CHAPTER-1

INTRODUCTION TO INSURANCE

1.1 THE MEANING OF INSURANCE

1.2 DEFINITION OF INSURANCE

1.3 BASICS OF INSURANCE

1.4 SCOPE OF INSURANCE

1.5 NATURE AND CHARACTERISTICS OF INSURANCE

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 Introduction to Insurance in India

1.1 THE MEANING OF INSURANCE:-

The meaning of insurance is important to understand for anybody that is considering buying an
insurance policy or simply understanding the basics of finance. Insurance is a hedging
instrument used as a precautionary measure against future contingent losses. This instrument is
used for managing the possible risks of the future.

Insurance is bought in order to hedge the possible risks of the future which may or may not
take place. This is a mode of financially insuring that if such a incident happens then the loss
does not affect the present well-being of the person or the property insured. Thus, through
insurance, a person buys security and protection.

A simple example will make the meaning of insurance easy to understand. A biker is always
subjected to the risk of head injury. But it is not certain that the accident causing him the head
injury would definitely occur. Still, people riding bikes cover their heads with helmets. This
helmet in such cases acts as insurance by protecting him/her from any possible danger. The
price paid was the possible inconvenience or act of wearing the helmet; this ie equivalent to the
insurance premiums paid.

Though loss of life or injuries incurred cannot be measured in financial terms, insurance
attempts to quantify such losses financially. Insurance can be defined as the process of
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reimbursing or protecting a person from contingent risk of losses through financial means, in
return for relatively small, regular payments to the insuring body or insurance company.

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1.2 DEFINITION OF INSURANCE:

The act of insuring, or assuring, against loss or damage by a contingent event; a contract
whereby, for a stipulated consideration, called premium, one party undertakes to indemnify or
guarantee another against loss by certain specified risks. Cf. Assurance,

The other definition of the insurance is the premium paid for insuring property or life and the
sum for which life or property is insured.

Insurance can range from life to medical to general (residential, commercial property,
natural incidents, burglary, etc).

 Lifeinsurance
It insures the life of the person buying the Life Insurance Certificate. Once a Life
Insurance is sold by a company then the company remains legally entitled to make
payment to the beneficiary after the death of the policy holder.

 MedicalInsurance
This is also known as medic aim. Here, the policy holder is entitled to receive the
amount spent for his health purposes from the insurance company.

 GeneralInsurance
This insurance type involves insuring the risks associated with the general life such as
automobiles, business related, natural incidents, commercial and residential properties,
etc. 3
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1.3 BASICS OF INSURANCE:-

Insurance provides financial protection against a loss arising out of happening of an uncertain
event. A person can avail this protection by paying premium to an insurance company. A pool is
created through contributions made by persons seeking to protect themselves from common risk.
Premium is collected by insurance companies which also act as trustee to the pool. Any loss to
the insured in case of happening of an uncertain event is paid out of this pool. Insurance
works on the basic principle of risk-sharing. A great advantage of insurance is that it
spreads the risk of a few people over a large group of people exposed to risk of similar
type.
Insurance is a contract between two parties whereby one party agrees to undertake the risk of
another in exchange for consideration known as premium and promises to pay a fixed sum of
money to the other party on happening of an uncertain event (death) or after the expiry of a
certain period in case of life insurance or to indemnify the other party on happening of an
uncertain event in case of general insurance.

The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is
covered is known as the 'insured' or 'assured'.

1.4 Scope of Insurance

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The scope of insurance is as follows:

Every individual is exposed to innumerable risks connected with life, business and his/her
vocation. Since insurance is a means to avoid the consequences of risks, the scope extends to
many areas. The subject matter and scope of insurance covers losses due to fire, life, marine and
accident. People are inventing new plans to face financial loss. The financial loss results from
uncertain events. Insurance provides the necessary defense or ways to save from these losses. We

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can take the example of the life of a factory worker. The workers in factories come from far of
villages. They have small income and little savings. If the worker falls sick, he loses his income
and also needs more money for medical treatment. Employees State Insurance takes care of the
worker in such a case by providing compensation and meeting the medical expenses. There are
many cases like this. In agriculture, the farmers face frequent crop failures. Crop failure reduces
the income of the farmer. The insurance company may insure against the risk of crop loss. In
India, The General Insurance Corporation issues policies against crop failure and loss of
livestock.

