Claims Manager 2

Abstract

Insurance have become an integral part of life of man all over the globe. The

proverb ‘Need is the mother of invention’ is proving equally correct in case of

insurance. Insurance have already had a considerable impact on many aspects of

our society. Claims management is another important aspect on insurance. It is

complex in nature, that is true, but it is a driving force to plant confidence in the

hearts of people.

Claims Management is one of the most challenging business processes in the

insurance industry. With the number of stakeholders involved, the dependencies

and the logistics, there are needs to eliminate manual interventions. For many

organizations, claim management and administration is viewed solely as a service

operation. Claim management is expected to run the claim process efficiently and

keep expenses low, but little attention is given to leveraging high-impact

opportunities afforded through effective data management. In fact, the data

captured in the claim process, which all too often are underutilized, are rich in

valuable information for those who know how to extract and analyze it.

Claims management is an expert system which generates the rules and regulations

for the assessment of general damages using the key information contained in

medical reports, surveyor report, loss assessor’s reports, claimant’s petition and the

procedures or conditions and warranties contained in the policy document. The

claims management regulates the payment of general damages and also payment

of the loss of future earnings.

This paper is just a gist about how the insurance companies settle the claims of life

risks, the procedure that is followed, and the intermediaries that are involved in the

process and so on. This paper throws light on various aspects on claims

management of life risks and the problems faced by them.

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INTRODUCTION TO LIFE INSURANCE

Human life is subject to risks of death and disability due to natural and accidental

causes. (Redja, 2005). 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 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. 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 MANAGEMENT

Many insurers have recognized the need to improve the efficiency of their claims

management process. They have streamlined processes, eliminated paper-based

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forms and redistributed work to match the demands to skills. However, to realize

even greater improvements in the claims handling process, insurers must also focus

on the effectiveness of their claims decisions. (Hansell, 2000).

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. (Seyewo, 2009). 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 involve collating and sharing large amounts of

information among multiple parties involved in a claim, from Insurance company to

adjusters to investigators to lawyers and doctors to claimants and regulators. And it

involves the knowledge of experienced adjusters to determine the fair and

appropriate outcome of a claim. In fact, losses and loss expenses absorb 80% of

premium collected by carriers. (Oderinde, 1999)

Service representatives and claims adjusters need to access data from multiple

sources when processing or assessing a claim, which delays settlement time and

increases costs. Manual steps reduce transparency of the claims process and raise

the risk of fraud, manipulation or simply human error. Customer retention is also a

challenge – experts say that 75 percent of customers leave their insurer due to

claims issues. (Oderinde, 1999)

TYPES OF CLAIMS (LIFE INSURANCE BENEFITS)

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.

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Death Claims:

This is a claim paid when then the person insured dies. For a death claim to be paid

the following basic conditions must be fulfilled.

The policy document, original death certificate, burial permit, copy of the ID of

the deceased must be provided to the insurance company.

A report from the doctor who treated the deceased must be presented to the

insurance company.

Claim forms must be completed

A report from the doctor who last treated the deceased person may be required.

A police abstract report may be required where death occurs through an

accident.

The documentation required for payment of death claims are easily available and

claimants need to immediately inform the insurance company where problems are

encountered in securing the documents. The documents are usually required so as

to reduce on the possibility of paying fraudulent claims or paying the wrong

claimants. Many insurance companies will frequently waive certain requirements

under certain special circumstances.

Maturity Claims:

A maturity claim is paid out mostly on endowment and education insurance policies

whose duration has expired. 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

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policy document. A typical education policy of 10 years provides for payment of

20% of the sum insured after four years and every year thereafter until the expiry of

the policy. The life insurance company usually prepares partial maturity cheques in

an automated manner and the customer does not have to claim. The cheque is

either sent directly to the customer or the nearest branch office for ease of

collection.

Surrender Value Claims:

When a customer is unable to continue with the payment of premiums due to

unplanned events like retrenchment or dismissal he has the option of 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:

This is strictly not a claim but a benefit given out by life companies for life policies

that have been in force for at least three years. To receive a policy loan directly

from a life company entails assigning the policy to the life company and receiving a

loan cheque. The insurance policy can also be assigned to a bank and the loan is

then granted by the banks and the policy document utilized as security for the loan.

