions and
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, claims processing and claims settlement.
The claims philosophy is defined as procedure or specified approach to settle
the claims. It contains the claims management principles and also claims
handling methods and 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 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 situation 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 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 notice of claim or loss to the insurer,
providing sufficient proof of loss to the insurer or his agent or the loss assessor
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Claims Management in Life Insurance Corporation of India
and surveyors. The insurer, on the receipt of the claim from the insured, has to
take certain immediate precautions such as verifying the claims, reviewing the
claim application, respond to the claimant, carry out claims investigation,
claims negotiation, claim settlement and claim payment.
Stages in claims system:
The claims handling is the integrated part of the claims management and
executes the decisions made by the claims management machinery of an
insurance company. Though claims management and claims handling are
generally the same externally, they are different in nature.
Claims management:
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 control and fund management. It is a
subjective concept. In claims management, the attention is on making
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Claims Management in Life Insurance Corporation of India
principles and guidelines for smooth and profitable settlement of claims in
the hands of the insurer.
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:
Claims handling is the
procedural way of processing a
claims application. Claims
handling involves utilization of
the laid down principles as
yardsticks and the measuring
methods in settling the issues before it occurs. 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 understanding the negotiating process. It
does not include any managerial outlook such as risk management, policy
making and decision making.
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
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Claims Management in Life Insurance Corporation of India
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. Every insurer has a standardized way of claims handling which will
improve quality and customer service. The insurer’s commitment to the service
of the customer is a part of the claims management.
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Claims Management in Life Insurance Corporation of India
COMPANY PROFILE
LIFE INSURANCE CORPORATION OF INDIA
The Life Insurance Corporation (LIC) was established about 44 years ago
with a view to provide an insurance cover against various risks in life. A
monolith then, the corporation, enjoyed a monopoly status and became
synonymous with life insurance. Its main asset is its staff strength of 1.24lakh
employees and 2,048 branches and over 6lakh agency force.
LIC has hundred divisional offices and has established extensive training
facilities at all levels. At the apex, there are the Management Development
Institute, seven Zonal Training Centers and 35 Sales Training Centers. LIC of
India is one of India’s leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking to
stock broking to mutual funds to life insurance to investment banking, the group
caters to the financials needs of individuals and corporate. The LIC has a net of
over Rs. 1,800crore. With a presence in 82cities in India and it services a
customer base of over 20, 00,000.
At the industry level, along with the Government and the GIC, it has helped
establish the National Insurance Academy. It presently transacts individual life
insurance businesses, group insurance businesses, social security schemes and
pensions, grants housing loans through its subsidiary; and markets savings and
investment products through its mutual fund. It pays off about Rs 6,000crore
annually to 5.6 million policyholders.
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Claims Management in Life Insurance Corporation of India
It has been started with the objectives of spreading Life Insurance widely
and in particular to the rural areas, meets the various life insurance needs of the
community that would arise in the changing social and economic environment.
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Claims Management in Life Insurance Corporation of India
ORGANIZATIONAL STRUCTURE OF LIC
The organization is the form having independent or co-ordinate parts for unit
action for the accomplishment of common objectives. As such the organization
relating to insurance business is a form having different functional divisional
units with the ultimate aim of providing effective services to the customers 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. 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 t the policies issued everyday in chronological order,
and also payment of claims. 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 of advocates. 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. Thus
the insurance organization is associated with the marketing of policies,
underwriting of policies, claims payment, claims defending and stff matters.
The delegation of duties to each unit with well-defined limitations,
responsibilities and decision making are all related to the organizational
structure and management.
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Claims Management in Life Insurance Corporation of India
BASIC STRUCTURE OF LIC
Today, most of functions, nearly 90%, related to the marketing and other
related 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
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8 Zonal officesBhopal,Chennai, Hyderabad,Kanpur, Kolkata, Mumbai, New Delhi, Patna105 DIVISIONAL OFFICES2048 BRANCH OFFICESSATELLITE OFFICESFOREIGN OFFICESUnited Kingdom,Mauritius, Fiji
Claims Management in Life Insurance Corporation of India
identified as departments of the branch office with responsible officials such as
Administration and Accounts Officers.