1.5 Nature and Characteristics of Insurance

The characteristics of insurance are as under:

(1) A co-operative device: “All for one and one for all” is at basis for a co-operative
device. The insurance is a method wherein large number of persons exposed to a
similar risk is covered and risk is spread over among the larger insurable public.
Therefore, “Insurance is a social or co-operative method wherein losses of one are
borne by the society.”
(2) Insurance is a contract: Insurance is a valid contract between the insured on the one
side and the insurer on the other side. It has all the essential elements of a valid
contract and is enforceable in the court of law.
(3) Consideration: Like other contracts, there must be lawful consideration in insurance
also. This consideration is in the form of premium, which the insured agreed to pay to
the insurer.
(4) Protection against the risk: The insurer agrees to indemnify the insured upon the
happening of a particular event. Thus, insurance is a protection against the risk.
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(5) A device to spread the risk: Insurance is a device to spread the risk among the large
numbers of insuring public. Thus, the losses of few are to be shared by many.
(6) Based upon certain principles: The insurance is based upon certain principles. They
are insurable interest, utmost good faith, indemnity, subrogation, contribution etc.

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 CHAPTER -2
INTRODUCTION TO LIFE INSURANCE

2.1 ORGANIZATIONAL STRUCTURE OF LIC

2.2 BASIC STRUCTURE OF LIC

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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.
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
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proper advice from insurance agents/insurer so that a right product could be chosen to suit
particular financial needs.

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 Life Insurance Corporation of India

The Life Insurance Corporation (LIC) was established about 44years 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. Training facilities at
all levels. Attheapex is the Management Development Institute, seven Zonal Training Centers
and 35 Sale straining 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’s. 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, meet the various life insurance Needs
of the community that would arise in the changing social and economic environment.

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 2.1 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
omission 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 insurance organization is associated with the marketing
of policies, underwriting of policies, claims payment, claims defending and stffmatters. The
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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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 2.2 Basic structure of LIC

Today, most of functions, nearly 90%, related to the marketing and other related activities of the
insurance consumers are dealt and handled at the branch level. The branch office, depending
upon its business, is headed by a manager and each function of insurance business like
marketing, underwriting of policies, accounts, claims payments, staff and administration matters
are 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 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 staffer 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
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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.

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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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 CHAPTER -3
CLAIMS IN INSURANCE

3.1 CLAIMS IN INSURANCE

3.2 CLAIMS MANAGEMENT

3.3 SYSTEM OF CLAIMS MANAGEMENT

3.4 STAGES IN CLAIMS SYSTEM

3.5 TYPES OF CLAIMS

3.6 GUIDELINES FOR CLAIMS SETTLEMENT BY

IRDA

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3.1Claims in Insurance

An insurance claim is the actual application for benefits provided by an insurance company.
Policy holders must first file insurance claim before any money can be disbursed to the hospital
or repair shop or other contracted service. The insurance company may or may not approve the
claim, based on their own assessment of the circumstances. Individuals who take out home, life,
health, or automobile insurance policies must maintain regular payments called premiums to the
insurers. Most of the time these premiums are used to settle another person’s insurance claim or
to build up the available assets of the insurance company. When claims are filed, the insured has
to observe the settled rules and procedures and the insurer has also to reciprocate in a similar
manner by undertaking appropriate steps for speedy disposal of claims. It is true that claims
settlement is complex in nature, but it is the driving force to plant confidence in the hearts of
people, in general and beneficiaries in specific. Insurance claim is a right of insured under a
contract of insurance. Insurance contract is a contract by which one party called the insurer
promises to save the other party, the insured on payment of consideration known as the premium.
The insurer promises to save the insured are nominees/assignees of the insured on happening of
event or risk insured. Disputes crop up in the payment of claim when the insurer and the insured
understand the process of claims payment in a different way. Claims settlement is an integral part
of the insurance business 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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3.2 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 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. Incarriers.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 challenge – experts say that 75 percent of customers leave their insurer due to claims issues.

