WHAT IS CLAIM ??? Claim is a right of insured to receive the amount secured under the policy of insurance contract promised by Insurer.
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.
WHY IS CLAIMS MANAGEMENT IMPORTANT ???
You need to identify and pay the valid claims
You need to identify and reject the invalid claims
Mistakes cost money and impact on brand
Claim settlement can be used as a marketing tool
THE COST OF NOT TAKING CLAIMS SERIOUSLY – EXAMPLE 1
3 month review
13 major errors
STAGES IN CLAIM MANAGEMENT Claims Management Claims Handling
SYSTEM 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.
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 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 handling is the integrated part of the claims management and executes the decisions made by the claims management machinery of an insurance company.
TYPES OF CLAIMS
LIFE INSURANCE CLAIMS Life insurance is broadly categorized as
Maturity claims are payable as per the terms of the policy. These policies are generally endowment policies including money back policies. If the insured dies before the expiry of the term of the policy, it is called as death claim. The death of the life assured has to be intimated in writing to the insurer.
MARINE INSURANCE CLAIMS Marine insurance claims can be broadly categorized into -
Ocean going vessels
FIRE INSURANCE CLAIMS The main documents generally required for processing fire claims are:-
Claim form duly completed by the insured.
Copies of the policy complete with terms, conditions and warranties.
Photographs (if necessary)
Police report and (if necessary)
Fire brigade report (if necessary)
Where the loss estimate is more than Rs. 1 crore, intimation is to be sent to tariff
Advisory committee ( TAC )
MOTOR INSURANCE CLAIMS Motor insurance claims are broadly categorized into: Own-Damage claims, and Third party claims. Own-Damage claims- Immediately on receipt of intimation of loss, either in writing or over telephone, a surveyor should be appointed based on the estimate of repairs.
The documents generally required for settlement of motorclaims are:
Photographs of the vehicle at the spot of the accident, showing all
the external damages and the number plate of the vehicle.
Claim form duly filled in.
Load Challan/Trip Sheet
Copy of the FIR
In case of partial loss claims, submission of bills can be dispensed with for claims up to Rs.50,OO0 in respect of private cars and two wheelers only, subject to: o The Survey Report indicating the cost of parts allowed for replacement.
THEFT CLAIMS Theft claims are either total loss claims or partial loss claims. If claims settling authority is not fully satisfied, investigation of the theft to be arranged by an investigator who may be appointed with specific terms of reference. The following documents should be collected from the insured in addition to a certified copy of FIR:
Surrender of the Registration Book and the Tax Book to the
insurer duly transferred in the name of the insurers.
Ignition keys of the vehicle
Certificate of insurance and the original insurance policy, if
not stolen with the vehicle.
Specially worded discharge voucher.
If the vehicle is recovered subsequently the insured will have the option to repay the claim amount already paid and retain the recovered vehicle. If the vehicle is found damaged, the insured will be indemnified against loss of damage.
THIRD PARTY CLAIMS The procedure for settling third party claims is broadly on the following lines:
Intimation of Claim: Intimation about an accident resulting into third party claim is received through various sources:
Courts by notice
Through accident report from police in Form 54 prescribed under Central Motor Vehicle Rules, 1989.
Investigation: Investigation about the accident to collect the relevant data to quantify reasonable and just compensation as per the formats enclosed in respect of all third party claims is mandatory.
Appointment of Advocate: A competent advocate may be appointed if necessary to ensure that the proper defenceis taken where necessary and no frivolous statements are made.
In the case where the fault of the driver is not proved, company should take immediate steps to deposit No Fault Liability amount as per section 140 of the MV Act, 1989.
MISCELLANEOUS INSURANCE CLAIMS Miscellaneous Accident Insurance includes a number of covers, which are in the nature of package policies. In this situation specific guidelines applicable to the representative sections are to be followed. BURGLARY INSURANCE The following documents are important while processing burglary insurance:
Duly completed claim form
Final investigation report from the police
It is considered preferable to appoint an investigator with surveyor’s license and knowledge of accounts as assessment of losses sometimes involves checking books of accounts.
WORKMEN'S COMPENSATION INSURANCE The necessary documents for processing workmen's Compensation claims include:
Proof of age as recorded by the employer.
For the permanent total disablement claims, the memorandum
of agreementis required to be submitted to the workmen's compensation commissioner while disposing compensation as per Workmen's Compensation Act.