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 maturity 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 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 settlement of claims disputes. 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 report to their respective divisional office. If any branch gets a
claim and there is a problem in identifying the correct claimant among the
claimants, or otherwise, a dispute of risk crops up, which will be forwarded 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 problems. The divisional office is
responsible to settle the claims referred by the branch office 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
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Claims Management in Life Insurance Corporation of India
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. Thus the
organizational structure of the insurance business is most flexible and decided,
based on the above said factors.
CLAIMS MANAGEMENT DEPARTMENT
The claims department is one of the key departments in an insurance
company. The claims department has the following functions to perform:
To provide the customers of insurance and reinsurance companies with
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.
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Claims Management in Life Insurance Corporation of India
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 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.
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.
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Claims Management in Life Insurance Corporation of India
TYPES OF CLAIMS
Understanding the requirements for various life insurance benefits (claims)
is important for the customers. The overriding condition on claims is the
payment of premiums i.e. claims are only payable if premiums are paid up to
date. There are various types of claims under life policies. The most common
claims include:
The general requirements for each of these claims are briefly explained below.
DEATH CLAIMS:
This is a claim paid when then the person insured dies. For a death claim to
be paid the following basic conditions must be fulfilled.
The policy document, original death certificate, burial permit copy of the
ID of the deceased must be provided to the insurance company.
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Claims Management in Life Insurance Corporation of India
A report from the doctor who treated the deceased must be presented to
the insurance company.
Claim forms must be completed
A report from the doctor who last treated the deceased person may be
required.
A police abstract report may be required where death occurs through an
accident.
The documentation required for payment of death claims are easily available
and claimants need to immediately inform the insurance company where
problems are encountered in securing the documents. The documents are
usually required so as to reduce on the possibility of paying fraudulent claims or
paying the wrong claimants. Many insurance companies will frequently waive
certain requirements under certain special circumstances.
Beneficiaries:
The claimants or the beneficiaries under the life insurance policies, paid on
the happening of the events 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
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Claims Management in Life Insurance Corporation of India
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.
MATURITY CLAIMS:
A maturity claim is paid out mostly on endowment and education insurance
policies whose duration has expired. For example in an insurance policy with
duration of 15 years, the maturity value will be paid on the 15 th anniversary after
affecting the policy. Payment of a maturity claim is a straightforward affair
where the customer returns the original policy document and signs a discharge
form. The claim cheque is usually released in a period of about two weeks once
all required conditions are fulfilled.
Beneficiaries in claims:
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:
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Claims Management in Life Insurance Corporation of India
The assured himself.
The payee, whose name appears in the benefit schedule of the policy as a
party interested.
The creditor who has been properly assigned and nominated to receive
the payment under the policy.
Amount payable:
The amount payable upon the maturity of the policy, i.e., non-happening of
the event is the sum assured plus profits and bonus that accrues with the policy.
The profits are paid on pro-rata basis, i.e., 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.
Dispute in payment of maturity claims:
The disputes arising in such cases are general and 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 case 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.
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Claims Management in Life Insurance Corporation of India
SURVIVAL BENEFITS
If the Life Assured survives the premium paying period and the policy
continues in full force, provided all premiums have been paid, but no further
premiums are required to be paid
‘Survival Benefits’ is a type of policy popularly known as ‘Money Back’
policy. Payment in these cases is easy because -
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,
and
The Insurance Company need not await any claim from the policyholder
and take initiative to settle the claims expeditiously.
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Claims Management in Life Insurance Corporation of India
NATIONAL ELECTRONIC FUND TRANSFER (NEFT)
The payment under your policy/ies will be to be credited, directly to your
Bank account through electronic mode of payment only. For this purpose, we
require your bank details for making the policy payment through NEFT
(National Electronic Fund Transfer). The details of NEFT are described below.
You are requested to submit the NEFT mandate along with necessary
enclosures to settle the payment under your policy through NEFT. Kindly note,
it is not possible for us to settle the policy payment in any other mode of
payment like cheque.
What is a NEFT?
It is a nationwide system that facilitates to transfer a fund from one account
of any bank branch to another account of any bank branch. This system is
operated by Reserve Bank of India. For transfer of funds the participating banks
have to be NEFT enabled. At present around 74000 Banks all over India are
participating under NEFT system. Advantages of NEFT system for LIC Policy holders / Annuitants :
The policy holder / claimant will get the credit in his own account on
the due date of payment irrespective of the location of his bank.
