Introduction

The Insurance industry in India has seen an array of changes in the past one decade. The
economic scenario which emerged after globalization, privatization and liberalization has
thrown a new challenge before the insurance sector. Insurance is a protection against
economical losses arising due to an unexpected event. In any type of insurance coverage claim
settlement plays very important part .claim settlement is an integral part of the insurance
business. A claim settlements an agreement between two or more parties to settle a legal claim
with payment and other terms. The most common form of claim settlement involves an
insurance claims. An insurance claim is the only way to officially apply for benefits under an
insurance policy. The customers know well about their rights and remedies, availability of
various grievance Redresses mechanisms, progressive decontrol...The present study attempts
customer perception on claim settlement services in life insurance companies. LIC of India is still
leading life insurance provider. Due to strong management framework of claims settlement.
Insurance industries in India nowadays have taken a giant shape especially after privatization
and introduction of insurance regulatory and development authority (IRDA). The claim
intimation should consist of basic information such as policy number, name of the insured,
death of date, cause of death, name of the claimant etc. As the regulation 8 of the IRDA
Regulation, 2002. The insurer is required to settle a claim with in 30day’s of receipts of all
documents including clarification sought by the insurer. If the claim requires further
investigation, the insurer has to complete its procedure within 6 months from receiving the
written intimation of claim. The payment by the insurer to the insured on the date of maturity is
called maturity payment. The amount payable at the time of the maturity includes a sum
assured and bonus/incentives, and it is to be returned to the office along with original policy
document, ID proof, Age proof if age is not already submitted, and any copy of climates’ Bank
book cancelled cheque. The life insurance policy can be attached with different rider like
accidental rider, critical illness rider, Hospital cash rider, waiver of premium rider etc for critical
illness, necessary medical documents such as first investigation report, Doctor Prescription,
Discharge summary etc are required. For accidental disability rider, attested copy of FIR, Doctor
Certificate of disability, original medical bills with prescription/treatment papers etc are
required.

Insurance is a means of protection from financial loss. It is a form of risk management,

primarily used to hedge against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, insurance
carrier or underwriter. A person or entity who buys insurance is known as an insured or
as a policyholder. The insurance transaction involves the insured assuming a guaranteed
and known relatively small loss in the form of payment to the insurer in exchange for the
insurer's promise to compensate the insured in the event of a covered loss. The loss may
or may not be financial, but it must be reducible to financial terms, and usually involves
something in which the insured has an insurable interest established by ownership,
possession, or pre-existing relationship.
The insured receives a contract, called the insurance policy, which details the conditions
and circumstances under which the insurer will compensate the insured. The amount of
money charged by the insurer to the policyholder for the coverage set forth in the
insurance policy is called the premium. If the insured experiences a loss which is
potentially covered by the insurance policy, the insured submits a claim to the insurer for
processing by a claims adjuster. The insurer may hedge its own risk by taking
out reinsurance, whereby another insurance company agrees to carry some of the risk,
especially if the primary insurer deems the risk too large for it to carry.
Human life is a most precious asset and life insurance is one of the ways which provides
financial protection to a person and his family at the time of any disaster. Life insurance
provides both safety as well as protection to individuals and also boosts savings among
people. Insurance companies play an important role in the welfare of human well-being
by providing protection to millions of people against life risks such as uncertain death or
accident. LIC is the most trusted and popular brand in life insurance, the market share of
private insurers are gradually increasing with people trust. The new private players offer
many new innovative products and services. They are increasing the awareness level
among consumers by using innovative and new techniques of advertisement, introducing
new products, increasing penetration of life insurance of consumers in uninsured markets.
The competition among public and private players has helped to increase in variety of
products being offered from pure risk based to ULIP plans. Customers are the back bone
of life insurance business. Every company tries to attract new customers and retain
existing customers in order to keep their profits high. This helps insurance companies to
www.pbr.co.in 53 Pacific Business Review International maintain a good competitive
edge on its competitors. The proper understanding of consumers, their needs and
expectations help insurance providers to bring betterment in product as well as services
offered. In comparison with the developed foreign countries, the Indian life insurance
industry has achieved only a little due of low customer awareness, high premiums,
delayed and poor customer services, lack of suitable products.
In today's competitive world, it becomes necessary for life insurers to provide customer
satisfaction, spread more awareness, stress on need based innovative products and
affordable price. This would help every individual to avail the benefits of insurance and
protect their lives against future risks and uncertainties. Earlier life insurance was used as
a tool to protect the income of families, particularly young families in income saving
phase, in the event of the head of household's death. But now, life insurance is used for
many other reasons, including wealth preservation and tax saving. Whether an individual
needs to have life insurance or not, merely depends on his need.