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3.3 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
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claims investigation, claims negotiation, claim settlement and claim payment.

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3.4Stages in claims system:

The claims handling is the integrated part of the claims management and executes the decisions
made by the claims management machinery of an insurance company. Though claims
management and claims handling are generally the same externally, they are different in nature.
Claims management 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.

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 16
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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 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

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customer service. The insurer’s commitment to the service of the customer is a part of the claims
management.

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 acclaim.

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, 17
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the life insurer shall hold the amount for the benefit of the payee and such an amount
shall earn interest at the rate applicable to a savings bank account with a scheduled bank
(effective from 30 days following the submission of all papers and information).

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 5) Where there is a delay on the part of the insurer in processing acclaim for a reaso
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.

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 18
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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.

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 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 formed Discharge (Form No. 3825)
to be executed by the policyholder,
Is also sent along with the Maturity Intimation.

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

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 properlyfilled, 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.
5) Assignment / Reassignment Deed, if any: In case the policy or any Deed of Assignment
or Reassignments lost by the policyholder, he has to submit an indemnity bond along
with a reliable surety of sound financial particular format (Form 3815). In such a case the
claim is settled in the absence of the policy document.

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

Policies.
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7) In due course, LIC sends a cheque to the policyholder for the money due to him as per
the terms of the policy.

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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.
The letter of intimation of death should contain the following 20
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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

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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 offices end 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 diedor was treated by the
hospital authorities.
Certificate of burial or cremation to be given by an independent person who attended the
funeral and has seen the dead body.
Certificate from the employer if the policyholder was in employment at the time of death.
3) Submission of Proof of Age
The claimant should submit age proof of the policyholder to LIC in case it has not already been
submitted.
L.I.C. accepts following documents as valid age proofs:
(i) Horoscope of the assured
(ii) Certificate relating to the baptism ceremony among Christians
(iii) Birth certificate from the Municipal Corporation
(iv) High School Certificate
(v) Service book.

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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.

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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.
In due course, LIC sends the cheque for the amount due to the person entitled to receive the
same.

5) 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)
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xi. Certificate of Identity and burial by a person who attended the funeral on Claim Form ‘C’ (F
No. 3785 revised)

6) Non early claims: If death occurs exactly or after 3 years from the date of the policy the

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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 payables 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-gratiaIf the death
occurred between six months and one year from the due date of the first unpaid premium date,
claim may be considered to the extent of the proportionate notional paid-up value on the basis of
actual premium paid.

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 Claims Management 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 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. 24
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 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

24
 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.

3.5 Types of claims

Understanding the requirements for various life insurance benefits (claims) is important for the
customers. The overriding condition on claims is the payment of premiums i.e. claims are only
payable if premiums are paid up to date. There are various types of claims under life policies.
The most common claims include: The general requirements for each of these claims are briefly
explained below.

Death Claims:
This is a claim paid when then the person insured dies. For a death claim to be paid the following
basic conditions must be fulfilled.
➢ The policy document, original death certificate, burial permit copy of the ID of the
deceased must be provided to the insurance company.
➢ 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.
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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 10years 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 encashing 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.

Policy Loans: 26
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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 policy loan directly from a life
company entails assigning the policy toothed 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.

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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.

3.6 Guidelines for claims settlement by IRDA

Proposal for insurance:
1) Except in cases of a marine insurance cover, where current market practices do not insist on a
written proposal form, in all cases, 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.
2) 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.
3) 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.
4) 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.
5) Wherever the benefit of nomination is available to the proposer, in terms of the Act or the
27
conditions of policy, the insurer shall draw the attention of the proposer to it and encourage the
Page

prospect to avail the facility.