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Claims Management in Life Insurance Corporation of India
NEFT will ensure speedier and secure mode of payment.
There will be no extra charges to the policy holders / claimant.
SMS and E-mail alerts may also be provided wherever the policy
payment is made to the policyholder/ claimants’ account through
NEFT.
Each payment from LIC through NEFT will create one UTR(Unique
Transaction Reference) number. If there is any problem in credit to
the account, policy holders / claimant can confirm from their bank by
quoting this UTR no. In other words it is easy to track a transaction of
NEFT, using UTR number.
Important information to the Policy holder / claimants opting for
NEFT :
All the items mentioned in the enclosed mandate form should be filled
correctly. This mandate can be used for 6 different policy numbers of
the same policyholder..
The completed mandate for NEFT should be sent to our Branch,
servicing at least one of the policies, listed in the mandate.
The policy holder / claimant should also submit either a cancelled
blank cheque leaf or the photo copy of the page of the passbook /
cheque book where details of the Bank account are mentioned.
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Claims Management in Life Insurance Corporation of India
If within two days of the due date, the amount is not credited to your
Bank Account, then you may contact the branch where you have
submitted the NEFT mandate.
The account of the policy holder / annuitant should be operational at
the time of receipt of policy payment.
Before submitting the mandate form, the policyholder/ claimant
should confirm from his bank that it is NEFT enabled.
Policy holder’s/ claimants’ name under the policy should match with
that of Bank A/c, else it is likely to be rejected.
NRI accounts are guided by FEMA regulations; LIC has decided not
to include NRI accounts for fund transfer. So policy holders /
annuitants are requested not to submit their NRI account details.
After submission of NEFT details, if there is any change in bank
details then fresh mandate form will have to be submitted.
If you are getting the annuity payments through ECS mode from our
IPP cells, you may opt for payment by NEFT by submitting the
mandate or continue to receive the annuity payment in the existing
ECS mode.
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Claims Management in Life Insurance Corporation of India
PROCEDURE FOR SETTLEMENT OF CLAIMS
Claims procedure in respect of a life insurance policy:
A life insurance policy shall state the primary documents which are
normally required to be submitted by a claimant in support of a claim.
A life insurance company, upon receiving a claim, shall process the claim
without delay. Any queries or requirement of additional documents, to the
extent possible, shall be raised all at once and not in a piece-meal manner,
within a period of 15 days of the receipt of the claim.
A claim under a life policy shall be paid or be disputed giving all the
relevant reasons, within 30 days from the date of receipt of all relevant
papers and clarifications required. However, where the circumstances of a
claim warrant an investigation in the opinion of the insurance company, it
shall initiate and complete such investigation at the earliest. Where in the
opinion of the insurance company the circumstances of a claim warrant
an investigation, it shall initiate and complete such investigation at the
earliest, in any case not later than 6 months from the time of lodging the
claim.
Subject to the provisions of section 47 of the Act, where a claim is ready
for payment but the payment cannot be made due to any reasons of a
proper identification of the payee, the life insurer shall hold the amount
for the benefit of the payee and such an amount shall earn interest at the
rate applicable to a savings bank account with a scheduled bank (effective
from 30 days following the submission of all papers and information).
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Claims Management in Life Insurance Corporation of India
Where there is a delay on the part of the insurer in processing a claim for
a reason other than the one covered by sub-regulation (4), the life
insurance company shall pay interest on the claim amount at a rate which
is 2% above the bank rate prevalent at the beginning of the financial year
in which the claim is reviewed by it.
Settlement of maturity claims:
Under LIC, claims can arise on maturity of policy of the policyholder. The
processing of claims by maturity is normally undertaken by Divisional Office of
LIC about two months before the date of maturity. . The LIC sends intimation
before the maturity date. If the notice of maturity is not received and the date of
maturity is known to the policyholder, then the policyholder can take the
necessary steps to get the due Maturity amount. The Corporation sends Maturity
Intimation along with the discharge forms to the policyholder informing him
about the requirements for the settlement of claim.
1) In case the maturity intimation is not received by the policyholder till
around 2 months before the date on which the policy matures, he should
contact the concerned Divisional Office and obtain a copy of the maturity
intimation.
