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Claims Management in LIC

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The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a market again. Tracing the
developments in the Indian insurance sector reveals the 360-degree turn
witnessed over a period of almost two centuries.
Today Insurance Companies in India have grown manifold. The insurance sector in
India has shown immense growth potential. Even today a giant share of Indian
population nearly 80% is not under life insurance coverage, let alone health and
non-life insurance policies. This clearly indicates the potential for insurance
companies to grow their market in India.
In simple terms it is a contract between the person who buys Insurance and
an Insurance company who sold the Policy. By entering into contract the Insurance
company agrees to pay the Policy holder or his family members a predetermined
sum of money in case of any unfortunate event for a predetermined fixed sum
payable which is informal term called Insurance Premiums.
Insurance is basically a protection against a financial loss which can arise
on the happening of an unexpected event. Insurance companies collect premiums
to provide for this protection. By paying a very small sum of money a person can
safeguard himself and his family financially from an unfortunate event.

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Definition of insurance:
Insurance in its basic form is defined as "A contract between two parties
whereby one party called insurer undertakes in exchange for a fixed sum
called premiums, to pay the other party called insured a fixed amount of money on
the happening of a certain event."

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 losses by way of a
benefit in the case of life insurance.
It is the uncertainty that is risk, which gives rise to the necessity foursome
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 tithe same risk. This is the essence of insurance the
sharing of losses and substitution of certainty for uncertainty.
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There are a variety of life insurance products to suit to the needs of various
categories of peoplechildren, youth, women, middle-aged persons, old
people; and also rural people, etc. Life insurance products could be purchased
from registered life insurers notified by the IRDA. Insurers appoint insurance
agents to sell their products. Public who are interested to buy life insurance
products should receive proper advice from insurance agents/insurer so that a right
product could be chosen to suit particular financial needs.
Claims in Insurance
An insurance claim is the actual application for benefits provided by an
insurance company. Policy holders must first file an insurance claim before any
money can be disbursed to the hospital or repair shop or other contracted service.
The insurance company may or may not approve the claim, based on their
own assessment of the circumstances. Individuals who take out home, life,
health, or automobile insurance policies must maintain regular payments called
premiums to the insurers.
Most of the time these premiums are used to settle another persons
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
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the insured are nominees/assignees of the insured on happening of event or risk
insured. Disputes crop up in the payment of claim when the insurer and the insured
understand the process of claims payment in a different way. Claims settlement is
an integral part of the insurance business which is a service industry and its growth
is interwoven with the people, the customers and consumers of service. It is
inevitable for the insurance company to protect and guard the interests of the
policyholders. An insurance claim is the only way to officially apply for benefits
under an insurance policy, but until the insurance company has assessed the
situation it will remain only a claim, not a pay-out.

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Claims Management:
Many insurers have recognized the need to improve the efficiency of their
claims management process. They have streamlined processes, eliminated paper-
based forms and redistributed work to match the demands to skills. The
objective of their efforts is to lower costs, while also increasing overall throughput.
Efficiency improvements make tasks quicker and less costly to execute. However,
to realize even greater improvements in the claims handling process, insurers must
also focus on the effectiveness of their claims decisions.
Claims handling costs typically represent 10% to 15% of net earned
premium; in contrast, claims payouts represent 40% to 65%.Insurers that
expand their focus to include effective as well as efficient claims processing will
find a far larger pool of savings opportunities. Technology can play a significant
role by providing integrated channels for communication and collaboration. This
would help the insurance company increase employee productivity by reducing
cycle time and defect rate and also increase employee participation and
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. Infect, losses and loss expenses absorb 80% of
premium collected by carriers.
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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 challenged experts say that 75 percent of
customers leave their insurer due to claims issues.

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.
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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, and carry out claims investigation, claims negotiation, claim
settlement and claim payment.

