Unit: 5

Fundamental of Agency Law

Q1) Give the definition of an Agent

A1) An agent, in legal terminology, is a person who has been legally empowered to act on behalf of another person or an entity. An agent may be employed to represent a client in negotiations and other dealings with third parties. The agent may be given decision-making authority.

Two common types of agents are attorneys, who represent their clients in legal matters, and stockbrokers, who are hired by investors to make investment decisions for them. The person represented by the agent in these scenarios is called the principal. In finance, it refers to a fiduciary relationship, in which an agent is authorized to perform transactions on behalf of the client.

Types of Agents

Legally, there are three classes of agents:

• Universal agents have a broad mandate to act on behalf of their clients. Often these agents have been given power of attorney for a client, which gives them considerable authority to represent a client in legal proceedings. They may also be authorized to make financial transactions on behalf of their clients.
• General agents are contracted to represent their clients in specific types of transactions or proceedings over a set period. They have broad authority to act but in a limited sphere. A talent agent for an actor would fall under this category.
• Special agents are authorized to make a single transaction or a series of transactions within a limited period. This is the type of agent most people use from time to time. A real estate agent, securities agent, insurance agent, and a travel agent are all special agents.

People hire agents to perform tasks that they lack the time or expertise to do for themselves. Investors hire stockbrokers to act as middlemen between them and the stock market. Athletes and actors hire agents to negotiate contracts on their behalf because the agents are typically more familiar with industry norms and

Have a better idea of how to position their clients. More commonly, prospective homeowners use agents as middlemen, relying on the professional's greater skills at negotiation.

Businesses often hire agents to represent them in a particular venture or negotiation, relying on the agents' superior skills, contacts, or background information to complete deals.

Special Considerations

There also is the agency by necessity, in which an agent is appointed to act on behalf of a client who is physically or mentally incapable of making a decision. This is not always a case of incapacitation. Business owners, for example, might designate agents to handle unexpected issues that occur in their absence.

An insurance agent is a person who works for an insurance company and sells the insurance products of this company. An important aspect of working with an agent is that he / she sells insurance products of one company only, and thus is typically not able and not interested to compare prices and features of other products on the market. Agents should not be confused with brokers (or insurance brokers) who are typically able to compare products from several insurance providers.

Typically, an insurance agent receives a salary paid by an insurance company, and he/she can also receive a sales-based commission or bonus. Often, an agent will be interested in selling additional products from the same company (e.g. Sell you a small term life insurance policy in the beginning and later offer you disability insurance and / or critical illness protection). Some companies, such as  State Farm work exclusively with agents and, therefore, their products will not appear among the products offered by brokers.

There is an additional category of agents called independent agents who may work with different companies similarly to insurance brokers.

Q2)What are the Agents regulations

A2) The Insurance Regulatory and Development Authority of India (IRDAI) has released the final guidelines for the appointment of insurance agents. With higher penalties and more on us on selling based on the requirements of customers, regulations have turned more stringent for agents.

The guidelines are

IRDAI has said insurers will be responsible for all acts and omission by its agents, including violation of the code of conduct specified under the guidelines. For violations, they will be liable to a penalty of up to Rs 1 crore.

“Insurers will be more cautious while appointing agents, now that the power to appoint them is in our hands. As penalties on insurers are very high, further checks on agents might also be made in the future," said the chief distribution officer of a mid-size private life insurer.  According to the new norms, an individual can act as an insurance agent for only one life insurer, one general insurer, one health insurer and one monoline insurer. IRDAI has said anyone acting as an insurance agent in contravention of the provisions of the Act will be liable to pay a penalty of up to Rs 10,000.

Industry executives say so far, the penalties imposed on agents were negligible, adding with the new provision, commission-based product sales might virtually come to an  end.

IRDAI also said it would maintain a centralised list of agents. It will also maintain a list of agents whose appointment is cancelled or suspended by a designated official of an insurance company for violation of the code of conduct and/or fraud. If a complaint is lodged against an agent with an insurance company, the details of the complaint will be preserved. Such agents might not be allowed to sell insurance-related products in the future.

IRDAI has said if an insurance agent represents more than one insurer offering the same line of products, she/he should dispassionately advise policyholders on the products of all insurers.

Now, the regulator is also empowered to appoint one or more of its officers as 'investigating officers' for inspection of the affairs of an insurance agent.

Detailed regulations on remuneration will also be announced. This will ensure an agent does not sell a product for first-year commissions alone. For this, commissions are expected to be distributed between the first, second and third years of the premium-paying term.

Q3) Explain Insurance intermediaries

A3) Insurance Intermediaries

• Insurance is a complex product representing a promise to compensate the insured or third party according to specified terms and conditions in the event of the occurrence of a covered contingency. In most insurance transactions there is usually an intermediary - an insurance agent (individual or corporate) or an insurance broker.

• Insurance intermediaries serve as a bridge between consumers (seeking to buy insurance policies) and insurance companies (seeking to sell those policies).

• Insurance brokers are licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002. Individual insurance agents and corporate agents are also licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (licensing of Individual Insurance Agents) Regulations, 2000 and the Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Regulations, 2002, respectively. These Regulations lay down the Code of Conduct for the respective intermediaries.

• An intermediary has a distinct role to play in the entire life cycle of a product, from the point of sale through policy servicing, up to claim servicing. An intermediary shall provide all material information with respect to a proposed cover to enable the prospect to decide on the best one. The intermediary is expected to advise the prospect with complete disclosures and transparency. After the sale is effected, the intermediary must coordinate effectively between the customer and the insurer for policy servicing as well as claim servicing.

• IRDA has prescribed regulations for protecting the interests of policyholders casting obligations not only on Insurers but also Intermediaries. These prescribe obligations at the point of sale as well as policy servicing and claims servicing.

Q4) Explain Agents compensation

A4) Insurers are not permitted to pay insurance agents or insurance intermediaries commission or remuneration in excess of the limits specified in the Draft Regulations. Schedules I to V of the Draft Regulations specify separate maximum limits for various types of life insurance, health insurance and general insurance  products.
Insurers are also not permitted to pay insurance agents or insurance intermediaries any rewards in excess of the amounts specified in the Draft Regulations. In this context, the Draft Regulations define "reward" as "amounts paid, whether directly or indirectly, as an incentive by whatever name called by an insurer to the insurance agent or the insurance intermediary towards benefits such as gratuity, term insurance cover, group life insurance cover, group personal accident cover, group health insurance cover, telephone charges, office allowance, sales & promotion gift items and such other items".

Insurers are required to have a policy for payment of commission, remuneration and rewards to its insurance agents and insurance intermediaries that must be approved by their Board of Directors.

The objectives of the Board approved policy include the utilization of insurance agents and insurance intermediaries in such a manner that:

• Insurance penetration and density is increased;
• Is commensurate with the Insurer's business strategy;
• It brings "cost efficiencies" in the conduct of business and simplification of the administration of insurance business.

Q5) Give the requirements to be included in the Board approved policy

A6)The minimum requirements to be included in the Board approved policy include:

• Manner and conditions for payment of commission or remuneration to insurance agents and insurance intermediaries and for payment of renewal commission and hereditary commission to insurance agents/their legal heirs after the termination of the insurance agency.
• Manner and conditions for payment of reward to insurance agents and insurance intermediaries which is "over and above the commission or remuneration" but cannot exceed:

1. 20% of the first year commission or remuneration in the case of individual insurance agents;
2. 40% of the first year commission or remuneration in the case of insurance intermediaries.

• Manner and conditions regarding the transfer of orphan policies.
• Grounds and manner for the termination, suspension and cancellation of the appointment of insurance agents and insurance intermediaries.
• Any restrictions on the products to be sold by insurance agents or insurance intermediaries.
• The Board approved policy is to be reviewed annually and changes, if any, are to be filed with the IRDAI within 30 days of the change.

The Draft Regulations supersede the commission limits specified in the Products Regulations for products to be introduced. However, for all existing products, the commission limits specified by the Products Regulations and the limits set out in the IRDAI approved File & Use application for General Insurers shall continue to be the maximum limits for commission.

The Draft Regulations clarify that where policies are procured "directly" by the Insurer, no commission or remuneration is payable, leaving the question open in

Terms of whether any commission, remuneration or reward is payable on products designated as "Online" products which are attributed to the Insurer's direct channel, but may be displayed on a broker or web aggregator's website.

Insurers are required to file a return in the specified format of the commission, remuneration and rewards paid each financial year that must be certified by the CEO, CFO, CCO and the statutory auditors of the Insurer.

Q6) Describe the procedure for becoming an agent for obtaining a license

A7) Procedure to Become an Insurance Agent

• Simple Registration Process: To become an Insurance agent, you have to complete a simple registration form available on the website. You can submit the documents specified in the article.
• Online or Offline Training: Once you are done with the registration process, you will have to go for online or offline Training of 25 hours. Upon the finish of the training, you will be awarded a training certificate. The training includes all the phases of Insurance Business.
• Examination: Further, you will perform a Pre-Licensing Online exam conducted by IRDA and obtain at least – 17 out of 50 Marks. The questions in the examination will be of objective type.
• License: Upon passing the exam, you will be given a license by IRDA to work as an insurance agent. Then you will be appointed as an agent.

Q7) Explain Duration of license

A8) Determined by the regulations made by it and on payment of the fee which shall not be determined by the regulations, which shall not be more than two hundred and fifty rupees, issue to any person making any application in the manner determined by the regulations, a license to act as an insurance agent for the purpose of soliciting or procuring insurance business:

Provided that—

(i)   in the case of an individual, he does not suffer from any of the disqualification mentioned in sub section (4); and

(ii) in the case of a company or firm, any of its directors or partners does not suffer from any of the said disqualifications:

Provided further that any licence issued immediately before the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall be deemed to have been issued in accordance with the regulations which provide for such licence.

(2) A licence issued under this section shall entitle the holder to act as an insurance agent for any insurer.

(3) A licence issued under this section, after the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall remain in force for a period of three years only from the date of issue, but shall, if the applicant being an individual does not, or being a company or firm any of its directors or partners, does not suffer from any of the disqualification mentioned in clauses (b), (c), (d), (e), (ea) and (f) of sub section (4) and the application for renewal of the licence reaches the issuing authority at least thirty days before the date on which the licence ceases to remain in force, be renewed for a period of three years at any one time on payment of the fee determined by the regulations made by the Authority which shall not be more than rupees two hundred and fifty, and an additional fee of an amount determined by the regulations not exceeding rupees one hundred by way of penalty, if the application for renewal of the licence does not reach the issuing authority at least thirty days before the date on which the licence ceases to remain in force.

(3A) No application for the renewal of a licence under this section shall be entertained if the application does not reach the issuing authority before the licence ceases to remain in force:

Provided that the Authority may, if satisfied that undue hardship would be caused otherwise, accept any application in contravention of this subsection on payment by the applicant of a penalty of seven hundred and fifty rupees.

(4) The disqualifications above referred to shall be the following:

(a) that the person is a minor;

(b) that he is found to be of unsound mind by a Court of competent jurisdiction;

(c) that he has been found guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or attempt to commit any such offence by a Court of competent jurisdiction:

Provided that where at least five years have elapsed since the completion of the sentence imposed on any person in respect of any such offence, the Authority shall ordinarily declare in respect of such person that his conviction shall cease to operate as a disqualification under this clause;

(d) that in the course of any judicial proceeding relating to any policy of insurance of the winding up of an insurance company or in the course of an investigation of the affairs of all insurer it has then found that he has been guilty off or has knowingly participated in or connived at any fraud, dishonestly fir misrepresentation against an insurer or an insured.

(e) that in the case of an individual, he does not possess the requisite qualifications and practical training for a period not exceeding twelve months, as may be specified by the regulations made by the Authority in this behalf;

(ea) that in the case of a company or firm making an application under sub-section (1) or sub-section (3), a director or a partner or one or more of its officers or other employees so designated by it and in the case of any other person, the chief executive, by whatever name called, or one or more of his employees designated by him, do not possess the requisite qualifications and practical training and have not passed such an examination as required under clauses (e) and (f);

(f) that he has not passed such examination as may be specified by the regulations made by the Authority in this behalf:

Provided that a person who had been issued a license under sub-section(1) of this section 64UM shall not required to possess the requisite qualifications , and practical training and pass such examination as required by clauses (e) and (f)

(g) that he violates the code of conduct as may be specified by the regulations made by the Authority.

(5) if it be found that an insurance agent being an individual is, or being a company or firm contains a director or partner who is suffering from any of the disqualifications mentioned in sub section (4), then, without prejudice to any other penalty to which he may be liable, the Authority shall, and if the insurance agent has knowingly contravened any of the provisions of this Act may, cancel the licence issued to the agent under this section.

(6) The Authority may issue a duplicate licence to replace a licence lost, destroyed or mutilated on payment of such fee not exceeding rupees fifty as may be determined by the regulations.

(7) Any person who acts as an insurance agent without holding a licence issued under this section to act as such shall be punishable with fine which may extend to five hundred rupees., and any insurer or any person acting on behalf of an insurer, who appoints as an insurance agent any person not licensed to act as such or transacts any insurance business in India through any such person shall be punishable with fine which may extend to one thousand rupees.

(8) Where the person contravening sub section (7) is a company or a firm, then, without prejudice to any other proceedings which may be taken against the company, or firm, every director, manager, secretary or other officer of the company, and every partner of the firm who is knowingly a party to such contravention shall be punishable with fine which may extend to five thousand rupees.

Q8) What do you mean by Cancellation of license of an agent?

A9)The designated person may cancel a license or a certificate of a corporate agent or a specified person, if such a corporate agent or the corporate insurance executive or the specified person suffers, at any time during the currency of the license, from any of the disqualifications mentioned in sub-section (4) of section 42-D of the Act and recover from him the license or certificate granted to him.

The Authority has the right to cancel the certificate of registration either wholly or in so far as it relates to a particular class of Insurance business if  any of the conditions specified for registration is not complied with.

Q9) Discuss the process of Revocation/suspension/termination of agent appointment

A10) Suspension of Certificate of Insurance Company License

• Neglects to conform to the arrangements of the activities identified with the estimation of benefits and liabilities.
• The insurer is in liquidation or is declared as a wiped out.
• The business or a class of the matter of the guarantor has been moved to any individual or has been moved to or amalgamated with the matter of some other safety net provider without the approval of the Authority.
• Default in consenting the provisions of the Act, or Rule or Regulations or direction or order gave by the Authority.
• Any case stays unpaid for over 3 months after the judgment is passed in court.
• Insurer conveys business other than Insurance business or recommended business.
• Defaults in consenting to the necessity of Companies Act, 2013, General Insurance Business Act, 1972 or Foreign Exchange Management Act, 1999 or Prevention of Money Laundering Act, 2002.
• Neglects to pay the yearly charges determined under Act.

Q10) Define Code of conduct

A11)

(1) Every person holding a license, shall adhere to the code of conduct as specified like identify himself and the insurance company of whom he is an insurance agent, Disclose his license to the prospect on demand, disseminate the requisite information in respect of insurance products offered for sale by his insurer, disclose the scales of commission in respect of the insurance product offered for sale, if asked by the prospect, indicate the premium to be charged by the insurer for the insurance product offered for sale, about proposal form etc

(2) No insurance agent shall, like solicit or procure insurance business without holding a valid license; induce the prospect to omit any material information in the proposal form; induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of the proposal; behave in a discourteous manner with the prospect; interfere with any proposal introduced by any other insurance agent; offer different rates, advantages, terms and conditions other than those offered by his insurer; etc.

Q11) What are the Unfair practices of an agent?

A12)

• Misrepresent pertinent facts or insurance policy provisions;
• Fail to acknowledge and act reasonably promptly upon communications with respect to claims;
• Fail to adopt and implement reasonable standards for the prompt investigation of claims;
• Refuse to pay claims without conducting a reasonable investigation;
• Fail to affirm or deny coverage within a reasonable time;
• Not attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
• Compel insured to institute litigation to recover amounts due under an insurance policy by offering substantially less than the claim is ultimately worth;
• Attempt to settle a claim for less than the amount to which a reasonable person would believe he was entitled;
• Fail to promptly settle claims under one portion of an insurance policy (like property damage) in order to influence settlements under other portions of the insurance policy (like bodily injury), and
• Fail to promptly provide a reasonable explanation for the denial of a claim or settlement demand.

Q12) Give the Functions of the Agent

A13) Functions of Insurance Agent

Insurance agents specialise in providing their clients with insurance policies that protect them against uncertain events such as illness, damage, theft, or death. The primary objective of an insurance agent is to sell insurance policies that will meet the requirements of the client.

An insurance agent may work in a team or individually. They have to deal with different people, such as team members, their seniors, and clients, and their work is usually target based.

In many insurance companies, agents are responsible for evaluating the insurance programs, and they have to give advice on making required modifications in the same. All insurance agents have certain functions and duties, and a few of them are mentioned below:

• Take details of the client’s requirements, understand it, and then suggest the appropriate insurance plan to the client.
• Calculate the premium details of the policy and discuss the same with the client.

• Attend programs, seminars, and meetings related to the field, and to learn about the latest techniques, products, and services.

• Call clients and policyholders to explain and deliver the insurance policy, to modify beneficiary, if asked, to estimate the insurance plan and recommend alterations or additions.
• Monitor insurance claims and make sure that they have settled rightfully for both the parties i.e., the insurer and the client.
• Discuss with clients what needs to be provided and receive information when the claims are made towards the insurance policies.
• Develop sales and marketing to compete with agents in the same field.
• Contact underwriters and customize insurance policies that will meet the client requirements, covering multiple risks, to make sure that the given plan suits the client’s insurance needs. To get customers to complete essential medical test requirements and completing KYC formalities.
• Examine and inspect the overall condition of the property, type of construction, age, and other characteristics to help underwriters in their decisions, whether it is an appropriate insurance risk for both the customer and the insurance company.
• Explain the features, merits, and demerits of various insurance policies to encourage the sale of an insurance policy.
• Interview potential customers to gather data about their insurance needs, financial resources, future financial requirements, the physical condition of the person (in case of life insurance), or property (in case of general insurance) to be insured and know about their existing coverage, if any.
• Plan and review the integration of insurance policies into the accounting system of the company.
• Carry out certain administrative tasks like handling policy renewals.
• Market and sell different types of insurance plans to individuals, businesses, and groups on behalf of the insurance company.
• Constantly look for new clients and increase the network to find out new customers.
• Work on the allotted sales target and obtain the same by adopting various methods and strategies.
• Understand the client’s requirement and if required, request the higher authorities to customize the insurance plan to meet the customer’s requirements.
• An insurance agent continually needs to keep himself updated about policy-related information such as modification in the existing plan, or services or the introduction of a new policy.
• Collect information regarding the other insurance companies and know about their products and services. This helps an insurance agent to explain the clients and how their insurance plans are competent as compared to others.

Q13) Discuss the Proposals and other forms for grant cover

A14) Proposal form is the basis of the Insurance contact between the Insurer and the insured. The details filled in the insurance proposal form is critical for the company to accept or reject the policy.

When anyone applies for an insurance policy, the proposer who is the payer or life to be insured in the Insurance policy fills the proposal form. This is the most important document which provide the complete details of the proposer and the life to be insured in the policy. Based on the information provided in the document the company will evaluate the risk to be insured and decide the premium rates applicable. They may also decide the condition on which the company is ready to accept the risk. A proposal form is a legal document that seeks relevant information from you so that the insurance company understands you well.

A proposal form in insurance is not just about giving out your details such as your name, age, gender and address. It seeks all the relevant information from you that helps the insurance company in underwriting. Underwriting is a process that financial companies use to assess your eligibility to receive their products. In case of life insurance, for instance, the proposal form will ask for details including your age, income and occupation. These details are relevant because mentioning your age ascertains the premium you pay, and income ascertains the amount of insurance you can buy. The form will also ask for nominee details which is essential because you need to make sure that the benefit reaches the right hands. Apart from all this, the proposal form will also ask you about your medical condition and any medical history. Typically, the insurer looks for ailments that may increase their risk. Also, depending on the level of cover you choose, you may be asked to go for medical check-ups.

Other forms include policy document

Policy document is a detailed document and it is the Evidence of the insurance contract which mentions all the terms and conditions of the insurance. The insured buys not the policy contract, but the right to the sum of money and its future delivery. The insurer on its part promises to pay a sum of money, provided of course the insured keeps its part of promise of paying the instalments of premium as scheduled. The pre-amble to the insurance contract makes the above statement clear and states that this policy is issued subject to the conditions and privileges printed on the back of the policy. The endorsements placed on the policy shall also be part of the policy and it also makes a reference to the proposal form saying that that the statements given in the proposal form are the basis of the contract. The schedule which is printed on the policy document identifies the office which has issued the policy. It states the name of the policyholder, the date of commencement of the policy, an identification number of the policy called policy number. This number is extremely useful for making any reference to the insurer relating to this policy. This shall avoid needless delay. Beneficiary’s name is also mentioned along with address. It is necessary to check that it is correct and any mistake should be immediately pointed out for correction. A mistake in the address may misdirect the premium notices and any other future correspondence. It also states the name of the nominee and the date up to which premium has to be paid. The schedule goes on to mention, the type of policy, on the happening of which, the sum assured is payable and to whom it is payable. It of course also mentions when and how long the premium is to be paid. The policy document is signed by an official of the insurer and dated and stamped as per the provision of the Stamp Act to make it a completely legally enforceable document.

Q14) What is  Financial and medical underwriting?

A15)Financial Underwriting is the evaluation of a prospective insured’s personal or business financial background and current economic situation. The analysis of an individual’s financial situation takes place every time a case is underwritten, although the depth of this evaluation is based on the amount of insurance applied for. The purpose of this evaluation is to determine the proposed insured’s need for insurance and make sure that the amount of insurance applied for is reasonable and in line with his or her needs.

Medical underwriting is the process of evaluating an application for health insurance coverage by examining the applicant's medical history. The price of coverage is determined by the risk factors of the applicant.

Depending on the insurance company's policies and on federal and state regulations, medical underwriting for high-risk candidates may lead to exclusion of coverage for certain conditions, denial of coverage altogether, or coverage offered only at a very high price.

Medical underwriting also is practiced in determining individual rates for life insurance and disability insurance policies.

Q15) Define Material information

A16) In insurance, material facts are used to determine the amount of coverage and the cost of the premium that will be charged. The information is used to determine the level of risk or class of insurance that the insurance company may be willing to offer. If it is deemed that a material fact was withheld, it may be grounds to terminate the policy or nullify the contract.

A simple example of a material fact for insurance is the insured person's age. It is presumed that an insurance transaction is being engaged in under the principle of utmost good faith. This means that all parties are acting in an honest and ethical manner and not being willfully deceitful. When someone wants to get a health insurance policy, for instance, they must reveal their health history so that the insurer can adequately determine the coverage and the premium. If the person smokes that would be considered a material fact. The smoking habit is a material fact because it exposes the insured to a number of health risks that the insurer will likely cover in the future. This would be different from an immaterial fact, such as the colour of your eyes or hair, which would have no bearing on whether you are insured or the cost of the premiums.

Insurance contracts are contracts that each party owes a duty to the other of the utmost good faith. This is unlike most other contractual relationships. The requirement for the duty of good faith is perhaps most pronounced in the case of life and disability policies in which the insured has unique knowledge about his or her own physical condition.

These types of contracts rely on this good faith when it comes to disclosing material facts that will impact the cost and decision in regards to offering insurance coverage. For instance, when an insured fills out the application form for health insurance, a common question about whether or not the insured has smoked in the last two years may be one of the questions.

If, in fact, the insured is a smoker or has ever smoked in the last two years, he should say “YES”. In contrast, if the insured says “No” because he thinks that it does not really matter and he feels good about his current health, it may cause an issue in the future.

When he has to make a claim on his insurance due to hospitalization, it may raise a problem for payment of the claim. When the claim is opened, the insurance company may open the insured's documents. One of those is the question containing the answer to the smoking question. Unfortunately, for the insured, the medical records show that he has been hospitalized due to heart disease caused by his smoking habit. In this case, the insurance company may firmly decline the claim for not disclosing material facts.

Therefore, all material facts must be disclosed honestly to ensure you have the coverage you think you are paying for.

Q16) Define Nomination and Assignment

A17) The  life insurance policy can be assigned free for a legal consideration or love and affection. The insured may assigned to anybody on any ground. As such, the assignment shall be complete and effectual only on the execution of such endorsement either on the policy itself or by a separate deed.

Nomination

Generally nomination is made at the time of taking a policy. In case it is not done, it is possible to make nomination subsequently by an endorsement on the policy. It is also possible to change a nomination subsequently by an endorsement. After marriage, such change in nomination is normally required.

Assignment

An assignment of a policy in favour of another person or institution can be effected by an endorsement on the policy. Re-assignment can also be done by a subsequent endorsement on the same policy

Q17) Explain the Procedure regarding settlement of policy claims

A18) Death Claim

Step One: Intimation of Claim The claimant must submit the written intimation as soon as possible to enable the insurance company to initiate the claim processing. The claim intimation should consist of basic information such as policy number, name of the insured, date of death, cause of death, place of death, name of the claimant etc .Claim intimation form can be availed from nearest branch of the insurance company or/and by downloading it from the company website.

Step Two: Documentation The claimant will be required to provide the following documents along with a claimant's statement:

1. Certificate of Death
2. Proof of age of the life assured (if not already given)
3. Deeds of assignment / reassignments (if required)
4. Policy document
5. Any other document as per requirement of the insurer

For early death Claim, (If the claim has accrued within three years from the beginning of the policy), the following additional requirements may be called for:

1. Statement from the hospital if the deceased had been admitted to hospital
2. Certificate of medical attendant of the deceased giving details of his/her last illness
3. Certificate of cremation or burial to be given by a person of known character and responsibility present at the cremation or burial of the body of the deceased
4. Certificate by employer if the deceased was an employee In special cases as per following the poof of death will be different from the standard specification In case of an air crash the certificate from the airline authorities would be necessary certifying that the assured was a passenger on the plane. In case of ship accident a certified extract from the logbook of the ship is required. In case of death from medical causes, the doctors’ certificate and/or treatment records may be required. If the life assured had a death due to accident, murder, suicide or unknown cause the police inquest report, panchanama, post mortem report, etc would be required.

Step Three: Submission of required Documents for Claim Processing For faster claim processing, it is essential that the claimant submits complete documentation as early as possible.

Step Four: Settlement of Claim As per the regulation 8 of the IRDA (Policy holder's Interest) Regulations, 2002, the insurer is required to settle a claim within 30 days of receipt of all documents including clarification sought by the insurer. If the claim requires further investigation, the insurer has to complete its procedures within six months from receiving the written intimation of claim. After receiving the required documents the company calculates the amount payable under the policy .For this purpose, a form is filled in which the particulars of the policy, bonus, nomination, assignment etc. should be entered by reference to the Policy Ledger Sheet. If a loan exists under the policy, then the section dealing with loan is contacted to give the details of outstanding loan and interest amount, which is deducted from the gross policy amount to calculate net payable claim amount. Generally all claim payments would be made through the electronic fund transfer. Maturity & Survival Claims: The payment by the insurer to the insured on the date of maturity is called maturity payment. The amount payable at the time of the maturity includes a sum assured and bonus/incentives, if any. The insurer sends in advance them intimation to the insured with a blank discharge form for filling various details in it. It is to be returned to the office along with Original Policy document, ID proof, Age proof if age is not already submitted, Assignment /reassignment, if any and Copy of claimant’s Bank Passbook & Cancelled Cheque. Settlement procedure for maturity claim is simple after receipt of completed and stamped discharge form from the person entitled to the policy money along with policy documents, claim amount will be paid by account payee cheque. Regarding maturity claims certain points are to be remembered: If the life assured is reported to have died after the date of maturity but before the receipt is discharged, the claim is to be treated as the maturity claim and paid to the legal heirs. In this case death certificate and evidence of title is required. Where the assured is known to be mentally deranged, a certificate from the court of law under the Indian Lunacy Act appointing a person to act as guardian to manage the properties of the lunatic should be called. For Survival Benefit claim, Policy bond and discharge voucher is required.

Rider Claims: The life insurance policy can be attached with different riders like accidental rider, Critical illness Rider, Hospital cash Rider, waiver of Premium Rider etc. For different Riders different proceedings can be opted for claim settlement. In some cases the claim may proceed as well as with the death Claim (Like Waiver of premium rider, accidental death Rider etc). But in some other cases different documents can be required for along with the duly filled Claim form & Policy Copy: For Critical Illness Rider, necessary medical documents such as first investigation report, Doctor’s prescription, Discharge Summery etc are required For Accidental disability rider, Attested copy of FIR, Doctor Certificate of disability, Photograph of the injured with reflecting disablement, Original Medical bills with prescriptions/ treatment papers etc are required. For Hospital cash rider medical documents are required such as Medical & Investigation report, Prescriptions, Medical and Investigation Bills, Discharge Card etc.

Importance of Proper Documentation in Claim Processing:

It is noted that in many cases the life insurance claim has been denied by the insurer because the claimant has failed to follow some step or not able to submit the necessary information to the company. So it is recommended that when you claim for life insurance, take proper steps and documentation.