Consumer Protection Act, 1986 (COPA)

Under this Act, a customer, as an individual or along with other individuals, or through a consumer organization, can approach the various forums prescribed under the Act for redress, in case he is not satisfied with the goods or services provided. He has to allege a defect in the goods or services A defect or deficiency is a fault, imperfection, shortcoming or inadequacy in the quality, nature or manner of performance, which is required to be maintained by or under any law or in pursuance of a contract or undertaking in relation to that service.

Consumer dispute redressed forums are established in each district and for each state. The three tier set up will hear complaints at these three levels up to the value of –

District Level ----> 20 Lakhs
State Level Forum ----> 1 Crore
National Commission ----> Above one core and also appeals against the decision of a state forum

The COPA applies to the insurance business. Policyholders have the right to seek redress against unfair practices or unsatisfactory service from insurers and agents. The majority of disputes relating to insurance arise out of repudiation and delays in settlement of claims.

Ombudsman in Insurance

The Governing body of the Insurance Council is authorized by law to appoint Ombudsmen for the insurance industry. The function of the Ombudsman is to resolve complaints in respect of disputes between policyholders and insurers in cost effective, efficient and impartial manner.

The complaints to the Ombudsman may relate to -

• partial or total repudiation of claim
• any dispute regarding premium paid or payable in terms of the policy
• any dispute on the legal construction of the policy relating to claims
• delay in settlement of claims
• non-issue of any insurance document to customers after receipt of premium

The Ombudsman acts as a counsel and mediator in matters within its terms of reference. It is not a judicial authority. It has no right to summon witnesses. It has to make its decision on the basis of documents submitted to it. The complainant and the insurer are allowed to make personal submissions. But lawyers are not permitted to argue the case.

Complaints to the Ombudsman lie only when the insurer had rejected the complaint or no reply was received within one month of the complaint or he reply was not satisfactory. A complaint can be made within one year after the insurer had rejected the representation. The subject matter should not be already before any court or consumer forum or arbitration.

The Ombudsman is expected to make a recommendation within one month from the date of receipt of complaint. If the complainant accepts this recommendation, the insurer has to comply within 15 days and inform the Ombudsman accordingly. If the complainant does not accept the Ombudsman's recommendation, the Ombudsman shall pass an award in writing, stating the amount awarded which shall not be in excess of what is necessary to cover the loss suffered by the complainant or for an amount not exceeding Rs.20 lacs, whichever is lower. The award has to be passed within 3 months. The complainant has to intimate his acceptance of the award within one month by a letter of acceptance to the insurer and the insurer has to comply within 15 days and inform the Ombudsman. If the complainant does not intimate acceptance, the award can not be implemented.

Keyman Insurance

With the tremendous industrial growth and technological development, every organization needs eminent technicians and top level experienced officials. It is an undeniable fact that the success of any business depends much on the competency of the key personnel. On the other hand, loss of a key man, say through premature death, would severely affect the profitability of a concern, at least in the short term. So it would be prudent to cover by means of insurance the financial loss likely to be suffered to the extent of the contribution to the business by the key man. The financial loss could be reduction in profits, loss of business, cost of finding and training a replacement, loss of goodwill and loss of profitability. Hence it is possible to establish an insurable interest in the life of such important personnel employed to the extent of financial loss likely to suffer by the business on the death of a key man and provide an appropriate cover through a life insurance policy. Arranging life insurance on the lives of important employees is known as Key man insurance.

Who is key man?

A key man can be an expert, a technocrat, a director, a shareholder or an executive. Broad guidelines for such a policy are as under: -

• The company should be a profit making one and average turnover tor the preceding three years should be more than Rs.5 crore.
• If the keyman is shareholder, he should have less than 51% shares in the company and he and his family should hold less than 70% shares in the company
• He should be at least a matriculate and less than 50 years age.
• Normally limited premium payment endowment assurance without profit plans are allowed for key man insurance. Other plans of assurance, if allowed, will also be generally without profit.
• Ordinarily, a term of 10 or 15 years is granted but maturity date of the policy would in no case be beyond norman retirement age.

Nomination

Section 39 of Insurance Act, 1938 provides for nomination under a life insurance policy. Nomination is a simple way to ensure easy payment of policy moneys in the event of a death claim

The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death.

Where any nominee is minor, it shall be lawful for the policyholder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his/her death during the minority of the nominee.