Stages in claims system:
The claims handling is the integrated part of the claims management and executes
the decisions made by the claims management machinery of an insurance
company. Though claims management and claims handling are generally the same
externally, they are different in nature.
Claims management:
Claims management is a managerial function in which the insurer has a
definite role to play in analysis of data, processing of application, decision-
making, budget planning, and business control and fund management. It is a
subjective concept. In claims management, the attention is on making
principles and guidelines for smooth and profitable settlement of claims in the
hands of the insurer.
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Claims management includes the entire process of claims handling and
claims payment. This includes review of the claims performance, monitoring of
claims expenses, legal costs, settlement costs, compromises and planning for
future payments and avoiding the delay and disputes in payment of claims. It is a
control system that has an important place in the claims management. It also
includes risk management techniques, loss assessment, and business forecasting
and planning.
Claims handling:
Claims handling is the procedural way of processing a claims application. Claims
handling involves utilization of the laid down principles as yardsticks and the
measuring methods in settling the issues before it occurs. Claims handling is
a traditional form of managing the claims settlements. It includes handling of
various stages of the insurance claims. It is functional in nature such as claims
review, investigation and understanding the negotiating process. It does not
include any managerial outlook such as risk management, policy making and
decision making.
Thus, it is concerned with the procedural methods and also interpretations of the
claims philosophy. Claims handling may change from case to case depending on
the merits of the claim, but it will not drastically change every 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
customer service. The insurers commitment to the service of the customer is a part
of the claims management.
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The following elements express the need of effective claims management system:-
a) Sharing of data and information within the organization by different departments
like underwriting staff, premium collection staff, and claims management staff,
claims payment staff and others.
b) The claimant, requirement for information, the extent of processing of their
claims, information regarding particular policy can all be fulfilled only if a proper
claims management system exists.
c) It also helps to reduce fraudulent claims, exaggerate and repeated claims and
hence helps to avert frauds at the initial stage
d) This system is necessary to updated information, and for proper analysis and for
decision making.
1. The payment of insurance amount is based on the principles of good faith. An
insurance contract embodies an implied covenant of good faith and fair dealing.
The claim contract must contain following important elements.
2. The claimant should have an insurable interest on the subject matter, which is
lost and for which claims is made.
3. There should be loss or damage to the subject matter.
4. The subject matter of the insurance policy should suffer loss due to risk
mentioned in the contract.
5. The insured and insurer have to show their efforts to mitigate the loss and the
intension to save the other.
6. The disclosure should have concerned with subject matter and contract of
7. The loss suffered should be actual but not constructive.
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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 laky employees and 2,048
branches and over six laky agency force.
LIC has hundred divisional offices and has established extensive training
facilities at all levels. At the apex, is the Management Development
Institute, seven Zonal Training Centers and 35 Sale straining Centers.LIC of
India is one of Indias 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
overs 1,800 cores. With a presence in 82cities in India and it services customer
base of over 20, 00,000.
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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 core
annually to 5.6 million policyholders.
It has been started with the objectives of spreading Life Insurance widely
and in particular to the rural areas, meets the various life insurance needs of the
community that would arise in the changing social and economic environment.

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 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
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and premium fixings, accepting the insurance proposals, issuing policy
documents, maintain records relating t the policies issued everyday in
chronological order, and also payment of claims. The claims department is
associated with the receipt of claims and arrangement of claims investigations.
After it is decided whether to make payment to the assured or to defer it, the
insurance company may seek guidance from the panel of advocates. The insurance
company needs to protect the company from the claims litigations of the clients by
defending the claims in the courts and supervise other alternative dispute
resolutions. Thus the insurance organization is associated with the
marketing of policies, underwriting of policies, claims payment, claims
defending and staff matters. The delegation of duties to each unit with
well-defined limitations, responsibilities and decision making are all related to the
organizational structure and management.
Basic structure of LIC
Today, most of functions, nearly 90%, related to the marketing another
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 byte AAO,
the functional head at root level. All the functions of claims will be settled at the
branch level. The AAO of life insurance business will deal with maturity and death
claims. If the branch is smaller, all the types of claims will be dealt by one AAO
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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 to settle the claims referred by the branch office and also report the
same to the zonal office, which in turn will consolidate the data and submit the
same as required by the statute or otherwise under any law to the government. The
government will put the same for the approval of the both the houses.
At the division office level, the claims department generally deals with the
claims, which are pending with the branches because of some disputes, or some
claims which are of high value. The investment portfolio and establishment
and maintenance of reserves for the purpose of claims payment or otherwise
required under the law is the important function of the central office. Thus the
organizational structure of the insurance business is most flexible and decided,
based on the above said factors.
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Claims Management Department
The claims department is one of the key departments in an insurance
company. The claims department has the following functions to perform:
To provide the customers of insurance and reinsurance companies with high
quality of service. This role gives a long-term edge to the company and
hence is referred to as the strategic role.
To monitor the claims and see that whether the benefits of
insurance exceed the costs of claims. This role is referred to as the cost-
monitoring role of the claims department.
To see that the expectations of the customers are met with regard to speed,
manner and efficiency of the service. This is called the customer service
role of the claims department.
To meet the standard of service, to keep up to the customers expectations
and still operate within the budget. This is the managerial role of the
claims department.
Both the quality of the service and cost of claims is the responsibility of the claims
department. The department has to look after the proper mix of the two. The cost
of claims must not exceed a given level in trying to render a very good service to
the customer. So the claims department should work with due diligence to balance
the two parameters. The estimation of future liabilities is just as important as
control over the claim payments. As the claims department is in direct touch with
the customer, it has to ensure the quality of service.
The claims department has the sole responsibility of managing claims.
Claims management by far is the most complex issue in an insurance company.
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The people in the claim department should have good interpersonal
skills. If they are not able to irk in harmony the customers will not receive quality
service. There should be sufficient number of people as managers so as to simplify
job and proper human resource systems in place so that such persons are recruited
whose philosophy goes with the mission and vision of the organization. It has
become imperative for the claims department to provide quality service to the
customers so that the corporate goals are achieved. The claims
department, in effect, acts as an interface between the customer service quality and
insurance companys objectives. It has to be given the proper weight age and
motivation so that the business as a whole functions well.