6) 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:

27
a) The name of the plan governing the policy, its terms and conditions;
b) Whether it is participating in profits or not;
c) The basis of participation in profits such as cash bonus deferred bonus, simple or compound
reversionary bonus;
d) The benefits payable and the contingencies upon which these are payable and the other terms
and conditions of the insurance contract;
e) The details of the riders attaching to the main policy;
f) The date of commencement of risk and the date of maturity or date(s) on which the benefits
are payable;
g) 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.
h) The age at entry and whether the same has been admitted;
i) The policy requirements for
(a) Conversion of the policy into paid up policy,
(b) Surrender
(c) Non-forfeiture and
(d)revival of lapsed policies;
j) Contingencies excluded from the scope of the cover, both in respect of the main policy and the
riders;

k) 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;
l) Any special clauses or conditions, such as, first pregnancy clause, suicide clause etc.; and
m) The address of the insurer to which all communications in respect of the policy shall be sent. 28
Page

n) The documents that are normally required to be submitted by claimant in support of a claim
under the policy.

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

28
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 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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29
 CHAPTER -4
IMPORTANT TERMS IN CLAIMS

4.1 MATURITY CLAIMS

4.2 DISPUTE IN PAYMENT OF MATURITY CLAIMS:

4.3 THE FACTORS THAT AFFECT THE CLAIMS

SETTLEMENT

4.4 DELAY IN CLAIMS SETTLEMENT

4.5 ROLE OF AGENTS IN CLAIMS SETTLEMENT

4.6 ROLE OF SURVEYORS AND ASSESSOR IN

CLAIMS SETTLEMENT

4.7 FRAUDS IN CLAIMS SETTLEMENT

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4.1 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 whom the holder of the policy has transferred
the policy. The persons entitled to claim under these policies can be:
The assured himself.
The payee, whose name appears in the benefit schedule of the policy as a party interested.
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
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.

4.2 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. 31
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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 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.
Factors affecting the claims settlement

4.3The 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
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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
insurancecompany.
 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.

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 The assured should suffer loss, actual or constructive, to getcompensation. 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.
 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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4.4 Delay in claims settlement
The time value for the settlement of a claim is of importance. All claim papers have to be
submitted within a limited period mentioned in the policy document or otherwise stated in the
Act. In some cases, the death of a person or the accident of vehicle has to be intimated
immediately either orally or in person, either by the policyholder or the claimant or by the
representative of the claimant? The time element is very important in the claims payment for the
following reasons:
 The delay in the claims settlement will have an adverse impact on the goodwill and
marketing of the insurance.
 The cost of claims will increase with the extension of time.
 The insurer may be asked to pay the interest on the unpaid insurance amount because of
the delay. The court may direct the insurer to pay the costs of the case to the assured,
which results in mounting up of costs.
 The delay in payment may lead to litigation which is expensive.
 Unproductive use of manpower to defend, expenses incurred andwaste of time on
litigations will be an extra burden on the insurer.
 Litigations will affect on the productive areas of the business particularly in the
marketing of the insurance business.
 The delay also leads to the increasing number of cases with consumer protection
councils. Thus the delay in the settlement of the claims will have an impact on thepresent
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:

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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

34
forms in full: If the claim forms are not properly filled, they will fail to provide the settle the
claims and as a result the claim settlement will be delayed for want of information. If sufficient
proof or supporting documents are not submitted along with the claim form to facilitate claim
assessor to know the date of the event or the cause of the event, claim settlement may be delayed.
 The insurer may not get the cooperation of the insured or the
 Claimant to finalize the claim or arrive at some compromise.
 Destroying the evidences, with or without intention that could have otherwise facilitated
the estimation of the loss payable under the claim.
 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 claimssettlement, 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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4.5 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 succeeds 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 Act1938 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 agent’s 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
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negotiations and mediations to retain the customer.

36
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 beguiled 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 business. Thus the agent under the changing economic scenario can
achieve their objectives by practicing psycho-marketing strategies. Their objectives are survival
and growth. Maximization of business is an end to achieve these objectives.
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4.6 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. 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:

i. 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.
ii. Maintaining confidentiality and neutrality without jeopardizing the liability of the insurer and
claim of the insured;
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iii. 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;

38
iv. Conducting spot and final surveys, as and when necessary and comment upon franchise,
excess/under insurance and any other related matter;
v. surveying and assessing the loss on behalf of insurer or insured;
vi. Assessing liability under the contract of insurance;
vii. Pointing out discrepancy, if any, in the policy wordings;
viii. Satisfying queries of the insured/insurer and of persons connected thereto in respect of the
claim/loss;
ix. Giving reasons for repudiation of claim, in case the claim is not covered by policy terms and
conditions;
x. taking expert opinion, wherever required;
xi. 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
aforementioned period can be extended with the consent of the insured and the insurer.