Life Insurance Corporation of India

The development of the life insurance market as positive effect on economic growth. The LIC
was founded in 1956 when the parliamentary of India passed the life insurance of India act that
nationalized the private insurance industry in India.LIC slogan is in Sanskrit “yoga kshemem
waham yaham” which translated in English as “your welfare is our responsibility”. This is derived
from the ancient Hindu text, the Bhaagawat geetha’s 9th chapter, 22nd verse. The life insurance
industry started with a modest beginning in the year 1957 with 82 corers of funds. The business
performance of life industry for the period ending 31-12 -1956 was 13 cores first year premium
on 9.5 lakh policies. The no. of direct agents was 12387 in the year 1958. It is the 2nd biggest
real estate after Indian railways. In term of policies paid 96.97% in the year of 2014-15 and
99.55.% in the year of 2015-16. In this study is an attempt to Customer perception on life
insurance policies with reference to Prakasam district in Andhra Pradesh. The present study
observes the changing efficiency levels of the claim management in view of the changing
scenario of insurance sector.

Definition:
Insurance is a contract providing for payment of a sum of money to the person assured
or failing him to the person entitled to receive the same on the happening of certain
event.Uncertainty of death is inherent in human life. It is this risk, which gives rise to
thenecessity for some form of protection against the financial loss arising from
death.Insurance substitutes this uncertainty by certainty.The objective of insurance is
normally to provide:

a)Family protection and / or

b)Provision for old age.

c)Protection against risks

Why Insurance?

 Insurance cover is essential because it provides the following benefits:

 A lump sum payment to the nominees at the time of the death of the policy
holder.
 A regular payment to the nominees in the event of the death of the policy holder.
Tax benefits, as premiums paid reduce the liability of tax.
 Relieves economic hardships in the family on the uneventful death of the sole
income holder.
  Inculcates the habit of savings.
 1.2 NEED FOR INSURANCE:
 Who will take care of my family if tomorrow something unfortunate happens to
me?” If this question bothers you, then Life Insurance is the answer.
Of course, under any circumstances, the loss of a loved one is a traumatic
experience. But, if your family is also left without sufficient money to meet basic
living needs or prepare for future goals, they will have to cope with a financial
crisis at the same time. A Life Insurance plan ensures that your family is
financially secure even if tomorrow you are no longer around to care for
them.Life insurance, especially tailored to meet your financial needs:

Need for Life Insurance

Today, there is no shortage of investment options for a person to choose from. Modern
day investments include gold, property, fixed income instruments, mutual funds and of
course, life insurance. Given the plethora of choices, it becomes imperative to make the
right choice when investing your hard-earned money. Life insurance is a unique
investment that helps you to meet your dual needs - saving for life's important goals, and
protecting your assets. Let us look at these unique benefits of life insurance in detail.

Asset Protection

From an investor's point of view, an investment can play two roles - asset appreciation or
asset protection. While most financial instruments have the underlying benefit of asset
appreciation, life insurance is unique in that it gives the customer the reassurance of asset
protection, along with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s family remain
protected from circumstances such as loss of income due to critical illness or death of the
policyholder. Simultaneously, insurance products also have a strong inbuilt wealth
creation proposition. The customer therefore benefits on two counts and life insurance
occupies a unique space in the landscape of investment options available to a customer.
Goal based savings

Each of us has some goals in life for which we need to save. For a young, newly married
couple, it could be buying a house. Once, they decide to start a family, the goal changes
to planning for the education or marriage of their children. As one grows older, planning
for one's retirement will begin to take precedence.
Clearly, as your life stage and therefore your financial goals change, the instrument in
which you invest should offer corresponding benefits pertinent to the new life stage.