Nomination can be made at the time of filling up the proposal form which can be incorporated in the text or schedule of the policy bond. If nomination has not been effected at the proposal stage, it can be made afterward at any time before the maturity of the policy by serving a notice of nomination to the insurer in the prescribed form regarding first nomination. Such nomination may be made at any time before the policy matures for payment. Nomination can be cancelled or changed by the policyholder by making an endorsement or a will, as the case may be. The insurer shall furnish to the policyholder a written acknowledgement of having registered a nomination or a cancellation or change thereof.

When a policy is assigned, the existing nomination is automatically cancelled. The assignee, not being the life assured, cannot make a nomination. When the policy is reassigned to the life assured, he will have to make a fresh nomination. An assignment made in favour of the insurer, in consideration of a loan granted against the security of the policy, does not cancel the nomination.

A nomination gives the nominee only the right to receive he policy moneys in the event of death of the life assured. A nominee does not have any right to the whole (or part) of the claim. He only has the right to give a valid discharge but has to hold the moneys on behalf of those entitled to it.

Some facts to be considered in respect of Death Claim

RIVAL CLAIM: If more than one person claims the policy moneys, it is called as Rival Claim. Such rival claimants are advised to approach a court with a request to serve a prohibitory order on the insurers from making the payment. Such an Order from the court should be served on the insurers within a fortnight from the date of insurer's advice to the effect. If the court stays the payment, the insurer has to wait till the court passes final order regarding payment.

LIMITATION PERIOD: Limitation Act, 1963 says that no claim can be made after a period of 3 years from the date of claim or from the date of last correspondence. In life insurance, if a claim arises, whether intimated immediately or not, the amount has to be paid in discharge of the insurer's duties under the contract. If the payment can not be made immediately because the intimation was not given within 3 years from the date of the claim or intimation, the payment has still to be made. The provisions of the Limitation Act do not apply to insurance contracts.

PRESUMPTION OF DEATH: In respect of death claim, proof of death is essential. A death certificate issued by the municipal office or similar local body is the acceptable proof of death. A certificate of burial or cremation can also be obtained. Statements from witnesses to the last rites will be supporting evidence. In the case of accidents or air crashes or on seas or natural calamities, the bodies may not be found. In such cases, insurers rely on statements from the carriers or other authorities with the relevant information. In case of defence personnel, a certificate from the commanding officer of the unit is to be obtained. If a court of enquiry is ordered, its findings should be obtained.

Sometimes a person is reported missing without any information about his whereabouts. The Indian Evidence Act provides for presumption of death in such cases, if he has not been heard of for seven years. If the nominee or heirs claim that the life assured is missing and must be presumed to be dead, the insurers insist on a decree from a competent court. It is necessary that the premiums should be paid till the court decrees presumption of death. The insurer may also act on its own without a decree of the court, if reasonably strong circumstantial evidence exists to show that the life assured could not have survived a fatal accident or hazard. Insurers may as a matter of concession, waive the premiums during the seven years' period.

ACCIDENT AND DISABILITY BENEFITS: These benefits are conditional on conclusive evidence, that all the eligibility conditions are satisfied and that the exclusions do not apply. The conditions are that –

• the accident must be caused by outward, violent and visible means, not self inflicted
• the death must be a result of injuries caused by that accident
• the death must occur within 120 days or such other period as may be
  specified

The exclusions may be –

• intentional self injury, attempted suicide, insanity, immorality, intoxication
• accident while engaged in civil aviation or aeronautics, other than as a passenger
• injuries resulting from riots, civil commotion etc.,

Claim settlement would require the following documents as evidences -

• First information report (FIR)
• Panchnama of accident site
• Police report
• Post mortem report
• Chemical examiner's report, in case of poisoning, drugs, narcotics, etc.
• Hospital reports, if any

CRITICAL ILLNESS CLAIMS

The benefits would be payable on satisfactory evidence, in the nature of hospital and other medical reports, that the conditions of criticality, waiting period and illness are met.