2) Policy Document (if not in the custody of LIC as security for loan):
On receipt of the maturity intimation, the policyholder should send the
original policy document along with the last receipt of insurance premium
paid. The policy document needs to be submitted in original unless it is in
custody of LIC as security for loan.
3) Age proof document (if age has not been admitted earlier):
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Claims Management in Life Insurance Corporation of India
The policyholder should also submit his age proof to the Corporation in
case it has not already been submitted. In case, the policyholder has
already submitted his age proof to LIC, the form of Discharge (Form No.
3825) to be executed by the policyholder, is also sent along with the
Maturity Intimation.
4) L.I.C. accepts following documents as valid age proofs:
Horoscope of the assured
Certificate relating to the baptism ceremony among Christians
Birth certificate from the Municipal Corporation
High School Certificate
Service book.
5) Discharge Form No. 3825 duly stamped & signed, attested by a witness:
The form of Discharge (Form 3825) should then be properly filled, signed
and sent to the Office of LIC from which it was issued. The signature
must be on a revenue stamp and must be attested by a witness.
6) Assignment / Reassignment Deed, if any:
In case the policy or any Deed of Assignment or Re-assignment is lost by
the policyholder, he has to submit an indemnity bond along with a
reliable surety of sound financial standing acceptable to LIC. The
indemnity bond has to be in a particular format (Form 3815). In such a
case the claim is settled in the absence of the policy document.
7) Existence certificates in case of children’s Deferred Assurance & Pure
Endowment Policies.
8) In due course, LIC sends a cheque to the policyholder for the money due
to him as per the terms of the policy.
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Claims Management in Life Insurance Corporation of India
LIC upon the receipt of the claim form will act in the following manner:
LIC 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.
Then the insurer will ask for necessary documents that are required for
settlement of claims. The claimant has to provide all the necessary
documents that are being asked by the insurer.
After verification, 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
insured.
Settlement of Death claims:
The death claim amount is payable in case of policies where premiums are
paid up-to-date or where the death occurs within the days of grace. The
following is the process of settlement of claims in case of death claims:
1) Intimation of death:
The first requirement of the Corporation in the case of death claim is that an
"intimation of death"’ should be sent to the branch office of the LIC from where
the policy was issued.
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Claims Management in Life Insurance Corporation of India
The intimation needs to be sent by the person who is entitled to get the proceeds
of the policy. It may be:
The nominee or
The assignee of the policy or
The deceased policyholder’s nearest relative.
The letter of intimation of death should contain the following information:
name of the life assured
a statement that the life assured is dead;
the date of death;
the cause of death;
the place of death; and
policy number/s
Claimant’s relationship with the assured or his status (nominee, assignee,
etc.).
Soon after the receipt of the intimation of the death, the branch office sends
the necessary claim forms along with instructions regarding the procedure to be
followed by the claimant.
2) Submission of Proof of Death:
The proof of death required to be submitted is a certificate by Municipal
Death Registry or by a Public Record Office which maintains the records of
births and deaths in the locality. Besides this some other statements or
certificates are also required to be given in the prescribed Claim forms:
Statement from the doctor who attended the deceased policyholder’s
last illness.
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Claims Management in Life Insurance Corporation of India
Certificate of treatment in the hospital where the policyholder died or
was treated by the hospital authorities.
Certificate of burial or cremation to be given by an independent person
who attended the funeral and has seen the dead body.
Certificate from the employer if the policyholder was in employment at
the time of death.
3) Submission of Proof of Age:
The claimant should submit age proof of the policyholder to LIC in case it
has not already been submitted.
L.I.C. accepts following documents as valid age proofs:
(i) Horoscope of the assured
(ii) Certificate relating to the baptism ceremony among Christians
(iii) Birth certificate from the Municipal Corporation
(iv) High School Certificate
(v) Service book.
4) Certificate of Ownership:
When the policy is validly assigned, or a nominee has been designated in the
policy, no further proof of title is necessary. In any other case, the certificate of
title is necessary. In such a case the corporation would require legal evidence of
title such as Succession Certificate or Letters of Administration or Letters of
Probate or a Will.
5) Payment and Discharge:
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Claims Management in Life Insurance Corporation of India
After completing all the above formalities, the insurance company issues a
discharge form for completion, which is to be signed by the person entitled to
receive policy money. That is, it should be signed by:
The nominee, in case nomination was made under the policy;
The assignee, in case the policy was validity and unconditionally
assigned;
The legal representative or successor.