Disability Claims:

This will arise in life policies where the customer purchases a personal accident

policy as an additional benefit. Disability claims are payable subject to sufficient

medical evidence being provided as proof of disablement.

Matters to be stated in life insurance policy:

1. A life insurance policy shall clearly state:

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;

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d) The benefits payable and the contingencies upon which these are payable and

the other terms and conditions of the insurance contract;

e) The necessary details 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.

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.

n) The documents that are normally required to be submitted by a claimant in

support of a claim under the policy.

2. While acting under regulation in forwarding the policy to the insured, the insurer

shall inform by the letter forwarding the policy that he has a period of 15 days from

the date of receipt of the policy document to review the terms and conditions of the

policy and where the insured disagrees to any of those terms or conditions, he has

the option to return the policy stating the reasons for his objection, when he shall

be entitled to a refund of the premium paid, subject only to a deduction of a

proportionate risk premium for the period on cover and the expenses incurred by

the insurer on medical examination of the proposer and stamp duty charges.

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3. 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.

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) Where a claim is ready for payment but the payment cannot be made due to any

reasons of a proper identification of the payee, the life insurer shall hold the amount

for the benefit of the payee and such an amount shall earn interest at the rate

applicable to a savings bank account with a scheduled bank (effective from 30 days

following the submission of all papers and information).

5) Where there is a delay on the part of the insurer in processing a claim for a

reason other than the one stated in number (4), the life insurance company shall

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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:

The processing of claims by maturity is normally undertaken by Insurance Company

about two months before the date of maturity. The insurer 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 Insurer 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 Insurer and obtain a copy of the maturity intimation.

2) Policy Document (if not in the custody of Insurer as security for loan):

On receipt of the maturity intimation, the policyholder should send the original

policy document along with the last receipt of insurance premium paid. The policy

document needs to be submitted in original unless it is in custody of Insurer 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 Insurer in case it has not

already been submitted. In case, the policyholder has already submitted his age

proof to Insurer, the form of Discharge to be executed by the policyholder, is also

sent along with the Maturity Intimation.

4) The Insurer accepts following documents as valid age proofs:

a. Birth certificate

b. High School Certificate

c. Service book.

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5) Discharge Form duly stamped & signed, attested by a witness:

The form of Discharge should then be properly filled, signed and sent to the Office

of Insurer from which it was issued. The signature must be on a revenue stamp and

must be attested by a witness.

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

Endowment Policies.

7) In due course, Insurer sends a cheque to the policyholder for the money due to

him as per the terms of the policy.

The Insurer upon the receipt of the claim form will act in the following

manner:

The Insurer 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 in the case of death claim is that an "intimation of death"’

should be sent to the branch office of the Insurer 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 information:

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i. Name of the life assured

ii. A statement that the life assured is dead;

iii. The date of death;

iv. The cause of death;

v. The place of death; and

vi. Policy number / s

vii. Claimant’s relationship with the assured or his status (nominee, assignee, etc.).

Soon after the receipt of the intimation of the death, the branch office sends the

necessary claim forms along with instructions regarding the procedure to be

followed by the claimant.

2) Submission of Proof of Death

The proof of death required to be submitted is a certificate by

Local Government 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 to the deceased policyholder’s last

illness.

Certificate of treatment from 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.

3) Submission of Proof of Age

The claimant should submit age proof of the policyholder to Insurer in case it has

not already been submitted.

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 Insurer 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

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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, The Insurer 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

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.

vi. Certificate by the employer if the deceased was an employee.

vii.Certificate of Death

viii.Legal Evidence of Title (if policy is not assigned / nominated)

ix. Claim Form

x. Statement from the Doctor who attended last to the deceased policyholder.

xi. Certificate of Identity and burial by a person who attended the

funeral.

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

iii. Legal Evidence of Title

iv. Death Certificate

v. Claim Form No.

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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 Insurer is giving such claim amount for the policies which are

not in force but

If Death occurred after the expiry of grace period of premium due date then Full

Sum Assured along with the bonus will be payable as Ex-gratia settlement

If Death occurred after three months but less than six months after the expiry of

first unpaid premium date half of the Sum Assured without bonus will be paid as

Ex-gratia

If the death occurred between six months and one year from the due date of the

first unpaid premium date, claim may be considered to the extent of the

proportionate notional paid-up value on the basis of actual premium paid.