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.

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4.7 Frauds in claims settlement

Insurance fraud is any deliberate deception/dishonesty committed against or by an insurance

company, insurance agent, or consumer for unjustified financial gain. It occurs and may be
committed at different points in the transaction by different parties such as policy owners, third-
party claimants, intermediaries and professionals who provide services to claimants. The nature
of these frauds may vary from an inflated/exaggerated value of a legitimate claim to a
completely fabricated or bogus claim where losses never really occurred. Promises made with no
intention to perform them can be treated as a fraud.
The essential components of an insurance fraud are:-
 Intent to deceive
 Desire to induce insurance company to pay more than it otherwise would. The fraudulent
claims may be of two categories:
 The cause or the claim itself is fraudulent
 The claim may be genuine but the method of calculation or the evidences, or the
information submitted may be fraudulent in nature.
As such any fraud made by the insured or the insurer in concluding the insurance
contract or the claims settlement, makes the entire contractviocable 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: 40
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1) Creating a fraudulent claim
2) Overstating amount of loss
3) Misrepresenting facts to receive payment
4) Bogus agents/Sale of forged cover notes

40
How to protect yourself from a fraud:

1. Be wary of unregistered insurance agents. Before purchasing insurance, contact your

insurance company to ensure the agent is an authorized agent.
2. Avoid paying premiums in cash. Opt to pay for premiums by cheque or money order. Made
payable to the insurance company instead of the agent.
3. Make sure you receive a written policy after payment of your first premium.
4. Immediately examine your insurance policy to ensure the coverage is what you have requested
for and ensure that the premium amount paid is reflected in the cover note/policy. Request for a
receipt as evidence of payment of premium.
5. Do not sign a blank insurance application, or insurance claim form.
6. Be suspicious if the price of insurance seems suspiciously low from other insurance
companies.
7. If you meet with an accident, be careful of strangers who offer you quick cash or urge you to
deal with specific workshops, medical clinic or law firm. They could be part of a fraud syndicate.
8. Insist on detailed bills for repairs and medical services rendered and check for accuracy.
9. Discreetly contact your insurance company or the police if you are being defrauded or have
been/are being persuaded to take part in a fraud. Provide as many details as possible about the
incident -name of the individual(s) involved, amount, date(s), and type of fraud.

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CHAPTER 5.
CASE STUDY

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Case study
(1)
Life Insurance Corporation of India v/s Mrs. Sunanda KanthaleAccording to complainant
Sunanda Kanthale, her husbandManoharrao Kanthale who worked as a stores superintendent
with theAmravati branch of Maharashtra State Corporation, purchased an insurance policy for Rs
20,000 on November 28, 1992. The policy which was a non-medical one, was scheduled to
mature on November 24, 2004, she said. Unfortunately Manoharrao passed away on October 22,
1993, 10 months and 25 days from the date of purchasing the instrument. Being the nominee in
the policy, she asked for her claim for an amount of Rs 40,000 (under double benefit provision in
accident cases) and made an application to the Akola Branch Manager of LIC. The senior
manager of LIC (Amravati Division) however refused to settle the claim vide his letter dated
August 4, 1994. As the policy was a non-medical one, the reason given by the official for not
settling the claim was also a bogus one, she alleged. Sunanda then wrote to the area manager of
LIC, Mumbai, justifying her claim. The Mumbai office too (vide letter datedApril 20, 1995)
refused to settle the claim, Kanthale added. She then lodged a complaint with Akola District
Consumers Grievancesredressal forum. In the complaint, she appealed to the forum to issue the
necessary directives to the LIC for paying Rs 40,000 along with 18 percent interest, a
compensation of Rs 50,000 towards mental tension caused Defending the stand taken by the
company, the LIC refuted all the allegations made by Sunanda. Manoharrao, who held the
policy, had keptthe information about his health a secret while purchasing the instrument, the
company alleged. The forum referred to columns 14 and 26 in the application form where the
policy purchaser had made statements about his health. The form was duly singed by Dr B R
Jain, the forum said. The LIC official’s produced proofs before the forum regarding heart
disorder of the policy holder and sick leave availed by him after taking the policy. However, they
could not prove that Manohar was not well on the day of purchasing the policy. The District
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Consumers Grievances Redressal Forum has directed Senior Divisional Manager of Life
Insurance Corporation (LIC), Amravati, AreaManager, Mumbai, and Branch Manager, Akola, to
pay Rs 20,000 to Sunanda Kanthale towards insurance claim besides interest on the amount from
October22, 1993, till the date of payment at a rate of 12 per cent. The forum has also
Directed LIC to pay compensation of Rs 10,000 to the woman for causing mental tension to her
during the four years, after her husband’s death, in releasing the insurance amount.