In due course, LIC sends the cheque for the amount due to the person
entitled to receive the same.
6) Early death claims:
If death occurs in less than three years from the date of the policy, following
requirements must be complied with:
Policy Document
Discharge Form 3801
Assignment / Re-assignment Deed, if any
Age Proof Document (if age has not been admitted earlier)
Certificate of treatment issued by the hospital authorities where the
deceased policyholder was treated last, on Claim Form ‘B1’ (F No. 3816)
Certificate by the employer if the deceased was an employee, on the
Claim Form ‘E’ (F No. 3787 revised)
Certificate of Death
Legal Evidence of Title (if policy is not assigned / nominated)
Claim Form ‘A’ (F No. 3783)
Statement from the Doctor who attended last the deceased policyholder,
on Claim Form ‘B’ (Form No. 3784 revised)
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Claims Management in Life Insurance Corporation of India
Certificate of Identity and burial by a person who attended the funeral on
Claim Form ‘C’ (F No. 3785 revised)
7) Non early claims:
If death occurs exactly or after 3 years from the date of the policy the
following requirements must be complied with:
Policy Document
Discharge Form 3801
Legal Evidence of Title
Death Certificate
Claim Form No. 3783A
Assignment / Re-assignment Deed, if any (if policy not assigned
/nominated)
Age Proof Document (if age has not been admitted earlier)
8) Ex-gratia Settlement of Death Claims:
Ex-gratia Settlement of Death Claims are not a right claim but on grounds of
humanity presently LIC is giving such claim amount for the policies which are
not in force but
If Death occurred after the expiry of grace period of premium due date
then Full Sum Assured along with the bonus will be payable as Ex-gratia
settlement.
If Death occurred after three months but less than six months after the
expiry of first unpaid premium date half of the Sum Assured without
bonus will be paid as Ex-gratia.
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Claims Management in Life Insurance Corporation of India
If the death occurred between six months and one year from the due date of
the first unpaid premium date, claim may be considered to the extent of the
proportionate notional paid-up value on the basis of actual premium paid.
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Claims Management in Life Insurance Corporation of India
FACTORS AFFECTING THE CLAIMS SETTLEMENT
The factors that affect 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. A
remote 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 compiled 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 assured should suffer loss, actual or constructive, to get
compensation. The assured should riot make benefits or gains out of the
insurance contract as 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.
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Claims Management in Life Insurance Corporation of India
Sufficient documentary evidence of loss should be presented along with
the application form.
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.
The insured may opt for the following alternatives while settling the claims:
Pay the claims as reported by the surveyor or the claims made by the
insurer 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 there may be litigation on the insurer. The
litigation will cost the insurer more, as the insurer has to pay the interest
for the amount due if he losses the litigation.
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.
39
Claims Management in Life Insurance Corporation of India
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 policyholder or the claimant or by the representative of the
claimant.
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.
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.
40
Claims Management in Life Insurance Corporation of India
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 form: 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 insurer 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, that could have
otherwise facilitated the estimation of the loss payable under the claim.
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Claims Management in Life Insurance Corporation of India
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 claim settlement.
The delay on the part of the insurer may be intentional or due to the
pressure of work.
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 staff will speed up claims settlement.
42
Claims Management in Life Insurance Corporation of India
ROLE OF AGENTS IN CLAIMS SETTLEMENT
An agent is a primary source for procurement of insurance business and as
such his role is the corner stone for building a solid edifice of any life insurance
organization. To effect a good quality of life insurance sale, an agent must be
equipped with technical aspects of insurance knowledge, he must possess
analytical ability to analyze human needs, he must be abreast with up to date
knowledge of merits or demerits of other instruments of investment available in
the financial market, he must be endowed with a burning desire of social service
and over and above all this, he must possess and develop an undeterred
determination to succeed as a Life Insurance Salesman. In short he must be an
agent with professional approach in life insurance salesmanship. Such an
agency force is expected to be helpful not only in proper field underwriting but
also after sales. Servicing. Concomitant and essential elements for higher
retention of business.
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 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
43
Claims Management in Life Insurance Corporation of India
such as receipt of premium, enquiries and publishing of information of the
insurance contracts and products.