Types of claims
Understanding the requirements for various life insurance benefits (claims) is
important for the customers. The overriding condition on claims is the payment
of premiums i.e. Claims are only payable if premiums are paid up to date. There
are various types of claims under life policies. The most common claims include:
The general requirements for each of these claims are briefly explained below.
Death Claims:
This is a claim paid when then the person insured dies. For a death claim to
be paid the following basic conditions must be fulfilled.
The policy document, original death certificate, burial permit copy of the
ID of the deceased must be provided to the insurance company.
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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
A police abstract report may be required where death occurs through an
The documentation required for payment of death claims is 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
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 15anniversary
after affecting the policy. Payment of a maturity the claim is a straightforward
affair where the customer returns the original policy document and signs a
discharge form. The claim cherub is usually released in a period of about two
weeks once all required conditions are fulfilled.

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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
cherubs 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 haste option of encasing the
policy to receive the surrender value so long as the policy has been in force for
more than 3 years. The procedure for lodging this type of claim is very simple and
is similar to the maturity claim whereby the customer returns the policy document
and signs a discharge form. The claim cheque is then paid to the customer within
two weeks.
Policy Loans:
This is strictly not a claim but a benefit given out by life companies for life policies
that have been in force for at least three years. To receive policy loan directly from
a life company entails assigning the policy to the life company and receiving a loan
cheque. The insurance policy can also be assigned to a bank and the loan is then
granted by the banks and the policy document utilized as security for the loan.

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Disability Claims:
This will arise in life policies where the customer purchases personal accident
policy rider as an additional benefit. Disability claims are payable subject to
sufficient medical evidence being provided as proof of disablement. Guidelines for
claims settlement by IRDA.

Guidelines for claims settlement by IRDA
Proposal for insurance:
I. Except in cases of a marine insurance cover, where current market practices
do not insist on a written proposal form, in all cases, a proposal for grant of a
cover, either for life business or for general business, must be evidenced by a
written document. It is the duty of an insurer to furnish to the insured frees
of charge, within 30 days of the acceptance of a proposal, a copy of the
proposal form. Forms and documents used in the grant of cover may,
depending upon the circumstances of each case, be made available
in languages recognized under the Constitution of India.
II. 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 there in the requirements of Section 45 of
the Act. Where a proposal form is not used, the insurer shall record the
III. Information obtained orally or in writing, and confirms it within a period of
15 days thereof with the proposer and incorporates the information in its
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cover note or policy. The onus of proof shall rest with the insurer in respect
of any information not so recorded, where the insurer claims that the
proposer suppressed any material information or provided misleading or
false information on any matter material to the grant of a cover. Wherever
the benefit of nomination is available to the proposer, in
IV. Terms of the Act or the conditions of policy, the insurer shall draw the
attention of the proposer to it and encourage the prospect to avail the facility.
V. Proposals shall be processed by the insurer with speed and
efficiency and all decisions thereof shall be communicated by it in writing
within a reasonable period not exceeding 15 days from receipt of proposals
by the insurer.

Matters to be stated in life insurance policy:
A life insurance policy shall clearly state:
1. the name of the plan governing the policy, its terms and conditions;
2. whether it is participating in profits or not;
3. the basis of participation in profits such as cash bonus, deferred bonus,
simple or compound reversionary bonus;
4. the benefits payable and the contingencies upon which these are payable
and the other terms and conditions of the insurance contract;
5. the details of the riders attaching to the main policy;
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6. the date of commencement of risk and the date of maturity or date(s) on
which the benefits are payable;
7. 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.
8. the age at entry and whether the same has been admitted;
9. the policy requirements for (a) conversion of the policy into paid up
policy, (b) surrender (c) non-forfeiture and (d)revival of lapsed
10. contingencies excluded from the scope of the cover, both in respect of the
main policy and the riders;
11. the provisions for nomination, assignment, and loans in 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;
12. any special clauses or conditions, such as, first pregnancy clause, suicide
clause etc.; and
13. The address of the insurer to which all communications in respect of the
policy shall be sent.
14. The documents that are normally required to be submitted by a claimant in
support of a claim under the policy.
While acting under regulation 6(1) in forwarding the policy to the insured,
the insurer shall inform by the letter forwarding the policy that he has a
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period of 15 days from the date of receipt of the policy document to review
the terms and conditions of the policy and where the insured disagrees
to any of those terms or conditions, he has the option to return the
policy stating the reasons for his objection, when he shall be entitled to a
refund of the premium paid, subject only to a deduction of a proportionate
risk premium for the period on cover and the expenses incurred by the
insurer on medical examination of the proposer and stamp duty charges.
In respect of a unit linked policy, in addition to the deductions under sub-
regulation (2) of this regulation, the insurer shall also be entitled to
repurchase the unit at the price of the units on the date of cancellation.
In respect of a cover, where premium charged is dependent on age, the
insurer shall ensure that the age is admitted as far as possible before issuance
of the policy document. In case where age has not been admitted by the time
the policy is issued, the insurer shall make efforts to obtain proof of age and
admit the same as soon as possible.