43
If the insurance company failed to pay the compensation within two months from the date of
receipt of copy of the judgment, the company will be liable to pay interest at a rate of 18 per cent
on the amount till final payment besides legal expenses of Rs 250, the forum ruled. The forum
also ruled that though the compensation amount, demanded by the complainant, appeared
exaggerated, considering the troubles she had to face in the last four years for settlement of
claim; the company should pay her Rs 10,000 towards compensation.

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Case study (2)

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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 indecember 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, misrepresentation about his health. "The burden of
proving that there was suppression of material fact and that it was made fraudulently" lied on
likened it had failed to prove it, the forum observed. LIC therefore was legally and morally duty-
bound to pay the claim, it said. Consumer disputes redressal forum, Ahmadabad, has directed
LIC of India to pay up Rs. 50,000 plus 12 per cent interest for seven years, as insurance money
due to her after her husband's death. The forum also ordered payment of Rs. 5000 for causing
mental agony, hardship and inconvenience to Neelamben. It granted Rs. 3000 as cost.

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Case study (3)

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Life Insurance Corporation of India v/s Lily Rani RoyThe petitioner has purchased a life
insurance policy from the appellate and premiums were paid regularly. The maturity of the said
policy was in 1978. Because of some personal reasons the claim was not filed. The LIC of India
rejected the payment on a plea that claim is time barred claim and as such the claim will not be
paid. The petitioner had filed a complaint with Consumer Council with are quest to direct the
LIC for the payment of the maturity claim as the policyholder had paid the entire premium till
the date of the maturity and has the right to receive the claim amount. Assured held LIC guilty
under Consumer Protection Act, 1986 Section (I) (g) for deficiency in service. But, the LIC of
India pleaded that the Corporation will be maintaining the records for a period of five years only
and the Corporation has received the claim notice from the petitioner in 1990which is far beyond
the time. The LIC also produced a photo copy of the maturity claims payment register showing
the payment of the complainant’s money. After examining all the facts, the State forum has
declared that the petitioners cannot claim the payment of policy as it is already time barred. On
the decision of the State Commission, the petitioners have filed a petition with the National
Commission. The National Commission, after verifying the terms of the policy, has opined that
though the payment of claim is time barred, the insurance company should have given notice to
that effect or should include clause in the policy document stating that the time barred maturity
claims will not be paid. As the Corporation has filed to bring this information to the notice of the
policyholder or failed to create the awareness among the policyholders, it has failed in its duties
and as such it is liable to pay the claim to the petitioners. Thus, the National Commission has
ordered the payment of time barred maturity claims.

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Conclusion

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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
theindustry.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.

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 BIBLIOGRAPHY

BOOKS:- (1) Environment and Management of

Financial Service
By- P.K. BANDGAR

(2) LIC OF INDIA

By –RAJAN VAIDYA

WEBLIOGRAPHY

www.insuremagic.com
www.licindia.com
www.icicprulife.com
www.insurancewatch.com
www.insuranceonline.com
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Search engines:
www.google.com
www.ask.com

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