ASSESSMENT OF LIFE ASSURANCE CLAMS

Life assurance claims are assessed following policy conditions. They are not as

complicated as property claims. Generally there will be no question of partial loss or

average as life assurance is not basically a contract of indemnity.

Although the sum assured is fixed at the inception of the policy, the actual amount

to be paid depends on several factors

i. Whether the policy participates in profits sharing

ii. Were policy loans granted?

iii. Are there outstanding premiums?

iv. Any variation in the age used to determine the premium to be paid?

v. The type of policy

vi. Mode of payment of the sum assured.

PARTICIPATING POLICY

A participating policy shares in the profits of the insurer. From time to time,

dividends are declared and a percentage of each of such dividends is credited to

the policy and usually paid at the time the policy comes up for a claim. The life

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office does the calculation when a claim comes up. The amount of money to be

added for each year during which the policy was in force will depend on the rate of

bonus as declared and on the sum assured. Whatever it works out to be will be

added to the agreed sum assured.

Any policy loans

The policy condition clearly stated that the outstanding amount shall be deducted

from any money payable in any settlement of the policy.

Outstanding premiums

If the policy is not already lapsed, the outstanding premiums with interest must be

deducted from any money payable at the time of claim.

Variation in age of assured

If at time of a claim a fresh evidence comes to light regarding the age of the life

assured, and it becomes clear that age was wrongly stated, then the sum assured

must be re-adjusted to total premium paid by the assured.

The type of policy

The sum assured as stated in the policy may not all be payable at the end of the

contract. Some percentage of it may be paid at various times during the policy

term. For example the common type of policy referred to by several insurers as the

anticipated endowment policy provide that certain percentages of the sum assured

be paid to the policyholder where he survives for a number of years within the term

of the policy. One form of the anticipated endowment pays 25% of the sum assured

after 5 years, another 25% at the end of 10years and the balance of 50% at

maturity after 15 years. Some companies would calculate the sum payable on death

as being reduced by the survival benefits earlier paid while others would still pay

the full sum assured disregarding earlier payments if claim is by death.

Variation in mode of payment

Some policies usually allow a claimant to choose the manner in which the benefits

will be paid. Instead of the usual lump sum option, a claimant may choose 13

installmental payment of the proceeds. Where this is the case, the office should be

able to calculate what each installment should work out to be.

Other considerations

A lapsed policy: when a policy lapses, the insurers often consider if there are any

benefits due to the policyholder. Where the office decides that a reduced-paid-up

policy is practicable, the policy comes up for a claim, the reduced paid up amount

has to be the basis of the settlement amount.

A Policy That Does Not Run The Full Term

Life policies may pay some benefits even when the policy does not run for the full

term. If the insured defaults in premium payment and the policy lapses, several

options are allowed by the insurer to make sure the premiums paid by the insurer

are partly credited to him. This is possible where some cash value has built up

under the policy and that happens after two or three years full premiums have been

paid. These possible benefits are described below.

Surrender values

When a policy has a cash value, some of this cash value may be paid to the insured

as cash surrender value (popularly called surrender value) where the insured so

desires. Where the insured is unable to continue payment of premiums but does not

request a surrender value, such surrender value may be applied in maintaining that

policy for some further length of time instead of allowing it to lapse immediately.

The surrender value is calculated using well developed formulae. The actual amount

paid will depend on any outstanding indebtedness of the policyholder just as in the

case of payment of the sum assured. It is paid in the same way as a survival

benefit. In Nigeria, some insurers indicate in their policies that the surrender value

for a policy that has been in force for three years works out to about one third of the

total premiums already paid. Other insurers give a table of surrender values

available to the insured at any time he wishes to surrender the policy.

Paid- up value

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This is a smaller sum assured paid in place of the original sum assured. It is

calculated at the time premiums have remained unpaid for a determined length of

time. This sum can be paid on death or survival to the term originally fixed for the

policy. This reduced sum is what the surrender value can purchase at that time.