Claims procedure in respect of a life insurance policy:
1) A life insurance policy shall state the primary documents which are normally
required to be submitted by a claimant in support of a claim. A life insurance
company, upon receiving a claim, shall process the
2) Claim without delay. Any queries or requirement of additional documents,
to the extent possible, shall be raised all at once and not in a piece-meal manner,
within a period of 15 days of the receipt of the claim. A claim under a life policy
shall be paid or be disputed giving all
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3) The relevant reasons, within 30 days from the date of receipt of all relevant
papers and clarifications required. However, where the circumstances of a claim
warrant an investigation in the opinion of the insurance company, it shall
initiate and complete such investigation at the earliest. Where in the opinion of
the insurance company the circumstances of a claim warrant an investigation, it
shall initiate and complete such investigation at the earliest, in any case not later
than 6 months from the time of lodging the claim.
4) Subject to the provisions of section 47 of the Act, where a claim is ready for
payment but the payment cannot be made due to any reasons of a proper
identification of the payee, the life insurer shall hold the amount for the benefit of
the payee and such an amount shall earn interest at the rate applicable to a savings
bank account
With a scheduled bank (effective from 30 days following the submission of all
papers and information).
5) Where there is a delay on the part of the insurer in processing acclaim for a
reason other than the one covered by sub-regulation (4), the life insurance
company shall pay interest on the claim amount at a rate which is 2% above
the bank rate prevalent at the beginning of the financial year in which the
claim is reviewed bit.
Procedure for settlement of claims:
1.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
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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 copy of the maturity intimation.
2. Policy Document (if not in the custody of LIC as security for loan): On
receipt of the maturity intimation, the policyholder should send the
original policy document along with the last receipt of insurance
premium paid. The policy document needs tube submitted in original unless
it is in custody of LIC as security for loan.
3. Age proof document (if age has not been admitted earlier): The policyholder
should also submit his age proof to the Corporation in case it has not already
been submitted. In case, the policyholder has already submitted his age proof
to LIC, the form of Discharge (Form No. 3825) to be executed by the
policyholder, is also sent along with the Maturity Intimation.
4. L.I.C. accepts following documents as valid age proofs:
Horoscope of the assured
Certificate relating to the baptism ceremony among Christians
Birth certificate from the Municipal Corporation
High School Certificate
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Service book.
5. Discharge Form No. 3825 duly stamped & signed, attested by witness:
The form of Discharge (Form 3825) should then be properly filled, signed and
sent to the Office of LIC from which it was issued. The signature must be on a
revenue stamp and must be attested by a witness.
6. Assignment / Reassignment Deed, if any: In case the policy or any
Deed of Assignment or Re-assignment is lost by the policyholder,
he has to submit an indemnity bond along with a reliable surety of
sound financial Standing acceptable to LIC. The indemnity bond has to be in
a particular format (Form 3815). In such a case the claim is settled in the
absence of the policy document.
7. Existence certificates in case of childrens Deferred Assurance &Pure
Endowment Policies.
8. In due course, LIC sends a cheque to the policyholder for the money due to
him as per the terms of the policy.
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.
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After verification, the insurer arrives at the final amount that has tube
paid to the claimant and then prepares a cherub or such mode of payment
as has been agreed upon in the policy or between the claimant and the

2.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 policyholders nearest relative.
The letter of intimation of death should contain the following
I. name of the life assured
ii. A statement that the life assured is dead;
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iii. The date of death;
iv. The cause of death;
V. the place of death; and
vi. Policy number / s
vii. Claimants relationship with the assured or his status (nominee, assignee, etc.).
Soon after the receipt of the intimation of the death, the branch office sends the
necessary claim forms along with instructions regarding the procedure to be
followed by the claimant.
2) Submission of Proof of Death:
The proof of death required to be submitted is a certificate by Municipal
Death Registry or by a Public Record Office which maintains the records of births
and deaths in the locality. Besides this some other Statements or certificates are
also required to be given in the prescribed Claim forms:
Statement from the doctor who attended the deceased
policyholders last illness.
Certificate of treatment in the hospital where the policyholder died or was
treated by the hospital authorities.
Certificate of burial or cremation to be given by an independent person who
attended the funeral and has seen the dead body.
Certificate from the employer if the policyholder was in
employment at the time of death.

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3) Submission of Proof of Age:
The claimant should submit age proof of the policyholder to LIC in case it has not
already been submitted.
L.I.C. accepts following documents as valid age proofs:
(I) Horoscope of the assured
(ii) Certificate relating to the baptism ceremony among Christians
(iii) Birth certificate from the Municipal Corporation
(iv) High School Certificate
(v) Service book.
4) Certificate of Ownership:
When the policy is validly assigned, or a nominee has been designated in the
policy, no further proof of title is necessary. In any other case, the certificate of
title is necessary. In such a case the corporation would require legal evidence of
title such as Succession Certificate or Letters of Administration or Letters of
Probate or a Will.
5) Payment and Discharge:
After completing all the above formalities, the insurance company issues a
discharge form for completion, which is to be signed by the person entitled to
receive policy money. That is, it should be signed by:
The nominee, in case nomination was made under the policy;
The assignee, in case the policy was validity and unconditionally assigned;
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The legal representative or successor.
In due course, LIC sends the cheque for the amount due to the person entitled to
receive the same.
6) Early death claims:
If death occurs in less than three years from the date of the policy, following
requirements must be complied with:
I. Policy Document
Ii. Discharge Form 3801
iii. Assignment / Re-assignment Deed, if any
Iv. Age Proof Document (if age has not been admitted earlier)
v. Certificate of treatment issued by the hospital authorities where the deceased
policyholder was treated last, on Claim Form B1 (F No. 3816)
vi. Certificate by the employer if the deceased was an employee, on the Claim
Form E (F No. 3787 revised)
vii. Certificate of Death
viii. Legal Evidence of Title (if policy is not assigned / nominated)
ix. Claim Form A (F No. 3783)
x. Statement from the Doctor who attended last the deceased
policyholder, on Claim Form B (Form No. 3784 revised)
xi. Certificate of Identity and burial by a person who attended the funeral on Claim
Form C (F No. 3785 revised)
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7) Non early claims:
If death occurs exactly or after 3 years from the date of the policy the following
requirements must be complied with:
I. Policy Document
Ii. Discharge Form 3801
Iii. Legal Evidence of Title
Iv. Death Certificate
v. Claim Form No. 3783A
vi. Assignment / Re-assignment Deed, if any (if policy not assigned /nominated)
vii. Age Proof Document (if age has not been admitted earlier)
8) Ex-gratia Settlement of Death Claims
Ex-gratia Settlement of Death Claims are not a right claim but on grounds of
humanity presently LIC is giving such claim amount for the policies which are not
in force but
If Death occurred after the expiry of grace period of premium due date then
Full Sum Assured along with the bonus will be payable as Ex-gratia
If Death occurred after three months but less than six months after the expiry
of first unpaid premium date half of the Sum Assured without bonus will be
paid as Ex-gratia.
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If the death occurred between six months and one year from the due date of the
first unpaid premium date, claim may be considered to the extent of the
proportionate notional paid-up value on the basis of actual premium paid.