Life insurance is the only investment option that offers specific products tailor made for
different life stages. It thus ensures that the benefits offered to the customer reflect the
needs of the customer at that particular life stage, and hence ensures that the financial
goals of that life stage are met.

The table below gives a general guide to the plans that are appropriate for
different life stages.

Life stage Primary need Life insurance product

Young & Single
Young & Just married
Married with kids
Middle aged with grown up kids
Across all life-stages
Asset creation
Asset creation & protection
Children's education, Asset
creation and protection
Planning for retirement & asset
protection
Health plans
Wealth creation plans
Wealth creation and mortgage
protection plans
Education insurance, mortgage
protection & wealth creation plans
Retirement solutions & mortgage
protection
Health Insurance

History of life insurance

In India, insurance has a deep-rooted history. It is mentioned in the writings of Manu

(Manusmrithi ), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk about
the pooling of resources that could be re-distributed in times of calamities such as fire, floods,
epidemics and famine. This was probably a starting point to modern day insurance. The earlier
times have preserved the traces of insurance in the form of marine trade loans and carriers'
contracts. The concept of Insurance in India has evolved from other countries, England in
particular. The life insurance business started in India in1818 with the establishment of the
Oriental Life Insurance Company in Calcutta. This Company however failed in 1834 with passage
of time. In 1829, the Madras Equitable began transacting life insurance business in the Madras
Presidency. There was enactment of the British Insurance Act in 1870 and last three decades of
the nineteenth century saw the starting of the Bombay Mutual (1871), Oriental (1874) and
Empire of India (1897) in the Bombay Residency. This era, however, was ruled by foreign
insurance offices that did good business in India, namely Albert Life Assurance, Royal Insurance,
Liverpool and London Globe Insurance and the Indian offices had to face hard competition from the
foreign companies.

In 1912 the first Indian insurance act was passed which was re-enacted in 1938.In 1914,the major step
taken was that the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the pioneer statutory measure to regulate life
business. In 1928, the Indian Insurance Companies Act was enacted to initiate the Government to
collect statistical information about both life and non-life insurance business transacted in India by
Indian and foreign insurers including provident insurance societies. In 1938, in order to protect the
interest of the Insuring public, the earlier legislation was consolidated and amended by the Insurance
Act, 1938 with comprehensive provisions for effective control over the activities of insurance
companies. The insurance amendment act of 1950 abolished the concept of Principal Agencies.
However, there was increase in number of insurance companies and the level of competition was quite
high. There were also allegations of unfair trade practices undertaken during that time period. As a
result the Government of India decided to nationalize insurance business.

In 1956; 245 Indian and foreign insurers and provident fund societies were taken over by the central
government and were nationalised. Life Insurance Company was formed by the Act of Parliament
called Life Corporation of India act 1956, with a capital contribution of Rs 5 crores from government
of India.

1.3 Characteristics of insurance

 Sharing of risks
 Cooperative device
 Evaluation of risk
 Payment on happening of a special event
 The amount of payment depends on the nature of losses incurred.
  The success of insurance business depends on the large number of people insured
against similar risk.
 Insurance is a plan, which spreads the risk and losses of few people among a large
number of people.13
 The insurance is a plan in which the insured transfers his risk on the insurer.
 Insurance is a legal contract which is based upon certain principles of insurance
which includes utmost good faith, insurable interest, contribution, indemnity,
causes proximal , subrogation, etc.
 The scope of insurance is much wider and extensive.

1.4 Functions of insurance:

Primary functions:
1.Provide protection: - Insurance cannot check the happening of the risk, but can
provide for the losses of risk.
2.Collective bearing of risk: - Insurance is a device to share the financial
losses of few among many others.
3.Assessment of risk: - Insurance determines the probable volume of risk by
evaluating various factors that give rise to risk.
4.Provide certainty: - Insurance is a device, which helps to change from
uncertainty to certainty.
Secondary functions:
1.Prevention of losses: -
Insurance cautions businessman and individuals
to adoptsuitable device to prevent unfortunate consequences of risk
by observing safetyinstructions.
2.Small capital to cover large risks: - Insurance relives the businessman
from security investment, by paying small amount of insurance against
larger risks and uncertainty.
3.Contributes towards development of larger industries.