Policy loan

After a policy has acquired a surrender value, the life office can grant a loan to the

policyholder. The advantage of this type of loan is that the interest rate is usually

much better than would obtain in other financial institutions offering similar

facilities. The amount that can be grated however is limited by the cash value of the

policy. Insurers often grant a loan of up to 90% of the amount of the surrender

value.

PAYMENT OF THE CLAIM

After the assessment of the amount payable has been concluded, the insurer must

take a decision on who to pay the proceeds for the policy to such a person must be

able to give a good discharge to the insurer otherwise, the insurer may be faced

with a claim from another person on the same loss. The right person to get the

policy money is not always the insured. Other persons may have the right to claim

as in the following circumstances.

i. In liability insurance cases, payment is usually made to the third party or

his representative.

ii. Where the insured is deceased payment is made to his executors or legal

representatives.

iii. Where the insured is a minor or of unsound mind or under some legal

disability, payment is made to his legal representatives.

iv. Where the insured has assigned the proceeds of the policy to another

person the assignee will receive the payment.

v. In the case of life policies, the policy itself may have been assigned or it

may be the subject of a trust.

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When a decision on the correct person to receive the policy money has been

reached, the insurer often sends claims discharge voucher requesting the claimant

to indicate his acceptance of the settlement amount by signing the voucher and

returning same to the insurer. The content of the discharges voucher for life

insurance are illustrated below.

a. Life assurance claims discharge voucher

Policy number ………………………………………………………………

I/we ……………………………………………………………………………

Of ……………………………………………………………………………….

Hereby agree to accept from the ABC insurance company the sum of

…………………………………………………… (N ), in full discharge and final

settlement of all claims and liabilities as a result of maturity,

First installment, surrender, death under policy

Number …………………………………………………., with effect from

………………….. day of ……………………………… 20……………

Assureds’/Claimants Name witness’s Name

…………………………………. ……………………………

Signature …………………… signature ………………

(official stamp in case of assignee/Bank)

Date …………………………. Date …………………….

When the discharge voucher is signed and returned to the insurer, it is an indication

of the acceptance of the amount of claim and the insurer can now send a cheque to

the person entitled to claim and the matter is concluded.

Further negotiations

Sometimes the insured or other claimant may reject the offer and there has to be a

negotiation between the parties until an acceptable level of compensation is

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reached. Negotiations are very important especially where there are large claims.

Liability claims are often delicate and this is one of the reasons why insurers would

not like the insured to go into negotiations with the third party. An offer of a

settlement amount made may prejudice the position of the insurer. Claims

negotiation really needs persons experienced in the job. and a lot of difficulties in

the claims settlement procedure may be taken care of by such experienced

negotiators.

The issues of who a claim should be paid to assumes greater dimension where life

assurance is concerned because of the ease with which life policies can be assigned

or made subjects of trusts we consider claims payment under these circumstances.

Payment to named beneficiary

In certain circumstances the assured will name a person to whom the policy

proceeds may be paid. Where such is the case, the insurer will rely on section 59 (5)

of the insurance decree 1991 re-enacted in section 73 (6) of the 1997 insurance

decree which states “in the case of claims arising from life insurance policies, it

shall be sufficient for the insurer to make any payment due to the policy to the

beneficially named in the policy document.”

Hence as long as the named beneficiary is identified as such, the insurer can pay

the claims. The production of the policy document will also be necessary.

Payment of trustees

When the assured makes another person or other persons trustee(s) of the policy,

the proceed will be paid to the trustee(s). trustees are legal owners and as such can

give a good discharge. The presentation of the trust deed will be necessary to

identify the trustees. Where changes in trustees have occurred, deeds of

appointment or retirement of trustees must also be presented.

If these are in order, the life office can safely pay the policy money to the trustees

unless it has knowledge of an intended breach of the trust.

Where any appointment of new trustees has been made by the survivors of survivor

of two or more persons in whom the power to appoint new trustees was vested,

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evidence of the deaths of trustees other than the last survivor should be furnished

together with the grant of representation of the estate of the last survivor.

The trustees may have employed the services of professionals like bankers,

solicitors or other agents. Such agents can be paid on presentation of evidence of

agency to the said trustees.

