Anjali Nair Claims MGMT

CLAIMS MANAGEMENT IN LIFE INSURANCE
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.
Definition of Insurance:
Insurance in its basic form is defined as “A contract between

two parties whereby one party called insurer undertakes in
exchange for a fixed sum called premiums, to pay the other
party called insured a fixed amount of money on the happening
of a certain event."
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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.
The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
 1957: General Insurance Council, a wing of the Insurance Association of India, frames
a code of conduct for ensuring fair conduct and sound business practices.
 1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.
 107 insurers amalgamated and grouped into four companies viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company.
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In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N.
Malhotra was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector. The reforms were aimed at "creating a more
efficient and competitive financial system suitable for the requirements of the economy
keeping in mind the structural changes currently underway and recognizing that insurance
is an important part of the overall financial system where it was necessary to address the
need for similar reforms. Thereafter many changes have taken place in the insurance sector.
Insurance sector in India was liberalized in March 2000 with the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private
players and allowing foreign players to enter the market with some limits on direct foreign
ownership. There is a 26% equity cap for foreign partners in an insurance company. There
is a proposal to increase this limit to 49%. The opening up of the insurance sector has led to
rapid growth of the sector. Presently, there are 16 life insurance companies and 15 non-life
insurance companies in the market. The potential for growth of insurance industry in India
is immense as nearly 80% of Indian population is without life insurance cover while health
insurance and non-life insurance continues to be well below international standards.
Furthermore, over the medium and long term, India’s insurance market will continue to
experience major changes as its operating environment increasingly deregulates. On the one
hand, a mix of new products, new delivery systems and a greater awareness of risk will
generate growth. On the other hand, competition will remain intense as private sector
insurers and those about to enter India seek to win market share from the more established
public sector entities.
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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.
Definition of life Insurance:
Life insurance is a contract between two parties

whereby one party agrees to pay to the other party, a
certain amount of money as premium to make good the
loss of life arising out of an uncertain event of death in
which the insured has interest.
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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 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.
Definition of claims:
Claim is a right of insured to

receive the amount secured under
the policy of insurance contract
promised by Insurer.
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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
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
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 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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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 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.
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 Stages in claims system:
Claims Management
Claims Handling
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 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.
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 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 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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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 1.24 lakh employees and 2,048 branches and over six lakh agency force.
LIC has hundred divisional offices and has established extensive training facilities at all levels.
At the apex, is 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. 1,800 crore. 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 6,000 crore annually to 5.6 million policyholders.
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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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 staff 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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Basic structure of LIC
Central office
Mumbai
8 Zonal offices
Bhopal,Chennai, Hyderabad,Kanpur, Kolkata,
FOREIGN OFFICES
Mumbai, New Delhi, Patna United Kingdom,
Mauritius, Fiji
105 DIVISIONAL
OFFICES
2048
BRANCH
OFFICES
SATELLITE
OFFICES
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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 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 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.
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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. 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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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:
Partial Policy
Death maturity loans
Maturity Surrender
value Disability
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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.
 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.
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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 15th 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.
Partial Maturity Claims:
Most endowment and education policies provide for payment of partial maturities after a given
duration. The partial maturity is normally paid on set dates in the policy document. A typical
education policy of 10 years provides for payment of 20% of the sum insured after four years
and every year thereafter until the expiry of the policy. The life insurance company usually
prepares partial maturity cheques in an automated manner and the customer does not have to
claim. The cheque is either sent directly to the customer or the nearest branch office for ease of
collection.
Surrender Value Claims:
When a customer is unable to continue with the payment of premiums due to unplanned events
like retrenchment or dismissal he has the option of encasing the policy to receive the surrender
value so long as the policy has been in force for more than 3 years. The procedure for lodging
this type of claim is very simple and is similar to the maturity claim whereby the customer
returns the policy document and signs a discharge form. The claim cheque is then paid to the
customer within two weeks.
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Policy Loans:
This is strictly not a claim but a benefit given out by life companies for life policies that have
been in force for at least three years. To receive a policy loan directly from a life company
entails assigning the policy to the life company and receiving a loan cheque. The insurance
policy can also be assigned to a bank and the loan is then granted by the banks and the policy
document utilized as security for the loan.
Disability Claims:
This will arise in life policies where the customer purchases a personal accident policy rider as
an additional benefit. Disability claims are payable subject to sufficient medical evidence being
provided as proof of disablement.
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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 frees 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.
 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.
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 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:

