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Life insurance servicing

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Life insurance servicing Life insurance servicing Presentation Transcript

  • Life Insurance Policy Servicing
  • Rights and duties of insured
    • Need for service/deficiency of service
    • Types of services rendered
    • Record maintainence – a statutory requirement
    • Premium payments- advance notices sent, not obligatory but a matter of courtesy
    • Contractual responsibility of insured to keep policy in force to prevent lapse
    • Duty of insured to receive premium and account for in records
  • Days of grace
    • Due dates mentioned & days of grace permitted – considered as payment in time
    • Not less than 30 days for all modes barring salary savings - privilege extended by insurance company
    • Lapsation forfeits claims
    • In case of premium default, policy conditions provide various safeguards called NON-FORFEITURE provisions
    • Various options before insurer
    • Return surrender value/ Guaranteed SV
    • Making policy paid – up
    • Providing term cover from SV
    • Paid –up value : definition & calculation
    Non-forfeiture provisions
  • Surrender
    • Surrender - a voluntary termination of contract - anytime before it becomes a claim – a breach of contract
    • Guaranteed SV – a percent of all premiums paid excluding first year’s premium.
    • SV is a percentage of premiums paid
    • Percentage increases as duration of policy increases
    • SV factor
  • Loan
    • Policy loans allowed, 85-90% of SV.
    • Loans not allowed on all policies
    • During loan, absolute assignment of policy to insurance co. Does not invalidate existing nomination.
    • FORECLOSURE
    • If premia not paid regularly, policy lapses. When loan & interest exceed surrender value foreclosure takes place.
  • Foreclosure
    • Foreclosure means closure or writing off the policy before the actual maturity
    • Notice sent to PH asking for loan arrears and interest , then action taken.
    • Balance of Surrender Value paid to policyholder after adjusting principal loan and interest.
    • Foreclosed policy can be reinstated before policyholder receives the balance SV.
  • Revival
    • Lapse suggests policyholder not fully convinced about utility of plan. Exposes PH to adverse circumstances.
    • Insurer also loses. It can recover initial expenses only if policy is in force.
    • Lapsation set right by revival. Arrears of
    • o/s premium plus interest plus proof of good health. No revival if policy lapsed more than 5 years – pure lapse.
  • Revival
    • No proof of good health required upto 6 months from date of lapse
    • Beyond this medical reports required
    • Revival is a fresh contract , risk being equal to original SA less paid - up value.
    • Underwriter may/may not agree to accept risk.
    • Loan –cum-revival scheme - loan amount adjusted towards revival- party to repay.
  • Nomination
    • NOMINATION- done to ensure payment of policy money in case of death claim.
    • Provision allowed as per sec 39 of Insurance act, 1938.
    • May be at time of proposal/ later – to be intimated to insurer else invalid
    • Can be changed by endorsement on policy - nomination automatically cancelled in case of assignment.
  • Nomination
    • Nominee cannot receive maturity claim.
    • For minor nominee, appointee fixed by PH.
    • Appointee cancelled when nominee is major. If nominee minor & no appointee, claim paid to legal heirs. When nominees more than one, money paid jointly.
    • Only insured can make nomination
    • Need not be supported by consideration
  • Nomination
    • Insured has full control of policy
    • If nominee dies, no one’s rights are affected
    • In spite of nomination, creditors can attach policy moneys
    • Assignee cannot make nomination as he is not the life assured
    • ASSIGNMENT- transfer of all rights, ownership, interest under policy to assignee.
  • Assignment
    • Legal provisions of LI policies exist
    • It is under Sec 38 of Insurance act, 1938.
    • Can be done by an endorsement on the policy or by separate deed. Stamp duty required in case done in separate deeds.
    • Must be signed by transferror & witnessed
    • Effective only after execution.
    • Notice of assignment to be sent to insurer.
  • Assignment
    • Only PH can assign. Assignor must be major. Assignment cannot be cancelled/ altered unless reassignment takes place
    • A – Absolute/conditional. In both cases, all
    • rights, title & interests pass to assignee.
    • In Conditional A, interest in policy reverts to LA on occurrence of specified condition.
    • i.e reversion if assignee predeceases assignor
  • Assignment
    • Absolute assignee is owner & can deal with it any way he feels/ he can sue
    • Assignment to be supported by a consideration.
    • If assignee dies after LA, but before settlement, policy moneys payable to heirs of assignee.
    • Creditors of LA can’t attach policy money.
    • In Child plan, LA can assign after vesting .
  • Alteration
    • ALTERATION –change in address, of mode in payment of premium, of nomination, break a policy into 2/more of smaller SAs
    • in plan, term.
    • Principle is that alterations in existing policies may be allowed if risk does not increase.
    • Alteration in plan not allowed
  • Other types of service
    • Transfer of policy
    • Issue of policy bond
    • Payment of claims
    • Corrections in bond
    • Duplicate policy issue
    • Change of address
  • Cooling –off period
    • Introduction by IRDA
    • Review of terms & conditions by policyholder within 15 days from receipt of policy document
    • Option to return policy in case of dissatisfaction
    • Entitled to refund of premium less expenses like postage, stamp & medical fees etc
  • Why is this allowed ?
    • Since life insurance is a long-term contract, these provisions provide an opportunity to policyholder to judge the suitability of the cover as per need
    • In case of Ulip policy, insurer can repurchase the units at their respective prices on the date of cancellation
  • Other information
    • Mention of various clauses like suicide, first pregnancy, exclusions
    • Details of riders/ charges/ calculation of NAV/ details of hospitalization coverage & expenses ( where applicable )
    • Participation in profits
    • Mis-statement of age - cancellation of policy if overage & uninsureable ; difference of premium if insureable
  • Indisputability
    • INDISPUTIBILITY OF THE POLICY -
    • Sec 45 of Insurance act states that a policy which has been in force for 2 years cannot be disputed on the grounds of incorrect or false statements in the proposal & other documents unless it has a material bearing & was made fraudulently.
  • Married Women’s Propert Act policies
    • If a life insurance policy is taken by any married man on his life and expressed on policy bond for benefit of his wife & children, policy becomes a trust & shall not be under control of insured/ his creditors/ his estate. Claims paid to trustees.
    • A financial arrangement for wife/ children
    • Individual policy a separate trust
    • Insured cannot alter/surrender/take loan .
    • Thank
    • You !