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. In times of disputes,
the agent is under an obligation to settle the issue of claims by way of
negotiations and mediations to retain the customer.
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Claims Management in Life Insurance Corporation of India
GUIDELINES FOR CLAIMS SETTLEMENT BY IRDA
PROPOSAL FOR INSURANCE:
Except in cases of a marine insurance cover, where current market
practices do not insist on a written proposal form, in all cases, a proposal
for grant of a cover, either for life business or for general business, must
be evidenced by a written document. It is the duty of an insurer to furnish
to the insured fees of charge, within 30 days of the acceptance of a
proposal, a copy of the proposal form.
Forms and documents used in the grant of cover may, depending upon the
circumstances of each case, be made available in languages recognized
under the Constitution of India.
In filling the form of proposal, the prospect is to be guided by the
provisions of Section 45 of the Act. Any proposal from seeking
information for grant of life cover may prominently state therein the
requirements of Section 45 of the Act.
Where a proposal form is not used, the insurer shall record the
information obtained orally or in writing, and confirm it within a period
of 15 days thereof with the proposer and incorporate the information in its
cover note or policy. The onus of proof shall rest with the insurer in
respect of any information not so recorded, where the insurer claims that
the proposer suppressed any material information or provided misleading
or false information on any matter material to the grant of a cover.
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Claims Management in Life Insurance Corporation of India
Wherever the benefit of nomination is available to the proposer, in terms
of the Act or the conditions of policy, the insurer shall draw the attention
of the proposer to it and encourage the prospect to avail the facility.
Proposals shall be processed by the insurer with speed and efficiency and
all decisions thereof shall be communicated by it in writing within a
reasonable period not exceeding 15 days from receipt of proposals by the
insurer.
MATTERS TO BE STATED IN LIFE INSURANCE POLICY:
A life insurance policy shall clearly state:
The name of the plan governing the policy, its terms and
conditions;
Whether it is participating in profits or not;
The basis of participation in profits such as cash bonus, deferred
bonus, simple or compound reversionary bonus;
The benefits payable and the contingencies upon which these are
payable and the other terms and conditions of the insurance
contract;
The details of the riders attaching to the main policy;
The date of commencement of risk and the date of maturity or
date(s) on which the benefits are payable;
The premiums payable, periodicity of payment, grace period
allowed for payment of the premium, the date the last installment
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Claims Management in Life Insurance Corporation of India
of premium, the implication of discontinuing the payment of an
installment(s) of premium and also the provisions of a guaranteed
surrender value.
The age at entry and whether the same has been admitted;
The policy requirements for
(a) Conversion of the policy into paid up policy,
(b) Surrender
(c) Non-forfeiture and
(d) Revival of lapsed policies;
Contingencies excluded from the scope of the cover, both in
respect of the main policy and the riders;
The provisions for nomination, assignment, and loans on security
of the policy and a statement that the rate of interest payable on
such loan amount shall be as prescribed by the insurer at the time
of taking the loan;
Any special clauses or conditions, such as, first pregnancy clause,
suicide clause etc.; and
The address of the insurer to which all communications in respect
of the policy shall be sent.
The documents that are normally required to be submitted by a
claimant in support of a claim under the policy.
While acting under regulation 6(1) in forwarding the policy to the
insured, the insurer shall inform by the letter forwarding the policy that
47
Claims Management in Life Insurance Corporation of India
he has a period of 15 days from the date of receipt of the policy document
to review the terms and conditions of the policy and where the insured
disagrees to any of those terms or conditions, he has the option to return
the policy stating the reasons for his objection, when he shall be entitled
to a refund of the premium paid, subject only to a deduction of a
proportionate risk premium for the period on cover and the expenses
incurred by the insurer on medical examination of the proposer and
Stamp duty charges.
In respect of a unit linked policy, in addition to the deductions under sub-
regulation (2) of this regulation, the insurer shall also be entitled to
repurchase the unit at the price of the units on the date of cancellation.
In respect of a cover, where premium charged is dependent on age, the
insurer shall ensure that the age is admitted as far as possible before
issuance of the policy document. In case where age has not been admitted
by the time the policy is issued, the insurer shall make efforts to obtain
proof of age and admit the same as soon as possible.