1. 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 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.
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2. While acting under regulation 6(1) in forwarding the policy to the insured, the insurer
shall inform by the letter forwarding the policy that 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.
3. 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.
4. 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 procedure in respect of a life insurance policy:
1) A life insurance policy shall state the primary documents which are normally required
to be submitted by a claimant in support of a claim.
2) 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.
3) 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.
4) 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).
5) 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.
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Procedure for settlement of claims
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):
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.
25
4) L.I.C. accepts following documents as valid age proofs:

a. Horoscope of the assured
b. Certificate relating to the baptism ceremony among Christians
c. Birth certificate from the Municipal Corporation
d. High School Certificate
e. 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.
26
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.
The intimation needs to be sent by the person who is entitled to get the proceeds of the policy.
It may be:
i. the nominee or
ii. the assignee of the policy or
iii. the deceased policyholder’s nearest relative.
27
The letter of intimation of death should contain the following information:
i. name of the life assured

ii. a statement that the life assured is dead;
iii. the date of death;
iv. the cause of death;
v. the place of death; and
vi. policy number / s
vii. 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.
 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.
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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
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.
29
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:
i. Policy Document
ii. Discharge Form 3801
iii. Assignment / Re-assignment Deed, if any
iv. Age Proof Document (if age has not been admitted earlier)
v. Certificate of treatment issued by the hospital authorities where the deceased
policyholder was treated last, on Claim Form ‘B1’ (F No. 3816)
vi. Certificate by the employer if the deceased was an employee, on the Claim Form ‘E’ (F
No. 3787 revised)
vii. Certificate of Death
viii. Legal Evidence of Title (if policy is not assigned / nominated)
ix. Claim Form ‘A’ (F No. 3783)
x. Statement from the Doctor who attended last the deceased policyholder, on Claim Form
‘B’ (Form No. 3784 revised)
xi. Certificate of Identity and burial by a person who attended the funeral on Claim Form
‘C’ (F No. 3785 revised)
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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:
i. Policy Document
ii. Discharge Form 3801
iii. Legal Evidence of Title
iv. Death Certificate
v. Claim Form No. 3783A
vi. Assignment / Re-assignment Deed, if any (if policy not assigned /nominated)
vii. 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
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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Important terms in claims
Maturity claims
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 which 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.
 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.
32
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.
Death claims
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
33
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.
34
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.
 Sufficient documentary evidence of loss should be presented along with the application
form.
35
 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.
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Delays 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.
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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 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.
38
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.
 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.
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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
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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Role of agents in an Insurance

company
1. 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.
2. An agent should be well versed in all the plans, the selling points and also be equipped
to assess the needs of the clients.
3. 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.
4. Agents must provide the office with the accurate information about the prospect for a
fair assessment of the risk involved. The agent’s confidential report must, therefore, be
completed very carefully.
5. Agents must also possess adequate knowledge of policy servicing and claim settlement
procedures so that the policyholders can be guided correctly.
6. Submission of proposal forms and proposal deposit to the branch office immediately to
avoid delays and to enable the office to take timely decisions.
7. A leaflet or brochure containing relevant features of the plan that is being sold should
be available with the agents.
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.
41
Role of surveyors and assessor in

claims settlement
Insurance users pay their premiums, year after year, trusting their policies to protect their lives
or businesses in the event of a loss. However, there are innumerable instances where a genuine
insurance user with a genuine loss and a seemingly valid claim, has been denied his claim
amount – in full or part. This happens because the insurance company is not able to estimate
the total amount of the claims. In life insurance claims the insurance company tries to reject the
claims without knowing the cause of the death or loss of the person.
Surveyors and Loss Assessors have been around for decades - we have all heard of them and
some of us have had occasion to use their services – but it is quite surprising how little is
actually known and understood about them – their job, their duties & responsibilities, their role
vis-à-vis insurers and insured’s, and the insured’s rights and duties vis-à-vis surveyors and
assessors. This is because they never come in the lime light but the main work of assessment
and survey of loss is done by them.
42
Duties and responsibilities of surveyors and loss assessors:
A surveyor and loss assessor shall, for a major part of the working time, investigate, manage,
quantify, validate and deal with losses (whether insured or not) arising from any contingency,
and report thereon, and carry out the work with competence, objectivity and professional
integrity by strictly adhering to the code of conduct expected of such surveyor and loss
assessor.
The following are their duties:
 Declaring whether he has any interest in the subject-matter in question or whether it

