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BY,ANIL KUMAR SINHA, PROFESSOR
KEJRIWAL INSTITUTE OF MANAGEMENT &
DEVELOPMENT STUDIES
CLAIM SETTLEMENT
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WHAT IS CLAIM
A claim is demand that the insurer redeem
the promise made in the contract.
The insurer then has to perform its parts ofthe contract, i.e settle the claim, after
satisfying itself that all the conditions and
requirements for the settlement of the claim
have been complied with.
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TYPE OF CLAIMS
In insurance there are three types of claims:
1. Maturity claims
2. Survival benefit claim3. Death claims
4. Rider benefits claim.
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MATURITY CLAIM
Some life insurance plans, such as endowment plansand whole life plans, promise to pay the insured aspecific amount at the end of the plan, if they survive
for the plans entire term.This amount is known as the maturity benefit claimamount.
The amount payable on maturity is the sum insured
plus any accumulated bonuses, minus any outstandingpremiums and interest thereon.
Action on maturity claims is normally initiated by theinsurance company itself. It will know from its recordswhich policies will mature each month and will normallysend an advance notification to the person insured.
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MATURITY CLAIM
The insurer is expected to make the payment onthe maturity date. Post-dated cheques are usually
sent a few days in advance of the maturity date,
provided a signed discharge form has been
received.
If the policy is reported lost, then the insurer may
settle on the basis of indemnity. This is possible
because no further obligations remain under the
policy.
There is no need to insist to get issued duplicate
policy.
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Survival benefit Claim
When it comes to making survival benefitspayments, the procedure is similar to the
payment of maturity claims. Action will be initiated
by the insurer and post-dated cheques will be
sent in advance.
If the policy is reported to be lost, a duplicate
policy may be provided on which an endorsement
will be made regarding the settlement of the
survival benefits.
For money-back policies the insurance company
makes specific payments to the policyholder at
specific times during the term of the policy. These
payments are known as survival benefits.
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Assigned Policy
If the policy holder had taken out any loans
against the policy and the policy has been
assigned to any financial institution and insurance
company has marked lien.
The outstanding amount of the loan, the interest
and any outstanding premium and interest
thereon will be deducted before the final amount
is paid.
If the assignment is conditional, reverting to the
policyholder on maturity, the insurance company
can make the payment to the policyholder. It willbe rudent, however, to first check that the
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Death claim
A death claim is where the life insurance company pays
the sum insured to the nominee/beneficiary on the
death of the insured during the term of the plan.If the policy is a participating policy, the insurance
company will also pay the bonuses accumulated until
then.
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Death claim
In the case of an ULIP, should the insured die, theinsurance company pays the higher of the sum
insured or the fund value (or, in the case of some
insurance companies, both the fund value and
the sum insured is paid).
There are certain policies where the benefit is not
paid on death but on a specified date as chosen
by the life insured at the time of taking out the
policy.
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Death claim
For example, a policy where the objective is to provide
for a lump sum amount for daughters marriage or
sons higher education, the amount is not paid on the
death of the life insured.but become payable on the date specified, for
When the son/daughter reaches the age of 18 or 21.
This is, of course, as per the terms and conditions of
the policy and the option exercised by the proposer.
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Rider benefit
A payment under a rider is made by the insurancecompany on the occurrence of a specified eventaccording to the rider terms and conditions. Forexample:
Under and accidental death benefit (ADB) rider, inthe event of the death of the insured, theadditional sum insured under this rider is paid
Under critical illness (CI) rider in the event of
diagnosis of a critical illness, a specified amountis paid as per the rider terms and conditions. Theillness should be covered in the list of CIsspecified by the insurance company (the list maydiffer among insurers):
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Under a hospital care rider the insurance
company pays the treatment costs in the event of
hospitalization of the insured, subject to the terms
and conditions of the rider.
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Valid claim
Once an insurance company receives notificationof a claim it will want to be sure that the claim isvalid before it makes a payment. It will do this bychecking the following:
Was the insurance policy in force when the eventoccurred?
Has the insured event taken place?
Have the original policy document, a completed
claim form and all the other required documentsbeen submitted?
Has the policyholder performed their part withregards to age admission and the disclosure ofmaterial facts relevant to the policy? These will beinvestigated by the insurance company as part of
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claim
Unless the insurance company knows about thedeath, it will not pay out the sum insured.
Therefore the first thing that must happen, after the
death of the life insured, is for the insurance
company to be advised that the death has taken
place.