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Claims Management in Life Insurance Corporation of India
FRAUDS IN CLAIMS SETTLEMENT
Insurance fraud is any deliberate deception/dishonesty committed against or
by an insurance company, insurance agent, or consumer for unjustified financial
gain. It occurs and may be committed at different points in the transaction by
different parties such as policy owners, third-party claimants, intermediaries and
professionals who provide services to claimants. The nature of these frauds may
vary from an inflated/exaggerated value of a legitimate claim to a completely
fabricated or bogus claim where losses never really occurred. Promises made
with no intention to perform them can be treated as a fraud. The essential components of an insurance fraud are:-
Intent to deceive.
Desire to induce insurance company to pay more than it otherwise would.
The fraudulent claims may be of two categories:
The cause or the claim itself is fraudulent.
The claim may be genuine but the method of calculation or the evidences,
or the information submitted may be fraudulent in nature.
As such any fraud made by the insured or the insurer in concluding the
insurance contract or the claims settlement, makes the entire contract viocable at
the option of the person on whom the fraud is played. 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
frauds. Sometimes the frauds may also result from gross negligence or
forbearance to use reasonable exertions and means at hand. The fraudulent
49
Claims Management in Life Insurance Corporation of India
claim by the assured will deprive him the right to claim as the insurer has the
right to reject it.
Examples of insurance fraud:
1) Creating a fraudulent claim
2) Overstating amount of loss
3) Misrepresenting facts to receive payment
4) Bogus agents/Sale of forged cover notes
How to protect yourself from a fraud:
1) Be wary of unregistered insurance agents. Before purchasing insurance,
contact your insurance company to ensure the agent is an authorized
agent.
2) Avoid paying premiums in cash. Opt to pay for premiums by cheque or
money order. Made payable to the insurance company instead of the
agent.
3) Make sure you receive a written policy after payment of your first
premium.
4) Immediately examine your insurance policy to ensure the coverage is
what you have requested for and ensure that the premium amount paid is
reflected in the cover note/policy. Request for a receipt as evidence of
payment of premium.
5) Do not sign a blank insurance application, or insurance claim form.
6) Be suspicious if the price of insurance seems suspiciously low from other
insurance companies.
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Claims Management in Life Insurance Corporation of India
7) If you meet with an accident, be careful of strangers who offer you quick
cash or urge you to deal with specific workshops, medical clinic or law
firm. They could be part of a fraud syndicate.
8) Insist on detailed bills for repairs and medical services rendered and
check for accuracy.
9) Discreetly contact your insurance company or the police if you are being
defrauded or have been/are being persuaded to take part in a fraud.
Provide as many details as possible about the incident - name of the
individual(s) involved, amount, date(s), and type of fraud.
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Claims Management in Life Insurance Corporation of India
COMPARATIVE ANALYSIS OF LIFE INSURANCE
CORPORATION OF INDIA & ICICI PRUDENTIAL LIFE
INSURANCE
Parameters LIC ICICI Prudential
Life cover LIC provides only
anticipated cover
ICICI offers 2 options
Anticipated cover
Group Term
Cover
Customer service LIC is profit oriented
and customer service &
satisfaction are not its
main objectives.
ICICI is customer
oriented and customer
satisfaction and delight
are its main objectives.
Claims payment period The claims payment
period is long. It takes
almost a month to settle
the claims except in
some cases.
It settles the claims in 8-
10 working days.
Documentation Claims settlement here
involves a lot of
documentation work.
It settles the claims with
least documentation.
Use of technology LIC has only limited use
of technology in claims
settlement such as only
data is centralized.
In ICICI the claims
processing system is all
centralized from data
input till claims
payment.
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Claims Management in Life Insurance Corporation of India
Efficiency of employees The person’s employed
in claims department
does not have in-depth
knowledge and skills.
The person’s employed
in claims department in
ICICI are qualified
professionals in the field.
Infrastructure The infrastructure is not
attractive. They follow
all the traditional
practices.
The infrastructure is
attractive and modern.
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Claims Management in Life Insurance Corporation of India
CURRENT DATA OF LIFE INSURANCE CORPORATION OF
INDIA
Number of Policies Sold – The number of policies that LIC issues in a
fiscal year is only a reflection of how well the company is performing in
the market. The policies sold by the Insurance Company for the year
2012-13 were 3, 57, 24, 749.