Important terms in claims:
Maturity claims
Beneficiaries in claims:
The claimant in life insurance policies at the time of payment of maturity claims
of life insurance policies can be the policyholder or the assignee to which the
holder of the policy has transferred the policy. The persons entitled to claim under
these policies can be:
The assured himself.
The payee, whose name appears in the benefit schedule of the policy as a
party interested.
The creditor who has been properly assigned and nominated to receive the
payment under the policy.
Amount payable:
The amount payable upon the maturity of the policy, i.e., non-happening of the
event is the sum assured plus profits and bonus that accrues with the policy. The
profits are paid on pro-rata basis, i.e., in the proportion of the premium paid and
declared are bonuses. The payment of profits is a condition inserted as a clause in
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the policy itself and it becomes an Obligation on the insurer to pay the amount of
such profit as may be accrued to the insured.
Dispute in payment of maturity claims:
The disputes arising in such cases are general and may be restricted to the proof of
age, if the age is not admitted at the time of issuing the policy document and about
the good title of the claimant on the policy. In case of the insurer shrugging off his
liability to make the payment of profits which are accrued to the insured upon
maturity and in case the payment of profit is as per the contract, the insurer has
every right to move to the court and to claim for such payment. The policy
document and scheme of the policy contains the details of the payment and the
payment made accordingly may not drag the parties into litigations.

Death claims:
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 Womens property
The creditor in whose name the policy has been endorsed

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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
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

Factors affecting the claims settlement
The factors that affect the claims settlement are as follows:
The policy should be in force on the date of the event.
The risk and cause of event should be covered by the policy.
The cause of loss or the event should be directly related to the loss. A remote
cause has no place in the settlement.
The loss should not have been caused with an intention to gain from the
The preconditions or warranties have to be compiled with. When conditions
to be fulfilled before affecting the cover of the policy, are not performed, the
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cover of insurance will not come into effect even though the premium is paid
and accepted by the insurance company.
Presence of insurable interest, in case of the property insurances, at least at
the time of happening of event or loss sufferings. Without Having the
insurable interest in the subject matter, no person can get benefit or
The assured should suffer loss, actual or constructive, to get
compensation. The assured should riot make benefits or gains out of the
insurance contract as the insurance contract is of indemnity in nature. It only
makes good the loss suffered by the assured and is not a source of gains.
Sufficient documentary evidence of loss should be presented along with the
application form.
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.
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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 loses 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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Elements in claim and Delay in Claims Settlement
Claims management means and includes all the managerial decisions and
processes concerning the settlement and payment of claim in accordance with the
term of insurance contract. It includes carrying out the entire claim process with a
particular emphasis on monitoring and lowering the claims costs.
The important elements of claims management are:-
A. Claims Philosophy
B. Claims Processing
C. Claims Settlement.
A) The claims philosophy:-
It is a method or a document or a defined procedure or a specified approach to
settle the claims. It contains the claims management principles and also claims
handling methods or procedures. The claims philosophy includes the preparation of
guide-lines 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 claims payment and improving the
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efficiency of the claims settlement and payment systems and finally the plans for
improving the quality of services and avoiding unnecessary disputes of claims
In India, the concept of claims philosophy has not grown to the extent required.
The claims philosophy has external and internal advantages. It will impress the
consumers of insurance business and help business to develop. Internally a detailed
systematic claims process is created and delay in settlement of the claims can be
avoided. The claims philosophy has a relation with the terms of service promotion,
prices and people concerning insurance. It influences the nature of claims that are
received by the insurance company, time period taken by the company to settle the
claims or process them and the extent to which the claims are cost and service
B) The claims process:-
It includes the basic claims procedure and handling of claims. The handling of
claims includes the monitoring of situations 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, or the process 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 the notice of claim or loss to the insurer, providing sufficient proof of the
loss to the insurer or his agent or the loss assessor and surveyors. The insurer, on
receipt of the claim from the insured, has taken certain immediate precautions and
also proceeds on methods such as verifying the claim, reviewing the claim
application, respond to the claimant, and carry out claim investigation, claims
negotiation, claim settlement and claims payment.