The notification may be sent by the nominee,
assignee, relative, the individuals employer or the
insurance agent,
However, notification of the death is not enough-
the insurance company will need proof, not just that
the death actually took place, but that the life wasinsured b the com an . Therefore, the next dut
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Documents to File for Insurance
Claim
The policy document.
Deeds of assignments/reassignments: If the policy
has been assigned, then the insurance company
needs to know this so that it can make the payment to
the correct person. Proof of age, if age is not already admitted.
The death certificates (Proof of Death)
The claimants statement.
Legal evidence of title, if the policy is not assigned or
nominated.
The discharge form, sent by the insurance company,
must be executed and witnessed and returned to the
insurance company
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Precautions to Settle Death claims
Unlike the first two types of claim, the processhere is started by the claimant, who will advisethe insurance company of the death of the lifeinsured. The insurance company will then wait for
the relevant documentation check it, and carryout any further investigations that it deemsnecessary. Once it is satisfied that the claim is avalid one, it will send the sum insured to thenominee or beneficiary within a reasonable
timeframe, i.e. it will settle the claim.Caution points at the time of handling death claims
Death claims are where most fraud occurs, andtherefore insurers tend to be more cautious when
handling them. The following are some
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Precautions to Settle Death
claims
If the notification of death is received from a stranger,there is reason to ask: why has it not come from afamily member or a relative?
Too many enquires about progress in the settlementof the claim should raise doubts.
If the notification of death is received three years afterthe date of death, these is reason to be suspicious. Insuch a scenario, investigation in the same way as foran early death claim would be desirable in all cases,
to rule out the possibility of a fraud. If the reasons forthe delay in making the claim are not fully satisfactory,the plea that the claim is timebarred can be made.
While insurers, as a matter of good faith, shouldexpedite claims settlement, as a trustee of the
policyholders premiums and theircompanys finances
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UN Natural Death Cliaim
If the life insured had an unnatural death, such asan accident, by suicide or by an unknown cause,
the following will also be looked into:
Police first information report (FIR);
Panchanama (inquest);
Forensic report;
Post mortem report; and
Coroners report; Depending on the initial evidence, a special
inquiry may ordered.
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Presumption of death
Proof of death is essential for a claim to besettled. However, sometimes a person is reported
missing without any information about their
whereabouts. What happens to the life insurance
of such and individual can a claim be made orwould an insurance company be suspicious that
all such claims were fraudulent?
Sections 107 and 108 of the Indian Evidence Act
1972 deal with presumption of death: under act ifan individual has not been heard of for seven
years they are presumed to be dead. This has the
following effect on the actions of the life insurance
company:
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Presumption of death
If the nominee or heirs claim that the life insuredis missing and must be presumed to be dead,insurers insist on a decree from a competentcourt.
However, the insurance may also act of its own,without a decree of the court, if reasonably strongcircumstantial evidence exists to show that thelife insured could not have survived a fatalaccident or hazard.
It is necessary that the premiums should be paiduntil the court decrees presumption of death:although insurers may, as a concession, waivethe premiums during the seven year period. This
is at the discretion of the individual insurance
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settlement
IRDA has laid down guidelines for the settlementof claim. These are included in the IRDA(Protection ofPolicyholders Interests) Regulation2002 and are as follows:
A life insurance policy shall state the primarydocuments which are normally required to besubmitted by a claimant in support of a claim.
A life insurance company, upon receiving a claim,shall process the claim without delay. Any queriesor requirement of additional documents, to theextent possible, shall be raised all at once andnot in a piecemeal manner, within a period of 15days of the receipt of the claim.
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A claim under a life policy shall be paid or bedisputed giving all the relevant reasons, within 30
days from the date or receipt of all relevant
papers and clarifications required.
Where in the opinion of the insurance companythe circumstances of a claim warrant an
investigation, it shall initiate and completed such
investigation at the earliest, in any case not later
than 6 months from the time of lodging the claim.
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Subject to the provisions of section 47 of the Act,where a claim is ready for payment but the payment
cannot be made due to any reasons of a proper
identification of the payee, the life insurer shall hold
the amount for the benefit of the payee and suchamount 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).
Where there is a delay on the part of the insurer in
processing a claim for a reason other than the one
covered by sub regulation (4), the life insurance
company shall pay interest on the claim amount at a
rate which is 2% above the bank rate prevalent at the
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