Total Life Insurance Premium Earned – A major fraction of the
premium earned by a life insurance company goes into the fund that is
deployed to pay the insured when he/she files a claim. It becomes a
measure of how financially sound an insurer is. Thus, the premium
earned by LIC 2, 02,889.28(in crores).
Claims Settlement Ratio – Assessing the claim settlement ratio is the
most significant criteria in establishing the credibility of a life insurer.
Put simply, claim settlement is the ratio of the number of claims settled
to the total number of claims filed in a particular fiscal year. Needless to
say, LIC rules the rooster here too. The highest Claim Settlement Ratio
(CSR) that LIC boasts of is primarily the reason, why it gets to enjoy the
trust of the major chunk of the market.
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Claims Management in Life Insurance Corporation of India
Life Insurance Corporation of India
No. of Claims filed 7,31,336
No. of Claims paid 712,501
Claims Settlement Ratio 97.42
55
Claims Management in Life Insurance Corporation of India
CASE STUDY
Life Insurance Corporation of India v/s Neelam Mehta
The case arose following the refusal of LIC to pay the insurance money
following the death of her husband Mahendrabhai Mehta. LIC had repudiated
the life policy alleging that he had hid from it that he was suffering from
diabetes at the time of taking the insurance policy in December 1993. On 6
November 1994 he died following a heart attack. Neelam told the consumer
forum that she came to know that her husband had a life policy with LIC three
months after his death, when she started receiving 'forms one after another to be
filled through LIC agent'. She then filled up all the relevant papers.
She also formally informed LIC about the death of her husband and
claimed the insurance money. thereupon, LIC intimated her that the claim for
her husband's insurance policy was repudiated because the life assured had
'deliberately' withheld information regarding his 'pre-existing illness which was
diabetes' and which, it said, had led to his death. It also alleged that because of
this disease he had been hospitalized before his death and that he was a insulin-
dependent diabetic. Neelam represented to both the Bhavnagar and Ahmadabad
offices of LIC and later to its zonal office in Mumbai urging them to
recommend her claim to the review committee.
This request was made in September 1996 and till now no decision had
been taken and the 'matter is still under consideration'. She also denied that her
husband was a diabetic or that he had been hospitalized for this. He had not
been treated for any ailment during the five years preceding his death, she
asserted. The forum comprising its president, K.D. Desai, members Leena Desai
and Malaybhai Kantharia, found that LIC had failed to prove that Mr. Mehta
had made false statement and misrepresentation about his health. "The burden
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Claims Management in Life Insurance Corporation of India
of proving that there was suppression of material fact and that it was made
fraudulently" lied on LIC and it had failed to prove it, the forum observed. LIC
therefore was legally and morally duty-bound to pay the claim, it said.
Consumer disputes redressal forum, Ahmadabad, has directed LIC of
India to pay up Rs. 50,000 plus 12 per cent interest for seven years, as insurance
money due to her after her husband's death. The forum also ordered payment of
Rs. 5000 for causing mental agony, hardship and inconvenience to Neelamben.
It granted Rs. 3000 as cost.
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Claims Management in Life Insurance Corporation of India
CONCLUSION
The insurance business is major service oriented business in the world. The
services offered by the insurance industry are 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. Global players
with strong brands in the insurance industry today set up their back office
operation in low cost countries, manage capital on a global basis, make use of
their special skills worldwide and use their superior managerial ability to secure
leadership positions in the industry.
The claims management is an integral part of insurance. It involves the
storage, processing and transmission of information relating to settlement of
insurance claims. The use of Information Technology also plays a very
important role in claims settlement. In managing the claims handling function,
insurers seek to balance the elements of customer satisfaction, administrative
handling expenses, and claims overpayment leakages. As part of this balancing
act, fraudulent insurance practices are a major business risk that must be
managed and overcome. Disputes between insurers and insured’s over the
validity of claims or claims handling practices occasionally escalate into
litigation which should be solved with due care.
In this fast developing scenario it will not be enough if companies have the
futuristic strategies. Implementation of the strategies, effectively adapting them
to ongoing changes can spell success. The success of claim management
depends on the satisfaction of the customers. The customers are attracted to an
insurance company by its state of art claim service. Therefore, before designing
an IT system for claim management, customer’s expectations are to be taken in
to account.
58