pertains to any of his relatives, business partners or through material shareholding.
 maintaining confidentiality and neutrality without jeopardizing the liability of the
insurer and claim of the insured;
 examining, inquiring, investigating, verifying and checking upon the causes and the
circumstances of the loss in question including extent of loss, nature of ownership and
insurable interest;
 conducting spot and final surveys, as and when necessary and comment upon franchise,
excess/under insurance and any other related matter;
 surveying and assessing the loss on behalf of insurer or insured;
 assessing liability under the contract of insurance;
 pointing out discrepancy, if any, in the policy wordings;
 satisfying queries of the insured/insurer and of persons connected thereto in respect of
the claim/loss;
 giving reasons for repudiation of claim, in case the claim is not covered by policy terms
and conditions;
 taking expert opinion, wherever required;
 A surveyor or loss assessor shall submit his report to the insurer as expeditiously as
possible, but not later than 30 days of his appointment. Provided that in exceptional
cases, the afore-mentioned period can be extended with the consent of the insured and
the insurer.
43
Surveyors and Loss assessors Report:
The report of surveyors and loss assessors will be the authentic report. The report contains the
investigations and results of the investigations, recommendation and assessments of the
surveyor and assessor. The surveyors will state the causes of the loss whether remote or direct,
the extent of actual total loss, insurance policy amount, value of salvage and assessment of
payment of claims. The report of the loss assessors will be a solid ground to settle the claims. 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 the report can
decide the claims payment.
Impact of claims on underwriting:

Insurance underwriting is the process of classification, rating, and selection of risks. In simpler
terms, it's a risk selection process. It is the process of selecting and classifying exposures.
Underwriting is one of the aspects of insurance that makes most people’s eyes glaze over. But
underwriting is one of the most important parts of the insurance process. And knowing what an
underwriter does — and why it’s so important — is helpful for people who are shopping for a
new policy. Claims settlement has a direct impact upon underwriting. If the 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 deletion of the clauses, changing the time span of the insurance product or other
changed, are discussed upon 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, claims settlement expenses and
budgeted profit. The premium is the present value of the future risk. The underwriting
department and claims management are related in sharing the information of the claim to find
out the current weaknesses, strengths and the possible improvements.
44
Insurance is based on risk. When you get an insurance policy, the insurance company is taking
on some of your risk. The underwriter's job is to use all the information gathered from
numerous sources to determine whether or not to accept a particular applicant. Individuals
applying for individually-owned life and health insurance typically receive more underwriting
scrutiny than members holding a group policy. An underwriter’s job is to make sure that the
insurance charges just the right amount for the coverage it provides. They figure how much risk
is represented, how much coverage the company can offer, and how much that coverage should
cost. The underwriter's primary function is to protect the insurance company insofar as is
possible against adverse selection (very poor risks) and those parties who may have fraudulent
intent.
The underwriter has a number of resources that can be called upon to provide the necessary
information for the risk selection process. These sources include:
 The policy application;

 Medical history and examinations;
 Inspection reports;
 The Medical Information Bureau (MIB); and
 The producer or insurance agent.
Life insurance companies each have their own extensive policy and procedure manuals they are
supposed to follow in determining whether or not to issue an Individual Life insurance policy,
and in pricing that policy. The insurer's underwriters typically use a combination of factors that
experience shows equates with the risk of death (and premature death).
45
They include the applicant's answers to a series of questions such as:
 Age, sex (except in several states that require "uni-sex" rates,