Other Function:
Means of savings and investment :Insurance companies are business houses.
The product they sell is financial protection. To succeed and survive, they
must cover their costs, which include payments to cover the losses of
policyholders, as well as sales and administrative expenses, taxes and
dividends.
Advantages of life insurance
1. Risk Coverage: Insurance provides risk coverage to the insured family in form
of monetary compensation in lieu of premium paid.
2. Difference plans for different uses: Insurance companies offer a different
type of plan to the insured depending on his need for insurance. More benefits
come with the more premium.
3. Cover for Health Expenses: These policies also cover hospitalization
expenses and critical illness treatment.
4. Promotes Savings/ Helps in Wealth creation: Insurance policies also come
with the saving plan i.e. they invest your money in profitable ventures.
5. Guaranteed Income: Insurance policies come with the guaranteed sum
assured amount which is payable on happening of the event.
6. Loan Facility: Insurance companies provide the option to the insured that
they can borrow a certain sum of amount. This option is available on selected
policies only.
7. Tax Benefits: Insurance premium is tax deductible under section 80C of the
income tax Act, 1961.

Types of Life Insurance Policies

1. Term insurance plan
As the name says Term insurance plan are those plan that is purchased for a
fixed period of time, say 10, 20 or 30 years. As these policies don’t carry any
cash value their policies do not carry any maturity benefits, hence their policies
are cheaper as compared to other policies. This policy turns beneficial only on
the occurrence of the event.
2. Endowment policy
The only difference between the term insurance plan and the endowment policy
is that endowment policy comes with the extra benefit that the policyholder will
receive a lump sum amount in case if he survives until the date of maturity. Rest
details of term policy are same and also applicable to an endowment policy.
3. Unit Linked Insurance Plan
These plans offer policyholder to build wealth in addition to life security. Premium
paid into this policy is bifurcated into two parts, one for the purpose of Life
insurance and another for the purpose of building wealth. This plan offers to
partially withdraw the amount.
4. Money Back Policy
This policy is similar to endowment policy, the only difference is that this policy
provides many survival benefits which are allotted proportionately over the period
of the policy term.
5. Whole Life Policy
Unlike other policies which expire at the end of a specified period of time, this
policy extends up to the whole life of the insured. This policy also provides the
survival benefit to the insured. In this type of policy, the policyholder has an
option to partially withdraw the sum insured. Policyholder also has the option to
borrow sum against the policy.
6. Annuity/ Pension Plan
Under this policy, the amount collected in the form of a premium is accumulated
as assets and distributed to the policyholder in form of income by way of annuity
or lump sum depending on the instruction of insured.

Claim Settlement Process

On the happening of the event, the beneficiary is required to send claim
intimation form to the insurance company as soon as possible. Claim intimation
should contain details such as Date, Place, and Cause of Death. On successful
submission of claim intimation form, an insurance company can ask for additional
information about
1. Certificate of Death
2. Copy of Insurance Policy
3. Legal Evidence of title in case insured has not appointed a beneficiary
4. Deeds of assignment
On successful submission of all the document, the insurance company shall
verify the claim and settle the same.

Principles of Life Insurance?

Life insurance is based on a number of principles that are tailored to meet market
conditions and ensure insurance companies make profits, while offering security
policies to insured individuals.
There are broadly four major insurance principles applied in India, these
being:

 Insurable Interest – This principle pertains to the level of interest an

individual is expected to have in a particular policy. The interest could be a
family bond, a personal relationship and so on. Based on the interest
level, an insurance company can choose to accept or reject an application
in order to protect the misuse of a policy.

 Law of large numbers – This is a theory that ensures long-term stability

and minimises losses in the long run when experiments are done with
large numbers.

 Good faith – Purchasing an insurance is entering into a contract between

company and individual. This should be done in good faith by providing all
relevant details with honesty. Covering any information from the insurance
company may result in serious consequences for the individual in the
future. This being said, the insurer must explain all aspects of a policy and
ensure that there are no unexplained or hidden clauses and that the
applicant is made aware of all terms and conditions.

 Risk & Minimal loss – Insurance is a risky and companies have to do

business and make profits keeping in mind the risk factor. The principle of
minimal risk states that the insured individual is expected to take
necessary action to limit him/her self from any hazards. This includes
following a healthy lifestyle, getting a regular health check-up and more.