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c) Claims settlement
Claims settlement is the mission of the insurance company. Every insurer wants
that the claims be settled and honored in accordance with the terms and conditions
of the insurance policy document. The insurer never wants to get in to a dispute by
rejecting the claims if they are filed by the insured along with sufficient proof of
the loss or the damage. The quality of services in the claims settlement will reflect
on the business of the insurer. The claims settlement is also claims handling and
has two phases.
The first phase is in the hands of the insured and the second phase is in the hands
of the insurer. The first phase of the claims settlement or claims process starts from
the date of happening of event or from the date of maturity in case of life insurance
policies. On the day of happening of risk or the event, if the insured subject matter
suffers damages and the insured has lost the economic use of the asset and is under
economic loss of income generation, the insured initiates the process of the claims
The second phase of the insurance settlement is in the hands of the insurer. As
soon as the application or claim form is received by the insurer from the claimant,
he should acknowledge its receipt and quickly respond to the claim and arrange the
payment if there is no hitch or if the claim is in accordance with the terms of the
contracts and the insured has already submitted the required data.
Immediate settlement of claim and a satisfied consumer are the tools of insurance
business and marketing. The other option available to the insurer apart from the
payment of claim is rejection of the claim, which results in claims disputes. On
appeal, the insurer may reconsider the appeal and the claim may be settled by way
of a compromise or negotiation. If the claimant refuses to compromise or
negotiate, the option of filing a suit is available to the insured.

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Delay in Claim 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
The time element is very important in the claims payment for the following
The delay in the claims settlement will have an adverse impact on the
goodwill and marketing of the insurance.
The cost of claims will increase with the extension of time.
The insurer may be asked to pay the interest on the unpaid insurance amount
because of the delay. The court may direct the insurer to pay the costs of the
case to the assured, which results in mounting up of costs.
The delay in payment may lead to litigation which is expensive.
Unproductive use of manpower to defend, expenses incurred and waste of
time on litigations will be an extra burden on the insurer.
Litigations will affect on the productive areas of the business particularly in
the marketing of the insurance business.
The delay also leads to the increasing number of cases with consumer
protection councils.
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Thus the delay in the settlement of the claims will have an impact on the present
and future business of the insurance along with the cost burden. As such it is
essential to have quicker claim settlements.
The delay in claims settlement may be due to the following reasons:
Late submission of claim form: The claim forms may be submitted late
because of the ignorance or lack of knowledge of the existence of the
insurance policies against the lives of the persons who face the event or no
information is given to the beneficiaries or no nominations are made to the
Innocence and illiteracy of the assured: The assured or the claimant may fail
to file the papers due to lack of knowledge, to file the insurance claims
within a certain period or of the claims procedure.
Not submitting the claims forms in full: If the claim forms are not properly
filled, they will fail to provide the required information to settle the claims
and as a result the claim settlement will be delayed for want of information.
If sufficient proof or supporting documents are not submitted along with the claim
form to facilitate claim assessor to know the date of the event or the cause of the
event, claim settlement may be delayed.
The insurer may not get the cooperation of the insured or the claimant to
finalize the claim or arrive at some compromise.
Destroying the evidences, with or without intention, that could have
otherwise facilitated the estimation of the loss payable under the claim.
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Not providing information about the changes in the constitution of the
organization or the changed address of the insured or the claimant or
any other information required to make a claim settlement.
The delay on the part of the insurer may be intentional or due to the pressure
of work.
Lack of motivation, lack of knowledge of importance of the claims
settlement, lack of awareness among the staff of the organizations or
defective supervision or organizational structure.
The delay in submission of claims or settlements can be avoided by making the
assured aware of the facts and importance of the insurance and procedure of
claims. The insurers can take the help of the agent or local staff to arrive at a
compromise with the claimants when the cases are of complex nature. The
organization should be so designed to avoid holding of papers at one or two places.
The staff should be trained and the importance of the claims management should
be driven into their minds. Use of latest technology to assess the losses and
recruitment of able staff will speed up claims settlement.

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Role of Surveyors and Agent in Claim 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--vis insurers and insureds, and
the insureds rights and duties vis--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.
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Duties and responsibilities of surveyors:
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:
a) 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.
b) Maintaining confidentiality and neutrality without jeopardizing the liability
of the insurer and claim of the insured;
c) 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;
d) Conducting spot and final surveys, as and when necessary and comment
upon franchise, excess/under insurance and any other related matter;
e) surveying and assessing the loss on behalf of insurer or insured;
f) Assessing liability under the contract of insurance;
g) Pointing out discrepancy, if any, in the policy wordings;
h) Satisfying queries of the insured/insurer and of persons connected thereto in
respect of the claim/loss;
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i) Giving reasons for repudiation of claim, in case the claim is not covered by
policy terms and conditions;
j) taking expert opinion, wherever required;
k) A surveyor or loss assessor shall submit his report to the insurer as
expeditiously as possible, as but not later than 30 days of his appointment.
Provided that in exceptional cases, the afore- mentioned period can be
extended with the consent of the insured and the insurer.