 Height, weight, and health history (and often family health history -- parents and
siblings),
 The purpose of the insurance
 Marital status and number of children,
 The amount of insurance the applicant already has, and any additional insurance s/he
proposes to buy
 Occupation (some are hazardous, and increase the risk of death), and income (to help
determine suitability),
 Smoking or tobacco use (, as smokers have shorter lives),
 Alcohol (excessive drinking seriously hurts life expectancy),
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.
46
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.
47
As such any fraud made by the insured or the insurer in concluding the insurance contract or
the claims settlement, makes the entire contract violable 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 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.
48
6. Be suspicious if the price of insurance seems suspiciously low from other insurance
companies.
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.
49
Comparative analysis of Life Insurance Corporation

of India & ICICI Prudential Life Insurance
Parameters LIC ICICI Prudential

Life cover LIC provides only anticipated ICICI offers 2 options –
cover Anticipated cover
Group Term Cover
Customer service LIC is profit oriented and ICICI is customer oriented
customer service & and customer satisfaction and
satisfaction are not its main delight are its main
objectives. objectives.
Claims payment period The claims payment period is It settles the claims in 8-10
long. It takes almost a month working days.
to settle the claims except in
some cases.
Documentation Claims settlement here It settles the claims with least
involves a lot of documentation.
documentation work.
Use of technology LIC has only limited use of In ICICI the claims
technology in claims processing system is all
settlement such as only data is centralized from data input till
centralized. claims payment.
Efficiency of employees The person’s employed in The persons employed in
claims department does not claims department in ICICI
have in-depth knowledge and are qualified professionals in
skills. the field.
Infrastructure The infrastructure is not The infrastructure is attractive
attractive. They follow all the and modern.
traditional practices.
50
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 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.
51
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. The customers, their needs, knowledge of how the market works, and what they
want, these are the things that are important for an insurance company for serving the
customers in a better manner through better technology.
52
Bibliography
The information is taken from various sources such as books, magazines, articles,
internet etc.
Books:
Theories and Practices in Insurance

Insurance watch
Business world
Business today
Webliography
www.insuranceonline.com
Search engines:
www.google.com
www.ask.com
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CLAIMS MANAGEMENT IN LIFE INSURANCE

Introduction to Insurance in India

Insurance in its basic form is defined as “A contract between

Brief history of the Insurance sector

Introduction to Life Insurance

Definition of life Insurance:

Life insurance is a contract between two parties

Claim is a right of insured to

System of claims management

 Basis of claims management:

 Stages in claims system:

Life Insurance Corporation of India

Organizational Structure of LIC

Basic structure of LIC

Claims Management Department

 Claim forms must be completed

Partial Maturity Claims:

Surrender Value Claims:

Guidelines for claims settlement by

Matters to be stated in life insurance policy:

Claims procedure in respect of a life insurance policy:

Procedure for settlement of claims

Settlement of maturity claims:

4) L.I.C. accepts following documents as valid age proofs:

6) Assignment / Reassignment Deed, if any:

7) Existence certificates in case of children’s Deferred Assurance & Pure Endowment

Settlement of Death claims:

The letter of intimation of death should contain the following information:

i. name of the life assured

2) Submission of Proof of Death

The proof of death required to be submitted is a certificate by Municipal Death Registry or by a

3) Submission of Proof of Age

(i) Horoscope of the assured

5) Payment and Discharge

 The nominee, in case nomination was made under the policy;

6) Early death claims:

7) Non early claims:

8) Ex-gratia Settlement of Death Claims

Important terms in claims

 The assured himself.

Dispute in payment of maturity claims:

 The legal heirs of the policyholder.

 The nominees, assignees and transferees

 The creditor in whose name the policy has been endorsed

 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.

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 preconditions or warranties have to be compiled with. When conditions to be

 Pay ex-gratia, if the claim is totally baseless and non-acceptable, on humanitarian

Delays in claims settlement

 The cost of claims will increase with the extension of time.

 The delay in payment may lead to litigation which is expensive.

 Unproductive use of manpower to defend, expenses incurred and waste of time on

The delay in claims settlement may be due to the following reasons:

 Lack of motivation, lack of knowledge of importance of the claims settlement, lack of

Role of agents in claims settlement

Role of agents in an Insurance

Role of surveyors and assessor in

Duties and responsibilities of surveyors and loss assessors: