OBJECTIVE OF THE STUDY

To find out insurance claim and which are the companies involved in it

To know what are the trends in Insurance claims

To find out the developments in the Insurance claim

To find out the Procedure of Claims

Marine Claim Insurance

Introduction
The claims collection procedure follows certain stages, which need further analysis. The levels
of difficulty are rather significant and therefore an interdisciplinary approach is necessary. The
work-flows in this procedure must follow a logical order, both by the policyholder and his
representatives, as well as by the insurance company and the P & I clubs. The present Congress
(as it is defined by its theme), offers the possibility of a systematic analysis of different fields of
knowledge and hence that of Claims, through the presentation and analysis of the workflow in
Marine Insurance Claims. Such a Claim appears when a risk prescribed by the policy contract
occurs and ends with the payment of the compensation from the insurer. It is a fact that the most
important way of dealing with Claims is the prevention of their formation. However it is
reasonable that taking into consideration the multi-diversity of maritime companies and their
difficulty coefficient, the prevention of risks is often rather difficult. Therefore whenever a
named peril raises, the procedure of claims resolution starts. The first step in the management of
claims is the report of the incident by the Captain to the shipping company, to the insurance
company and the P & I club provided that the incident concerns the P & I club. Alternatively the
incident shall be reported to the insurance company by either the shipping company or by the
insurance broker. The assortment of evidence and proofs, which help towards a more efficient
management of claims, follows in the next step. In any case, the insurance company must be
notified of the claim with a relative note of the policy holder, within a certain deadline starting
from the moment the incident occurred or should have come to the knowledge of the ship-

owners. If this requirement hasnt been met a claim cant be substantiated from the
policyholder.1 2. The Procedure of Claims The process of gathering evidence is assisted by
representatives inspectors appointed by the ship owner who are in charge of contacting all
involved parties, European Research Studies, Volume XII, Issue (3), 2009 172 such as
inspectors, local authorities, shipyards, charterers, receivers of cargo etc. In case these
individuals havent been appointed jointly by the ship owner and the insurance company or the P
& I Club, if the latter is involved, the policyholder has the responsibility to appoint a maritime
inspector as well as an engineer inspector 2. The maritime inspector takes over the inspection of
the works concerning the reinstatement of the ships sailing ability as well as the Trans load and
storage of the cargo if needed. Respectively, the engineer inspector is in charge of the propulsion
capability and the function of the rest of the ships equipment. Meanwhile, the insurance
company has the possibility to assign to Salvage Association the appointment of an inspector3
who will examine thoroughly the case on its behalf. To be more specific, the representative of
Salvage Association focuses his interest on the examination of the causes where the claim stems
from, on the size of the claim as well as on the possible next steps. The extents of the repairs
which must be done to the shipyards as well as the cost of the repairs constitute the main duty of
the inspector of the Salvage Association. It is possible to reason that there has been an
overvaluation of the repairs, and in such case an intervention is necessary in order to re-evaluate
the final amount of money that will be paid for the restoration of damages. If there is an
implication of fraud, the Salvage Association inspector needs to undertake extra investigation
duties. It must also be noticed that he deals with the supervision of salvaging duties. To expedite
those tasks the Salvage Association often uses Lloyds global net of representatives. The
policyholder can request from the Average Adjuster a report on the expenditures 4. It is useful to

mention that the Average Adjuster can be replaced in his duties by the Claims Adjuster 5, with
the exception of the General Average whose presence is mandatory. As far as the Average
Adjuster is concerned, its often specified in the charter party that if needed to appoint an
Average Adjuster, he must meet a series of requirements regarding his head office, in order to
secure his credibility. The Average Adjuster is responsible for conducting a study where he
describes and quantifies the expenses that are required for the harbor expenses and other
expenses that may arise, as well as the repairs that already have been agreed to be made.
Therefore, the Average Adjuster is responsible of contacts with the inspector insurer for the
estimation of the required repairs and their cost. In order that the claim is presented to the
insurance company, the broker who represents the insured and who has been in charge of the
duty of conducting the claim should firstly complete his work and calculate the Claim (demand).
Alternatively, when the insured has 100% interest from the insured peril, no broker is involved.
Regarding the cases that refer to the ship, the Average Adjuster, who processes the data collected
concerning the case and who ensures that each claim from the insured s side is well founded and
is legally based, intervenes in the procedure. Despite this fact, if certain claims havent got a
strong legal support, the Average Adjuster can submit them to insurers for consideration6. At
the same time, his advices the two sides contributing to the choice of either taking legal actions
or follow the path of negotiations 7. Work-Flow in the Procedure of Marine Insurance Claims
173 In order to make the choice between Arbitration and Courts, the main criterion taken into
account will be the comparison of expenses required in each case. After The Average Adjuster
completes his work, he delivers to the broker his report where the final amount of recognized
expenses is determined. In most cases the broker who deals with the settlement of the claims is
the one who negotiated the accomplishment of the insurance in the first place 8. Often the broker

undertakes the assignment of maritime inspectors on behalf of the insured 9. After he has
assembled and classified the reports of the Average Adjuster joint with the reports of the marine
inspectors, the broker undertakes the duty to present the various claims to the involved insurance
companies that have undertaken the coverage of the relevant risks. The brokers position presents
particularities, because although he acts on behalf of the insured, he undertakes at the same time
the additional duty of providing information to the insurers, before the report of the Average
Adjuster becomes definitive. Consequently he should often show impartiality, which is not
always compatible with the obligations he has towards the insured 10. It seems purposeful to add
that in case that a false representation of real facts is attempted by the insured, the broker will not
be discharged of conspiracy, unless he withdraws from the handling of case 11. Provided that the
claims have henceforth been regulated, the insured can receive the insurance compensation either
directly or via the broker or even via the Average Adjuster12. Having previously ensured
authorization, the broker or the Average Adjuster can collect the compensations and afterwards to
attribute the proportional amount to the beneficiaries. Practically, this entails that a remittance or
a credit note will be issued by the broker or the Average Adjuster to the secured, certifying thus
the payment of the claim. We should add that for any further doubt, the involved parts may
consult the Average Adjuster. In case the risk comes upon on the transported cargo, another
procedure is followed. The recipient of the cargo has the responsibility to inform the involved
parts about the condition of the cargo, immediately as soon as this falls into his perception. More
concretely, the insurers must be notified about the incident, in order to appoint an inspector, who
will undertake to check up the condition of the cargo. We should underline that an inspection
made jointly by the inspector and a representative of the recipient of the cargo is desirable so that
the conclusion is mutually accepted.2 Moreover, the carrier should be informed of the condition

of the cargo and he should be called to participate in the joint inspection of the cargo. From this
inspection can result a claim of the recipient of the cargo against the carrier. The appointed
inspector may decide the landing or the handing of the cargo before the inspection in order to
eliminate the damage. At the same time, it is often useful that the possible intermediary carriers
of the cargo, normally the carriers from the harbor of landing to the storehouse of the recipient as
well as the local harbor authorities13, to be informed about the condition of the cargo. European
Research Studies, Volume XII, Issue (3), 2009 174 Afterwards, the report of the inspector is
handed to the Average Adjuster who should declare the final amount of the compensation. In this
point we should note that with regard to the market of small ships and off-shore oil and natural
gas production and transport, the average adjuster can be replaced by the Loss Adjuster14. In
certain cases the inspector also undertakes the duties of the Average Adjusters. At this point a
difference between the cargo insurance and the ship insurance is underlined. In particular, while
in ship insurance the Average Adjuster is independent, in cargo insurance usually he is appointed
by the insurance company. Evidence of the particular importance of the role of the Average
Adjuster and of his status is that although his report concerning the compensation is not binding
neither for the insured nor for the insurer, it is usually accepted without objections by the
concerned parties. It has been established that the payment of the compensation to the
beneficiary is collected by the broker on behalf of the insured. Usually, monthly - payments have
been agreed but also a special settlement can be arranged. Subsequently, the broker is responsible
of refunding the equivalent sum to the insured. If the broker has a large turnover and proportional
liquidity, it is possible that he pays the compensation to the beneficiary before he collects it from
the insurers. It is, however, possible that the case is not yet closed. For instance, we note the
possibility of a partial recollection of the compensation paid to the insured, in case it is

needed15. A different procedure is required in case of the General Average, which is the situation
in which the owners of the cargo are obliged to contribute proportionally to the expenses done
for the necessary and safe emersion of the ship from a situation which lurks dangers for the ship
or the cargo.3 In this case only the Average Adjuster can undertake the duties of the Adjuster.
When a situation of General Average has to be dealt with, the carrier has the obligation to inform
immediately the recipient of the cargo about this situation. When in advance payment is required
for the participation in General Average, the recipient of the cargo should pay the sum
corresponding to him and claim compensation from the insurance company. It should be noted
that the presence of the Average Adjuster is quite important in order to determine the degree of
participation of each party in the total amount of compensation. In the case of the General
Average, at least in the United Kingdom, it has been established that the Average Adjuster
assumes the responsibility to inform anyone related to the cargo about the extent of the claim16

. 3. Conclusions
The application of information systems is necessary in order to facilitate considerably the
settlement of claims. These applications should be put into practice from both the insured and the
insurance companies. If the information systems are simultaneously applied to the preliminary
agreements and the insurance policy, the Work-Flow in the Procedure of Marine Insurance
Claims 175 settlement of claims will be considerably facilitated. The information systems should
cover the needs of both the insured and the insurers. If this occurs it will have important
implications, provided that shipping enterprises have the possibility to create independent

departments specialized in claims which will use specialized executives where information
systems are applied. The subject analyzed above focuses on the issues of procedures and rational,
equitable and effective settlement of claims setting aside the matters of substance of marine
insurance agreements. However, it offers great opportunity for future development and analysis,
and for the beginning of a scientific dialogue. As a concluding Remarque, I would like to
underline the quantity and variety of legislation, the variance of jurisprudence in various
countries, an issue that should be scrutinized in order to reach to synthesis.
Documents Required for Claims
Claims under marine policies have to be supported by certain documents which vary according
to the type of loss as also the circumstances of the claim and the mode of carriage.
The documents required for any claim are as under:

Intimation to the Insurance Company: As soon as the loss is discovered then it is the
duty of the policyholder to inform the insurance company to enable it to assess the loss.

Policy: The original policy or certificate of insurance is to be submitted to the

company. This document establishes the claimants title and also serves as an evidence of the
subject matter being actually insured.

Bill of Lading: Bill of Lading is a document which serves as evidence that the goods
were actually shipped. It also gives the particulars of cargo.

Invoice: An invoice evidences the terms of sale. It also contains complete description
of the goods, prices, etc. The invoice enables the insurers to see that the insured value of the

cargo is not unreasonably in excess of its cost, and that there is no gross overvaluation. The
original invoice (or a copy thereof) is required in support of claim.

Packing List: which shows the list of Items and condition of packing.

Survey Report: Survey report shows the cause and extent of loss, and is absolutely
necessary for the settlement of claim. The findings of the surveyors relate to the nature and
extent of loss or damage, particulars of the sound values and damaged values, etc. It is normally
issued with the remarks "without prejudice" i.e. without prejudice to the question of liability
under the policy.

Debit Note: The claimant is expected to send a debit note showing the amount claimed
by him in respect of the loss or damage. This is sometimes referred to as a claim bill.

Copy of Protest: If the loss or damage to cargo has been (issued by insurers) which
transfers the rights of the claimant against a third party to the insurers. On payment of claim, the
insurers may wish to pursue recovery from a carrier or other third party who, in their opinion, is
responsible for the loss. The authority to do so is derived from this document. It is required to be
duly stamped. Some of the other documents required in support of particular average claims are
Ship survey report lost overboard certificate if cargo is lost during loading and unloading
operation, short landing certificate etc.

Bill of entry: The other important document is bill of entry issued by the customs
authorities showing therein the amount of duty paid, the date of arrival of the steamer, etc.,
account sales showing the proceeds of the sale of the goods if they have been disposed of; repairs
or replacements bills in case of damages or breakage; and copies of correspondence exchanged
between the carriers and the claimants for compensation in case of liability resting on the
carriers.

Debit Note: The claimant is expected to send a debit note showing the amount claimed
by him in respect of the loss or damage. This is sometimes referred to as a claim bill.

Dock Receipt: To Show the condition of the Cargo whilst Loading and Unloading.
What to Do in the Event of a Claim
Any shipment that arrives damaged or incomplete requires IMMEDIATE ACTION Upon
Receiving Cargo:

Examine all packages for external damage. Note signs of damage and shortage on the bill
of lading and/or delivery receipt before you accept delivery

Count the number of packages. Note shortages on the bill of lading and/or the delivery
receipt

If the shipment contains fragile items, open the packages to check for breakage - even if
there is no external damage. If there is "concealed damage", contact the carrier immediately.
If there is damage or loss

Take photographs - if possible - of damaged packages and goods.

Do not discard damaged packing materials or contents.

Make every effort to minimize the loss, or prevent further loss, as stipulated under the
insurance contract. Reasonable expenses incurred in minimizing loss are reimbursable

Immediately put all carriers on notice in writing, holding them responsible for the loss or
damage. Include the bill of lading and/or waybill and/or delivery note number, as well as the
name of the transporting vessel or other mode of transport. A description of the loss should also
be included, and the carrier(s) should be informed that a final claim will be filed when the full
extent of damage has been confirmed.

When delivery is made by container, if the container is delivered damaged or with seal
broken or missing, or seal number other than that stated in the shipping documents, retain all
defective or irregular seals for subsequent identification. Make sure that the tallyman who goes
along with the container note, the damage or discrepancy on his tally sheet and get a copy of
damage/exception sheet from the tally company.

Obtain damaged cargo certificate or short landed memo or exception list issued by the
carriers/forwarders, or make notations of the damage/loss on the bill of lading or carriers
delivery receipt.

DO NOT give a clean receipt to the delivering carrier/forwarder unless you can
immediately inspect the cargo and you have found it undamaged. When there is any doubt, you
should mark any documentation with "Received in Apparent Good Order and Condition".

As soon as you are aware of a potential loss/claim, immediately notify the

carrier/forwarder and/or the responsible parties involved in writing of the damaged or missing
cargo and of your intent to hold them responsible within the time limit set out in your contract of
carriage.

In case of theft, pilferage, robbery, malicious damage or traffic accident, please refer to
the local authority and obtain the relevant Police or Traffic Accident Report. Also weighment slip
at the point of loading and weighment slip at the point of unloading should be produced.

Take such reasonable action to prevent further loss.

Notice of Claim for Transportation by Inland vessels or Road Carriers (booking and
destination offices) within 6 months from the date of booking in terms of Sec10 of the Carriers
Act 1865.

Notice of Claim for Transportation by Air, the concerned Air carriers within 7 days from
the date of delivery of goods at the destination or in non-delivery within 14 days from the date of
booking in terms of Rule26(2) Chapter III of the Indian Carriage of Air Act. Rule 26 is appended
here below:

26. (1) Receipt by the person entitled to delivery of luggage or goods without complaint
is prima facie evidence that the same have 93 been delivered in good condition and in
accordance with the document of carriage. (2) In the case of damage, the person entitled to
delivery must complain to the carrier forthwith after the discovery of the damage, and, at the
latest, within three days from the date of receipt in the case of luggage and seven days from the
date of receipt in the case of goods. In the case of delivery the complaint must be made at the
latest within fourteen days from the date on which the luggage or goods have been placed at his
disposal. (3) Every complaint must be made in writing upon the document of carriage or by
separate notice in writing dispatched within the times aforesaid. (4) Failing complaint within the
times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part.
In the event of Claims being repudiated by the Insurance Company the following
options are available as a recourse:
1. Make a representation to the Insurance Company/TPA.
2. If no reply is received within 15 days on making such representation make a
representation to the Grievance Cell of the Insurance Company.

3. If No Reply is received or if the reply is not satisfactory then make a representation to

the Insurance Ombudsman who has Quasi-Judicial powers to hear the case and make
adjudication.
4. If still not satisfied the next option is to go to court.
- See more at: http://www.claimsbazaar.com/marine-claims#sthash.Dw7PJs1q.dpuf

Fire Insurance Claim

Fire Insurance basically covers property damage. From the above pictures we can see that it
covers not only Fire but also damages to property due to natural/manmade disasters.

Fire

Lightning

Explosion/Implosion

Aircraft Damage

Riot, Strike, Malicious Damage

Storm, Typhoon, Hurricane, Tornado, Flood and Inundation

Impact damage

Subsidence and landslide including Rock slide

Bursting and overflowing of water tanks, apparatus and Pipes

Missile testing operations

Leakage from Automatic Sprinkler Installation

Bush Fire

Earthquake/Terrorism etc. are covers that have to be opted for while submitting the
proposal form.
What is the Claims Process?

What do I do in the event of a Claim?

1Take spot photographs of fire damage to property and contents.

2Remove articles or stock that could be salvaged.

3Intimate insurance company on their toll free number and obtain a claim number.

4Obtain a certificate from fire brigade.

5In the event of Flood / Cyclone / Earthquake / Lightning damage obtain meteorological
report.

6In the event of Riot and Strike obtain a first information report from the police
authorities.

7Submit claim form with claim bill.

What are the documents that have to be submitted for the Claim?

Completed claim form

Estimate of loss

Fire brigade report

Damaged area plan copy / plant plan copy

In case of flood claims- meteorological report

Approved plan copy of Municipal authorities

Placement of Fire Extinguishers-Sketch

In case of Implosion/Explosion report from Inspector of Boilers.

In case of falling of Foreign Objects/Aircraft Damage FIR for local Police Station

In case of terrorist attacks FIR from Local Police Station.

In case of Riot and Strike FIR from Local Police Station.

In case of Manufacturing Units: License issued by Inspector of Factories, Stock

Statement for 30 days, Statement of Stock in process and Purchase bill of Raw Materials and
Statement of Finished Products with value.

In case of Office Buildings: Approved Plan Copy, Inventory List and Purchase bill of
Furniture/Fixtures/Fittings.

In case of Shops: License from Local Authority under Shops and Establishment Act,
Copy of Inventory for last 30 days, Copy of purchase bills, Sales Invoice for the last 30 days. In
case of Sale but not delivered the list should be produced. List of Furniture/Fixtures/Fittings and
Municipal Tax Receipts.

In case of Residential Buildings: Approved Plan Copy, List of contents, Purchase bills if
available and Municipal tax receipts.
What are the reasons for disputes in a Fire Claim?
Quantum of Claim, cause of Fire, buildings extended without approved plans, faulty electrical
installations, not insuring for the full value, breach of Policy Conditions and warranties for eg.
POULTRY FARMS WARRANTY Warranted that birds in the poultry farm are not covered
by this insurance. Non-inclusion of add on covers like Earthquake/Terrorism etc.,
Underinsurance, omission to insure additions, etc.
How do I get relief in case of disputes?

1Make a representation to the Insurance Company.

2If no reply is received within 15 days on making such representation make a

representation to the Grievance Cell of the Insurance Company.

3If No Reply is received or if the reply is not satisfactory then make a representation to
the Insurance Ombudsman who has Quasi-Judicial powers to hear the case and make
adjudication.

4If still not satisfied the next option is to go to court.

Life insurance claim

I was 23 when I was married and settled in Mumbai, the iconic Financial Capital of India. My
Husband then was 28. In about 5 years our family size had grown to 4 with two dependent

(Parents of my beloved at Nagpur, dependent on him). My husband who started his career as a
lower level executive had climbed up the ladder and our life style had changed.
During his career concentration he left me with the job of evaluating our needs, budgeting,
meeting the needs of his parents, health expenses etc. I used to evaluate his income with tax
payments, liabilities, requirements for the next 20 years and so on. All this came in handy with
Life Insurance investment.
Life was beautiful, children were in the best school, had our own home, brand new car and all
the luxuries.
My Husband was on a trip to Goa, and instead of flying he chose to drive. Yes he was a good
driver but loved to travel at top notch speeds. He was only 40 then. The mobile chimed and since
it was from my husbands phone I said wow dear, you reached? The voice at the other end
gave the feel that something was not well, and then I fainted.
Now began our woes. Should I go start working? Now even my parents were blaming that I
should have been employed but not. As I kept mourning I was convinced that my husband had
done his best because he was keen on Life Insurance. Yes, he was Insured for 2crores (of course
over a period of time with various policies), home was covered under a term insurance; kids
education was covered with policies for education. Now was the real relief. My husband had not
left us in lurch. We could live life as we lived when he was alive. His parents were also duly
supported.
Thanks to Life Insurance.

How do I calculate my Life Insurance need?

When purchasing life insurance, the question really isnt how much you need, but how much
capital your family will need at the time of your death, which depends on two variables:
1)

How much will be needed at death to meet immediate obligations?

This amount takes into account all final expenses: uncovered medical bills, funeral and estatesettling costs, outstanding debts, mortgage balance and college costs to name a few.
2)

How much future income is needed to sustain the household?

This is the number youll arrive at after calculating the present value of cash-flow streams your
family will need after your death.
What do I do in the event of a claim?

Intimation to Insurance company

Correctly filling up the claim form

Original policy document

In case of Natural death, Death certificate from Registrar of Births and Deaths, Legal
Heir certificate from revenue department.

In case of accidental Death: Death Certificate-from registrar of births and deaths, First
Information Report and Inquest Report and Post mortem report from concerned police station
and Legal Heir Certificate from revenue department.

In case of Suicidal Death: Claims can be made only upon completion of 1st year of the
policy: Death Certificate from registrar of births and death, First Information Report and Inquest
report and post mortem report from the concerned police station and Legal Heir certificate from
revenue department.

In case of Murder: Death Certificate from registrar of births and death, First Information
Report and Inquest Report and Post mortem report from the concerned police station and Legal
Heir Certificate from revenue department.

For Points No.4, 5&6 in the event of multiple Legal Heirs, the Legal Heir making the
claim must produce a No objection certificate from the other Legal Heirs. Kindly note this is
imperative even if nomination has been duly endorsed in the policy. In cases where the Legal
Heir is an adopted person such documents pertaining to adoption must be duly submitted.

In all the above circumstances the discharge voucher given by the Insurance Company
along with copy of bank pass book must be submitted for crediting the claims to the claimants
account.
There is a hiccup in the claim settlement, the Insurance Company is refusing payment, now
what do I do?

Make a representation to the Insurance Company

Wait for a period of 15 days and then make a representation to the Grievance cell of the
Insurance Company.

When reply from the Insurance Company is adverse/ no info make a representation to the
Ombudsman who is a quasi-judicial authority or move the Consumer Redressed Forum
(Consumer Court).

The field of insurance has taken a giant leap at threshold of twentieth century. Insurance have
became an integral part of life of man all over the globe. The proverb Need is the mother of
invention i s proving equally correct in case of insurance Insurance have already had
considerable impact on many aspects of our society
.many organization 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. Claim management is one of the most challenging process in the industry.
W it h t h e n u m b e r o f s t a k e h o l d e r i n v o l v e d , t h e d e p e n d e n c i e s a n d t h e
logistics, there is a need to eliminate manual intervention. For many
o r g a n i z a t i o n , c l a i m m a n a g e m e n t a n d 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 a n d r e g u l a t i o n s f o r t h e a s s e s s m e n t o f
g e n e r a l d a m a g e s u s i n g t h e k e y information contained in medical reports, surveyor
report, loss assessors reports, claimants petition and the procedures or conditions and
warrenties contained in the policy document. The claims management regulates the
payment of general damages and also payment of the loss of future earnings. This project is just
a gist about how the insurance companies settle t h e c l a i m s , t h e p r o c e d u r e t h a t i s
f o l l o w e d , a n d t h e i n t e r m e d i a r i e s t h a t a r e involved in the process and so on.

This project throws light on various aspects on claims management and the problems faced
by them.

Introduction to Insurance in India

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to liberalized market again. Tracing the
development in Indian Insurance sector reveals the 360 degree turn witnessed over a
period of almost two centuries. Today insurance companies 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 indicate the potential for insurance
companies to grow their market in India. In simple term it is a contract between the person who
buys Insurance and the 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 in
normal 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
premium to provide can safeguard himself and his family financially from an unfortunate event.

Brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the year 1818 witgh
the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
1 9 1 2 : T h e I n d i a n L i f e As s u r a n c e C o m p a n i e s Ac t e n a c t e d a s t h e f i r s t
statue to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and on-life insurance businesses.
1 9 3 8 : E a r l i e r l e g i s l a t i o n c o n s o l i d a t e d a n d a m e n d e d t o b y t h e
Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
with a capital contribution of Rest. 5 core from the Government of India. The General
insurance business in India, on the other hand, can trace its roots to the Triton Insurance
Company Ltd., the first general insurance company established in the year 1850 in Calcutta by
the British. Some of the important milestones in the general insurance business in
India are:
1 9 0 7 : T h e I n d i a n M e r c a n t i l e I n s u r a n c e L t d . s e t u p , t h e f i r s
t company to transact all classes of general insurance business.
1 9 5 7 : G e n e r a l I n s u r a n c e C o u n c i l , a w i n g o f t h e I n s u r a n c e A
s s o c i a t i o n o f I n d i a , f r a m e s a c o d e o f c o n d u c t f o r e n s u r i n g f a i r conduct and
sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee setup.

1972: The General Insurance Business (Nationalization) Act, 1972n a t i o n a l i s e d t h e

g e n e r a l i n s u r a n c e b u s i n e s s i n I n d i a w i t h e f f e c t from 1st January 1973.
107 insurers amalgamated and grouped into four companys viz.the National
Insurance Company Ltd., the New India Assurance Company Ltd.,the Oriental
Insurance Company Ltd., and the United Indian Insurance Company Ltd., GIC
incorporated as a company.
An insurance claim is the actual application for benefits provided b y a n i n s u r a n c e
c o m p a n y. P o l i c y h o l d e r s m u s t f i r s t f i l e a n i n s u r a n c e 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.
Individual who take home, life, health, or automobile insurance policies must maintain regular
payments called premiums to the insurers.
Most of the time these premium are used to settle another persons insurance claim or to build up
the available assets of the insurance company. When claims are filed, the insurance has to
observe the settle rules and procedure and the insurer has also to reciprocate in a similar manner
by undertaking appropriate steps for speedy disposal of claim. It is true that the claims settlement
is complex in nature, but it is the driving force to plant confidence in the heart of people, in
general and beneficiaries inspection. Insurance claim is 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 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 inter woven with people, the customer and the consumer service. It is inevitable for the
insurance company to protect the guard the interest of the policy holder. 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.
Many insurers have recognized the need to improve the efficiency of their claims
management process. They have streamlined processes,

eliminated paper-

b a s e d f o r m s a n d r e d i s t r i b u t e d w o r k t o m a t c h t h e demands to skills. The

objective of their efforts is to lower costs, while also increasing overall throughput.
Efficiency

improvements

make

tasksq u i c k e r a n d l e s s c o s t l y t o e x e c u t e . H o w e v e r, t o r e a l i z e e v e n g r e a t e r im
provements in the claims handling process, insurers must also focus on the effectiveness of their
claims decisions.

C l a i m s h a n d l i n g c o s t s t y p i c a l l y r e p r e s e n t 1 0 % t o 1 5 % o f n e t earned
p r e m i u m ; i n c o n t r a s t , c l a i m s p a y o u t s r e p r e s e n t 4 0 % t o 6 5 % . Insurers
expand

their

focus

to

include

effective

as

well

that
as

efficientc l a i m s p r o c e s s i n g w i l l f i n d a f a r l a r g e r p o o l o f s a v i n g s o p p o r t u n i t i
e s . Technology

can

play

significant

role

by

providing

integrated

channelsf o r c o m m u n i c a t i o n a n d c o l l a b o r a t i o n . T h i s w o u l d h e l p t h e i n s u r a n c
e c o m p a n y i n c r e a s e e m p l o y e e p r o d u c t i v i t y b y r e d u c i n g c y c l e t i m e a n d defect

rate and also increase employee participation and compliance. Claims Processing sometimes
involves collating and sharing large amounts of information among multiple parties involved in a
claim,
from b o d y s h o p s t o a d j u s t e r s t o i n v e s t i g a t o r s t o l a w y e r s a n d d o c t o r
s t o claimants and regulators. And it involves the knowledge of experienced
adjusters to determine the fair and appropriate outcome of a claim.
Inf a c t , l o s s e s a n d l o s s e x p e n s e s a b s o r b 8 0 % o f p r e m i u m c o l l e c t e d
b y carriers.S e r v i c e

representatives

and

claims

adjusters

need

to

access

dataf r o m m u l t i p l e s o u r c e s w h e n p r o c e s s i n g o r a s s e s s i n g a c l a i m , w
hichd e l a ys s e t t l e m e n t t i m e a n d i n c r e a s e s c o s t s . M a n u a l s t e p s
reducetransparenc y of the claims proces s and raise the
risk of fraud,
manipulation or simply human error. Customer retention is also ac
hallenge experts say that 75 percent of customers leave their insurer due to claims
issues.

C l a i m s h a n d l i n g c o s t s t y p i c a l l y r e p r e s e n t 1 0 % t o 1 5 % o f n e t earned
p r e m i u m ; i n c o n t r a s t , c l a i m s p a y o u t s r e p r e s e n t 4 0 % t o 6 5 % . Insurers
expand

their

focus

to

include

effective

as

well

that
as

efficientc l a i m s p r o c e s s i n g w i l l f i n d a f a r l a r g e r p o o l o f s a v i n g s o p p o r t u n i t i
e s . Technology

can

play

significant

role

by

providing

integrated

channelsf o r c o m m u n i c a t i o n a n d c o l l a b o r a t i o n . T h i s w o u l d h e l p t h e i n s u r a n c
e c o m p a n y i n c r e a s e e m p l o y e e p r o d u c t i v i t y b y r e d u c i n g c y c l e t i m e a n d defect

rate and also increase employee participation and compliance. Claims Processing sometimes
involves collating and sharing large amounts of information among multiple parties involved in a
claim,
from b o d y s h o p s t o a d j u s t e r s t o i n v e s t i g a t o r s t o l a w y e r s a n d d o c t o r
s t o claimants and regulators. And it involves the knowledge of experienced
adjusters to determine the fair and appropriate outcome of a claim.
Inf a c t , l o s s e s a n d l o s s e x p e n s e s a b s o r b 8 0 % o f p r e m i u m c o l l e c t e d
b y carriers.S e r v i c e

representatives

and

claims

adjusters

need

to

access

dataf r o m m u l t i p l e s o u r c e s w h e n p r o c e s s i n g o r a s s e s s i n g a c l a i m , w
hichd e l a ys s e t t l e m e n t t i m e a n d i n c r e a s e s c o s t s . M a n u a l s t e p s
reducetransparenc y of the claims process and raise the
risk of fraud,
manipulation or simply human error. Customer retention is also ac
hallenge 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

particular

emphasis

on

monitoringa n d l o w e r i n g t h e c l a i m s c o s t s . T h e i m p o r t a n t e l e m e n

t s o f c l a i m s management are claims preparation, claims philosophy, claims processing and

claims
settlement.T h e c l a i m s p h i l o s o p h y i s d e f i n e d a s p r o c e d u r e o r s p e
cifiedapproach to settle the claims. It contains the claims m
a n a g e m e n t Principles and also claims handling methods and procedures. The
claims philosophy

includes

the

preparation

of

guidelines

regarding

the

receipt

of c l a i m s f r o m t h e i n s u r e r s o r c l a i m a n t s , a n a l y s i s o f t h e
c l a i m s , consideration of the possible decision on the particular is
s u e s a n d 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.T h e c l a i m s p r o c e s s i n c l u d e s t h e b a s i c c l a i m s p r o c e d u r e a n d ha
ndling 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 p o i n t o f v i e w o f t h e i n s u r e d , i t i n c l u d e s
t h e s u f f e r i n g o f l o s s o r t h e damage, understanding and identifying the cause of
action, information or giving notice of claim or loss to the insurer, providing sufficient proof
of l o s s t o t h e i n s u r e r o r h i s a g e n t o r t h e l o s s a s s e s s o r a n d s u r v e y o r s . T h e
insurer, on the receipt of the claim from the insured, has to take certain immediate
precautions

such

as

verifying

the

claims,

reviewing

the

claima p p l i c a t i o n , r e s p o n d t o t h e c l a i m a n t , a n d
c a r r y o u t c l a i m s i n v e s t i g a t i o n , 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.

C l a i m s m a n a g e m e n t i s a m a n a g e r i a l f u n c t i o n i n w h i c h t h e insurer ha
s

a d e f i n i t e r o l e t o p l a y i n a n a l ys i s o f d a t a , p r o c e s s i n g o f application,

decision-making,

budget

planning,

and

business

controla n d f u n d m a n a g e m e n t . I t i s a s u b j e c t i v e c o n c e p t . I
n c l a i m s management, the attention is on making principles and guidelines for smooth and
profitable

settlement

of

claims

in

the hands

of

the

insurer.C l a i m s m a n a g e m e n t i n c l u d e s t h e e n t i r e p r o c e s s o f c l a i m s h a n d l
i n g a n d c l a i m s p a y m e n t . T h i s i n c l u d e s r e v i e w o f t h e c l a i m s 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 a n i m p o r t a n t p l a c e i n t h e c l a i m s m a n a g e m e n t . I t a l s o i n c l u d e s
r i s k m a n a g e m e n t t e c h n i q u e s , l o s s a s s e s s m e n t , a n d b u s i n e s s f o r e c a s t i n g and
planning.

Claims handling:

Claims

handling

is

the

procedural

way

of

processing

claimsa p p l i c a t i o n . C l a i m s h a n d l i n g i n v o l v e s u t i l i z a t i o n o f t h e l a i d d o w n p r
inciples

as

yardsticks

and

the

measuring

methods

in

settling

thei s s u e s b e f o r e i t o c c u r s . C l a i m s h a n d l i n g i s a t r a d i t i o n a l f o r m o f
m a n a g i n g t h e c l a i m s s e t t l e m e n t s . I t i n c l u d e s h a n d l i n g o f v a r i o u s stages of the
insurance

claims.

It

is

functional

in

nature

such

as

claimsr e v i e w, i n v e s t i g a t i o n a n d u n d e r s t a n d i n g t h e n e g o t i a t i n g p r o c e s s . I t do
es not include any managerial outlook such as risk management, policy making and
decision making. T h u s , i t i s c o n c e r n e d w i t h t h e p r o c e d u r a l m e t h o d s a n d a l s o
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 o f h a n d l i n g t h e i s s u e s h a v i n g i n t e r e s t o f t h e
i n s u r e r i n m i n d . I t i s s ystematic 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.

Types of claims
Understanding the requirements for various life insurance benefits

(claims)

is

importantforthecustomers.The overriding condition onc l a i m s i s t h e p a y m

e n t o f p r e m i u m s i . e . c l a i m s a r e o n l y p a y a b l e i f 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

copyo f t h e I D o f t h e d e c e a s e d m u s t b e p r o v i d e d t o t h e i n s u r a n
c e company.
A r e p o r t f r o m t h e d o c t o r w h o t r e a t e d t h e d e c e a s e d m u s t b e
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 p o l i c e a b s t r a c t r e p o r t m a y b e r e q u i r e d w h e r e d e a t h o c c u r s throug
h an accident. The documentation required for payment of death claims are
easilya v a i l a b l e a n d c l a i m a n t s n e e d t o i m m e d i a t e l y i n f o r m t h e i n s u r a
n c e 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

insurancec o m p a n i e s w i l l f r e q u e n t l y w a i v e c e r t a i n r e q u i r e m e n t s u n d e r c e r t a i n
special circumstances.

Maturity Claims:
A

maturity

claim

is

paid

out

mostly

on

endowment

and

educationi n s u r a n c e p o l i c i e s w h o s e d u r a t i o n h a s e x p i r e d . F o r e x a m p
l e i n a n insurance policy with duration of 15 years, the maturity value will be paid o n t h e
15
The
Anniversary

after affecting the policy. Payment of a maturity

claim

is

straightforward affair where the customer returns the original policy document and
signs a discharge form. The claim cheese 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 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
insurancec o m p a n y u s u a l l y p r e p a r e s p a r t i a l m a t u r i t y c h e q u e s i n a n a u t o m a t e d
manner and the customer does not have to claim. The cheese is either sent
d i r e c t l y t o t h e c u s t o m e r o r t h e n e a r e s t b r a n c h o f f i c e f o r e a s e o f 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 c l a i m w h e r e b y t h e c u s t o m e r r e t u r n s t h e
p o l i c y d o c u m e n t a n d s i g n s d ischarge form. The claim cheese 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 tithe life company and receiving a loan check. 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:
T h i s w i l l a r i s e i n l i f e p o l i c i e s w h e r e t h e c u s t o m e r p u r c h a s e s a personal
accident

policy

rider

as

an

additional

benefit.

Disability

claimsa r e p a y a b l e s u b j e c t t o s u f f i c i e n t m e d i c a l e v i d e n c e b e i n g p r o v i d e d a s
proof of disablement.