For total claims, the perusal of death certificate and postmortem report is important before depositing the amount with workmen's compensation commissioner.
MEDICLAIM The following documents are required:
Duly completed claim forms
Bills, receipts and discharge card
from the hospital
Cash memos from the
Bills from chemists supported
by proper prescription
Surgeon’s bills and receipts,
bills from pathologist supported by proper prescription
GUIDELINES FOR CLAIMS SETTLEMENT BY IRDA
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 free of charge, within 30 daysof 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.
In filling the form of proposal, the prospect is to be guided by the
provisions of Section 45 of the Act. Any proposal form seeking information for grant of life cover may prominently state therein the requirements of Section 45 of the Act.
Where a proposal form is not used, the insurer shall record the information obtained orally or in writing, and confirm it within a period of 15 days thereof with the proposer and incorporate the information in its cover note or policy.
Wherever the benefit of nomination is available to the proposer, in termsof 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.
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.
FACTORS AFFECTING THE CLAIMS MANAGEMENT
The policy should be in force on the date of the
The risk and cause of event should be covered by
The cause of loss or the event should be directly
related to the loss. A remote cause has no place in thesettlement.
The loss should not have been caused with an
intention to gain from the situation.
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.
Presence of insurable interest, in case of the property
insurances, at least at the time of happening of event or loss sufferings. Without having the insurable interest in the subject matter, no person can get benefit or compensation.
IMPORTANCE OF TIME ELEMENT IN THE CLAIMS PAYMENT
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 because 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
-waste of time
-will affect on the productive areas of the business particularly in the marketing of the insurance business.
DELAY IN CLAIMS SETTLEMENT
REASONS FOR DELAY IN CLAIMS SETTLEMENT
Late submission of claim form along with sufficient proof or supporting documents
Innocence and illiteracy of the assured
Not submitting the claims forms in full
Lack of motivation or knowledge about the importance of the claims settlement
Lack of awareness among the staff of the organizations or defective supervision
The delay on the part of the insurer may be intentional or due to the pressure of work.
ROLE OF SURVEYORS AND LOSS ASSESSORS
Maintaining confidentiality and neutrality without jeopardizing the liability of the insurer and claim of the insured;
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;
Conducting spot and final surveys and comment upon excess/under insurance etc
Surveying and assessing the loss on behalf of insurer or insured;
Assessing liability under the contract of insurance;
Pointing out discrepancy, if any, in the policy wordings;
Satisfying queries of the insured/insurer and of persons connected thereto in respect of the claim/loss;
Giving reasons for repudiation of claim, in case the claim is not covered by policy terms and conditions;
Taking expert opinion, wherever required;
A surveyor or loss assessor shall submit his report to the insurer within 30 days of his appointment. which can be extended with the consent of the insured and the insurer.
UNDERWRITING IN INSURANCE Insurance underwriting is the process of classification, rating, and selection of risks. Thus the underwriter fixes the premium of the product considering various factors such as cost of risk, administration expenses, brokerage or marketing expenditure, claims settlement expenses and budgeted profit. The premium is the present value of the future risk sources include:
The policy application;
Medical history and examinations;
The Medical Information Bureau (MIB); and
The producer or insurance agent.
IMPACT OF CLAIMS ON UNDERWRITING Claims settlement has a direct impact upon underwriting. If the claims of certain insurance products are frequently received they have an impact upon the claims reserves and warrant review of the product and take decision either to modify the terms or continue.
FRAUDS IN CLAIM SETTLEMENT
WHAT IS FRAUD ??? Insurance fraud is any deliberate deception/dishonesty committed against or by an insurance company, insurance agent, or consumer for unjustified financial gain. 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 fraudulent claims may be of two categories: The cause or the claim itself is fraudulent The claim may be genuine but the method of calculation or the evidences, or the information submitted may be fraudulent in nature.
FOR EXAMPLE : 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 HOW IS IT DEALT WITH ??? As such any fraud made by the insured or the insurer in concluding the insurance contract or the claims settlement, makes the entire contract viocable at the option of the person on whom the fraud is played. The fraudulent claim by the assured will deprive him the right to claim as the insurer has the right to reject it.
CONCLUSION 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.
One Final Thought… An experienced, competent claims team can’t on it’s own make your CI business profitable… …BUT… …An inexperienced, claims team can make your business unprofitable even if you have got the pricing and underwriting right. (and damage your brand at the same time)