Where there are two or more trustees, the life office should not pay to only one

unless such a trustee is a banker, solicitor or other agent of the trustee. The office

should also avoid paying directly to the beneficiary where the policy is a trust policy

unless the trust instrument specified that such action is allowed.

Group policies which are used to secure some kinds of benefits to employees of the

policyholder (the employer always have trustees and all payments should be made

to the trustee.

Payment to assignee:

As assignee may be a legal or an equitable assignee. A legal assignee of a life policy

can give a good discharge to an insurer. He has to give the evidence of an

assignment and a notice of assignment if given earlier will facilitate payment. For

an equitable assignee, the life office will pay if personal representatives of the

assured join the assignee to discharge the insurer.

A policy may be used in mortgage transaction in which case it is like if it is assigned

though conditionally. Where the claims is made by the mortgagee, the life office will

normally pay the whole of the policy money to the mortgagee relying on the law of

property Act a section of which says

“The receipt in writing of a mortgagee shall be sufficient discharge for any money

arising under the power of sale conferred by this Act or for any money or securities

comprised in his mortgage”

Hence the life office needs not try to investigate whether part of the loan has been

repaid. However, it may make payments to the different interested parties.

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If the office has notice that there is no debt outstanding under the mortgage but

reassignment has not been done, it should not pay the mortgage without involving

the mortgagor or persons deriving title from him. The mortgage deed will also have

to be presented as additional evidence.

PAYMENTS TO EXECUTORS

When the life assured has made a valid will, his executors are expected to manage

his estate. These executors usually specified in the will have authority to deal with

the insurer. On production of evidence of appointment the Grant of probate in this

case, the office can safely pay to the executors

Payment to administrations:

When a will is not made or the one made is not proved and therefore not valid, the

life assured is regarded as having died intestate. In that case, there will not be

executors and his legal personal representatives will be termed administrators. His

estate will be administered by such administrators and they will be able to give a

good grant of letters of administration.

It should also be necessary to investigate that administrators are appointed

appropriately. The method of appointment will depend on whether the life assured

contracted a marriage under the marriage act or under customary or Islamic law.

Appropriate law will suggest proper representatives. Such persons armed with the

grant of letters of administration will be able to give a good discharge.

Payment into court:

When there are several claimants on the same policy money, the insurer may

decide to pay into court having informed all interested parties. Payment could also

be made into court if insurer is not satisfied that the claimant will give a good

discharge. This mode of payment is to avoid the possibility of having to face

another claimant after having paid the claim to some other.

PROVING TITLE IN DEATH CLAIMS

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When the policyholder dies, the policy money reverts to the estate unless a proper

arrangement was made to transfer it to a particular person like a named

beneficiary. If no such arrangement was made, the administrators of the estate

become authorized by law to claim the policy money for the estate. They will be

able to prove title by presenting the usual court grants. Two types of grants are

issued by the probate division of the ministry of justice.

GRANT OF PROBATE

Where a will is left by the deceased, the will usually names one or more persons

called executors who are to administer the estate. To be able to administer the

estate, the executors must obtain a grant of probate from the probate registry. This

will be granted when they submit the will along with the request and when the

probate registry has satisfied herself/ himself that the will is valid and the last will of

the deceased. The grant of probate records the death of the deceased,the names of

the executors and attaches a copy of the will. The executor’s titles derive from the

will but the grant gives them the power to sue and the process of issuing the grant

allows time to prove the will. The insurer should insist on seeing the original grant of

probate before paying in order to avoid forgery.

GRANT OF LETTERS OF ADMINISTRATION

Where no will is left or where the will did not name any executors, any person who

is interested in administering the estate has to apply to the probate registry for a

grant of letters of Administration. A grant of letters of administration is similar to the

grant of probate. Each grant can be referred to as a grant of representation – a

common name.

ASSIGNMENT OF LIFE POLICIES

The ownership of life assurance policies is easily transferable from one person to

another. A transfer of ownership is known as assignment. For an assignment to be a

legal assignment it has to follow the stipulations of sections 53 to 56 of the

Insurance Decree of 1997.

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In the 1997 Decree, section 65 gives for making an assignment either by

endorsement of the policy document or using a separate instrument the form of

which was given in that section.