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.

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
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equipped with technical aspects of insurance knowledge, he must possess
analytical ability to analyze human needs, he must be abreast with up to date
knowledge of merits or demerits of other instruments of investment available in the
financial market, he must be endowed with a burning desire of social service and
over and above all this, he must possess and develop an undeterred determination
to succeed as a Life Insurance Salesman. In short he must be an agent
with professional approach in life insurance salesmanship. Such an agency force is
expected to be helpful not only in proper field underwriting but also after sales.
Servicing. Concomitant and essential elements for higher retention of business
The insurance company, being a corporate structure, does not deal directly
with the customers to promote the insurance business. It avails the help of
middlemen to undertake the promotion such on its behalf and the agents are
middlemen or intermediaries. Section 40 of Insurance Act 1938 authorizes the
payment of the remuneration to the agents for the services. Section 42 of the Act
enumerates the essential qualifications for their appointment and issuing of
licenses. The appointment of agents to procure policies of insurance is a
general practice among insurance companies all over the world. The agents are
allowed to market the insurance business but not allowed to issue the policies. The
agent has no right to conclude the insurance contract and the final approval or
rejection of contract proposal is vested with the insurer, the principal. But, in
promoting the insurance business, the agent binds the principal to all activities
such as receipt of premium, enquiries and publishing of information of the
insurance contracts and products.
The agent is bound by duty and responsibility to convey the message to the
insurer. But, giving the information to the agent does not bind the insurer as the
agent is appointed only to promote the insurance Business. In times of disputes, the
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agent is under an obligation to settle the issue of claims by way of negotiations and
mediations to retain the customer.

Role of agents in an Insurance company:
a) 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.
b) An agent should be well versed in all the plans, the selling points and also be
equipped to assess the needs of the clients.
c) 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.
d) Agents must provide the office with the accurate information about the
prospect for a fair assessment of the risk involved. The agents confidential
report must, therefore, be completed very carefully.
e) Agents must also possess adequate knowledge of policy servicing and claim
settlement procedures so that the policyholders can be guided correctly.
f) Submission of proposal forms and proposal deposit to the branch office
immediately to avoid delays and to enable the office to take timely
g) A leaflet or brochure containing relevant features of the plan that is being
sold should be available with the agents.
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If the agents are well conversant with the claim settlement procedure and
assist the claimants in completing the necessary requirements, it would not only
quicken the process of claim settlement and enhance their professional status but
also help the organization to improve upon their outstanding claim ratio. This,
while further boosting the image of the Organization may provide them an
overflowing fountain for further business in those families. The performance of
agents will now depend on not how many hours he works but the quality of
service, his attitude to customers and the image that he will create for the entire life
insurance business. Thus the agent under the changing economic scenario can
achieve their objectives by practicing psycho-marketing strategies. Their objectives
are survival and growth. Maximization of business is an end to achieve these

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Data Analysis on LIC
The outcomes of survey taken of 20 policy holder
The researcher asks eight questions to each policy holder through questioner
method. The following are outcome of question to policy holder
1) The 85% of the policyholders are satisfied with services of LIC while 15% of
the policyholders were not satisfied with its services while Claim Settlement
2) The 60% of the policyholders did not face any problem while claim settlement
&40% of the policyholders faced problems in claim settlement.
3) The 90% of the policyholders claim was settled within the 30 days of receipt of
the relevant documents as per
IRDAs guideline while 10% policyholders claim was not settled within 30 days.
4) The 80% of the policyholders felt that LIC maintained transparency & secrecy
while claim settlement while 20% policyholders felt that it had not maintained
proper transparency & secrecy.
5) The 40% of the policyholder faced documentation problem at the time of
maturity & death claim settlement while 60% of the policyholder did not face
documentation problem at the time of claim settlement.
6) The 90% felt that there was not any unnecessary delay mad at the time of claim
settlement process 10% felt that there was unnecessary delay mad at the time of
claim settlement process.
7) The 75% policyholders felt that investigation mechanism of LIC was efficient at
the time of claim settlement process 25% policyholders felt that investigation
mechanism of LIC was not so efficient at the time of claim settlement process.

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The Policyholders are satisfied with the services of LIC of Claim Settlement.
Some of the policyholders face problems while Claim Settlement.
The Claim is settled within 30 days on the receipt of document as per IRDA
The LIC has maintained the adequate transparency & secrecy while Claim
There is no unnecessary delay made at the time of Claim Settlement.
Death Claim Settlement Ratio has shown constant improvement every year due to
efficient investigation mechanism.

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Data Analysis & interpretation
The claim settlement scenario in insurance industry
Life Insurance Corporation of India (LIC) has continued its good performance
against private players when it comes to claim settlement. According to the IRDA
annual report FY 2010-2011.