Section 64 requires that notice of any such assignment should be sent to the

insurer. The section provides as follows in S. 64 (1) “No assignment of a policy of life

insurance shall confer on the assignee or his personal representatives any right to

sue for the amount of the policy money or the insured money, unless and until, a

written notice of the date and purport of the assignment is given to the insurer

liable under the policy at his principal address of business”.

Section 63 provides that when a proper assignment has been done, the assignee is

able to give a proper discharge to the insurer liable to pay the policy money. Such

an assignee is also able to sue in his own name to recover such money. It is to be

noted that this section makes it clear that the assignee cannot have a better title

than the insured.

There are two types of assignment: absolute and collateral.

Absolute assignment implies that the transfer is complete and irrevocable and the

assignee receives full control of the policy and full rights of the benefits. Collateral

assignment is one in which the policy is assigned to a creditor as security, or

collateral, for a debt. If the insured dies, the creditor is entitled to be repaid his loan

put of the proceeds of the policy. The insured’s beneficiary will then be entitled to

the balance of the policy money due. If the loan is repaid, the policy holder is

entititled to the return of the assigned rights.

EQUITABLE ASSIGNMENT

What we just discussed is a legal assignment. Where the procedures detailed are

not conformed with, we may have an equitable assignment. The assignee has only

a charge on the proceeds of the policy. He cannot terminate the assured’s equity of

redemption and can only bring an action in court not in his name alone but the

assured or his representatives must be joined. An equitable assignee cannot give a

good discharge to the insurer unless he has the consent of the assured or his legal

representatives if he is deceased.

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A person who has possession of a policy of life assurance may claim the policy has

been assigned but once the procedure of legal assignment has not been followed,

He can at best regarded as an equitable assignee.

CLAIMS UNDER LOST LIFE POLICIES

When a policy is reported lost, the action taken by the insurer depends on when the

report arises. The loss may be reported either at the claims stage or before a claim

is made. The first step is to make a proper search of the policy. The assured will be

asked to make a proper search on his own. His bankers, lawyers or agents should

be contacted. The insures may also help by checking their records to see if any

assignment were recorded as transacted. If it is conclusively lost and cannot be

traced, the assured is asked to make a statutory declaration of the loss stating that

the policy has not been assigned or charge in any way. The claim can be paid after

a reasonable length of time has elapsed but the claimant may be required to

complete an indemnity against any losses to the life office. If the money involved is

large, the life office may require an indemnity bond from another life office.

Under the above procedure, if subsequently claims are brought by some assignee

who did not give notice claims, such a claim would not succeed due to lack of

notice.

If the loss is reported at a time a claim is not being made the life office may issue

what is regarded as a “copy policy” marked as such and being treated as

replacement of the old copy.

On the other hand, the lost policy may be cancelled and another one issued. The

new one bears a new number but gives the same benefits as the old one.

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 whom the holder of

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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. The payment of profits is a condition inserted as a

clause in the policy itself and it becomes an obligation on the insurer to pay the

amount of such profit as may be accrued to the insured.

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.

CONCLUSION

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The insurance business is major service oriented business in the world.(Greene,

1998). 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.(Swadener, 2005).

Global players with strong brands in the insurance industry today make use of their

special skills world wide and use their superior managerial ability to secure

leadership positions in the industry.

The claims management is an integral part of insurance. (Ohalhuwa, 2008). 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 insureds 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 products, 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.

References

George E, Rejda. (2005) “The Principle of Risk Management and Insurance”, Oxford

University Press. New York.24

Hansell D.S. (2000) “Elements of Insurance”, Macbonald & Evans, Great Britain

Mark R. Greene (1988). “The Principle of Risk Management and Insurance”, Journal

of Financial Economics, 329-359.

Oderinde M.I. (1999) Towards Settling Insurance Claims. Oxford, Blackwell Publishing.

Ohalhuwa F.(2008).Tackling the Odds of Claims Management the Finance Post, vol.1

Seyewo S.S. (2009) “Insurance Claims and the Insuring Public” Amicable Bulletin vol.19.

Swadener W, (2005), “Risk and Uncertainty”. Journal of Risk Management and

Insurance 50, pp. 1029–1058

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