Claims Report for Year 2009-10 & 2010-11
Name of
2009-10 2010-11
LIC 1.21 96.53 1.41 1.09 97.50 1.47
ICICI Prudential 3.27 90.17 6.56 2.80 94.40 2.60
HDFC Life 4.67 91.14 4.20 3.97 96.03 0.61
Aviva Life 9.75 87.11 3.14 4.10 87.11 3.14
Birla Sun Life 10.62 89.09 5.82 4.99 94.66 0.35
India First Life 7.69 53.85 38.46 9.40 90.558 0.03
Max New York
12.31 65.71 7.14 14.85 78.01 7.14
SBI Life 14.75 83.27 1.96 16.74 82.24 1.03
IDBI Federal Life 23.81 49.52 26.67 21.00 65.00 14.00

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The above table shows details about claim rejected, claim settled & claims pending
of all insurance companies for year 2009-10 & 2010-11. The LIC is best insurance
company among all companies regarding claim settlement ratio.

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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:
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The cause or the claim itself is fraudulent
The claim may be genuine but the method of calculation or the evidences, or
the information submitted may be fraudulent in nature.
As such any fraud made by the insured or the insurer in concluding the insurance
contract or the claims settlement, makes the entire contract violable at the
option of the person on whom the fraud is played. Creating forged
documents such as wills, legal heir certificates, assignments of the policies
and other papers to support their claim, deliberate destruction of the insured
subject with an intention to get the policy amount all constitute different types of
frauds. Sometimes the frauds may also result from gross negligence or
forbearance to use reasonable exertions and means at hand. The fraudulent
claim by the assured will deprive him the right to claim as the insurer has the right
to reject it.
Examples of insurance fraud:
A. Creating a fraudulent claim
B. Overstating amount of loss
C. Misrepresenting facts to receive payment
D. Bogus agents/Sale of forged cover notes
How to protect yourself from a fraud:
a) Be wary of unregistered insurance agents. Before purchasing
insurance, contact your insurance company to ensure the agent is an
authorized agent.
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b) Avoid paying premiums in cash. Opt to pay for premiums by cherub or
money order. Made payable to the insurance company instead of the agent.
c) Make sure you receive a written policy after payment of your first premium.
d) 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.
e) Do not sign a blank insurance application, or insurance claim form.
f) be suspicious if the price of insurance seems suspiciously low from other
insurance companies.
g) 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.
h) Insist on detailed bills for repairs and medical services rendered and check
for accuracy.
i) 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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Case study & Limitation
1.Case Study
Life Insurance Corporation of India v/s Mrs. Sunanda Kanthale
According to complainant Sunanda Kanthale, her husband
Manoharrao Kanthale who worked as a stores superintendent with the Amravati
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 dated April 20, 1995) refused to settle the claim, Kanthale added.
She then lodged a complaint with Akola District Consumers Grievances
redressal 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 per cent interest, a
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compensation of Rs 50,000 towards mental tension caused and Rs 1,000 towards
legal expenses.
Defending the stand taken by the company, the LIC refuted all the
allegations made by Sunanda. Manoharrao, who held the policy, had kept the
information about his health a secret while purchasing the instrument, the company
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 officials 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 Consumers Grievances Redressal Forum has directed Senior
Divisional Manager of Life Insurance Corporation (LIC), Amravati, Area
Manager, Mumbai, and Branch Manager, Akola, to pay Rs 20,000 to Sunanda
Kanthale towards insurance claim besides interest on the amount from October 22,
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
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,
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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.
Life Insurance Corporation of India v/s Lily Rani Roy
The 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 petitioner had filed
the claim after 13 years of its maturity. 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 a request
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 1990 which is far
beyond the time. The LIC also produced a photo copy of the Maturity claims
payment register showing the payment of the complainants 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.
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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 a 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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Before concluding, it should be useful to point out some of the potential limitations
of the study. There was a lack of numeric data or statistics related to this research
question, nothing of what is needed is available. Even the data was collected from
various financial related web sites & books, but the data is not really enough useful
or enough relevant to be used in this research.
Qualification requirement used in the project may differ from investor to

The data taken during the project study may not represent the realistic
picture. Hence there may be margin of error.

Small sample size taken at convenience might have affected the result of the

Existence of biases in the respondent mind.

Most of authorized people working in the security market are afraid to
disclose their strategies in investing in hybrid instrument.

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The easy & timely settlement of valid claim is an important function of an
insurance company & Claim Settlement is the integral part of Claim Management.
It is yardstick to judge the insurance companys efficiency. There are different
types of claims mainly divided into Death Claim & Maturity Claim. LIC of India
after making proper investigation of documentation & cause of death settled the
claim on time. Insurance Agents, Surveyors, Claim Assessors & Claim
Underwriters play important role in Claim Settlement.
There are cases of frauds in Claim Settlement that may happen but if the
policyholder uses proper precautions he can prevent himself from fraud. LIC of
India provides better corporate services for settling the customer claim as their
total Claim Settlement Ratio is 98% & it has shown constant increasing trend. The
IRDA guidelines for claim settlement are properly followed by the LIC which
results in lower Claim Pending Ratio i.e., 1.47%.The Claim Repudiation Ratio of
LIC is 1.09% which help the LIC of India to maintain better corporate image in
Life Insurance sector. All the branches of the LIC of India were automated. If the
LIC of India give some documentation relaxation to the policyholders & maintain
the policy documents in electronic form like D-mat they can improve the
transparency & efficiency of the Claim Settlement System.

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A. Theories and Practices in Insurance
B. Insurance watch
C. Business world
D. Business today

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