IRDA REGULATIONS: IRDA has set forth following guidelines for Insurers regarding settlement of Claim -

• the insurer should ask for all the requirements in the case of a death claim at one time and not piecemeal.
• the decision to admit or to repudiate should be made within 30 days of receipt of all papers
• If an investigation is necessary, it should be completed within 6 months
• Interest at 2% over the Bank rate, will be payable for delays in settling the death claims
• Interest at the Savings Bank rate will be paid if the insurer is ready to pay but the claimants are not ready to collect

Requirement of Document in respect of Death Claim

Death within 3 years from the date of issue of First Premium Receipt or from the date of revival is known as early death claim and death after 3 years from date of issue of First Premium Receipt or from the date of revival is known as non-early death claim. In respect of early death claim, an investigation has to be done to rule out the possibility of wrong payment to wrong party. The investigation is generally entrusted to an officer of the insurer. The officer has to submit the investigation report within a maximum period of 6 months, as per guidelines of IRDA. Following documents are requirement in respect of death claim -

NATURAL DEATH:

• Intimation of death by the members of the family, relatives, neighbours, friends, and colleagues, employers, professionals like doctors, lawyers etc. or insurance agents.
• Death certificate
• Policy Bond
• Proof of premiums paid
• Proof of age is required, if the age has not been admitted earlier.
• Proof of title of the claimant e.g. (nominee, assignee, or legal heirs etc.)
• Discharge form duly signed by the claimant and witnessed by a responsible person.

UNATURAL DEATH: (In respect Early or non-early claim) :

• First Information Report (FIR)
• Post Mortem Report
• Panch nama

CLAIM CONCESSION: The policy lapses, if the payment of premium is not made within the grace period. But in case of death of the life assured after lapse of policy after certain period, death claim can be paid after allowing claim concession, as per the practice of Life Insurance Corporation of India, which is appended below : -

1. If the premiums are paid for at least 3 years and death of the Life Assured occurred within 6 months from the first unpaid premium, full sum assured is paid along with Bonus, if participating policy, subject to deduction of unpaid premium along with interest
2. If the premiums are paid for at least 5 years and death of Life Assured occurred within 12 months from the date of first unpaid premium, full sum assured is paid alongwith Bonus, if participating policy, subject to deduction of unpaid premium alongwith interest.

Death Claim under Life Assurance Policies

Claim is a demand by the insured on the insurer to fulfill its promise made in the life insurance contract. Claim is of two types i.e. Maturity or Death. Payment of maturity claim is taken by the policy holder on completion of specified term, mentioned in the Policy Bond. The insurers send the intimation in advance in respect of maturity of the policy to the life assured to enable him to get the payment before the date of maturity.

On the other hand, the procedures in settling a death claim are more complex than in the case of maturity claims. This is mainly because of the facts relating to the death which have to be studied and the identities of the claimants have to be established.

Who can Claim?

When the claim has arisen due to the death of the life assured, policy amount has to be paid to the claimant. Either of the following persons may claim the amount of the Policy, after fulfilling certain procedure : -

• NOMINEE : The nominee can make a claim. Nominee is not the owner of the policy. The nominee can only give a valid discharge to the insurer, in the event of any happening. Nominee is expected to be the representative of all the legal heirs of the life assured. If the nominee is minor, the appointee can receive the claim amount.
• WILL : The executor of a WILL left by the life assured can also make a claim. The WILL has to be registered with the registrar to establish the priority of the claim. There should be a mention of the policy in the WILL. The contents of the WILL prevail even if there is mention of nomination in the policy. The WILL should have to be registered for this purpose with the Registration Authorities.
• ABSENCE OF NOMINATION OR WILL: If there is no nomination or WILL, the legal heirs of the life assured can prefer the claim. The legal heirs have to prove their title through a Succession Certificate or Administrator General's Certificate.
• ASSIGNMENT: The assignee can make a claim, if the policy is assigned to him. If the assignment is not registered with the insurer, the assignee can apply for registration of the assignment at the time of making a claim. In respect of minor assignee, the guardian of the assignee can claim, if they are registered as guardians.
• If the policy is assigned for natural love and affection, then, the assignee (normally within the family) can claim.
• If the policy is conditionally assigned conferring the rights to the conditional assignee on the death of the Life Assured, the conditional assignee can claim.
• If the assignee had predeceased the life assured or if the assignee died after the life assured but before he received the claim amount, then the legal heirs of the assignee can make the claim. The legal heirs of the assignee have to submit the documents of death of the life assured or the assignee. They have to produce the title or documents as their succession to the assignee
• If the policy is taken under Married Women's Property Act, the trustees can make a claim. If no trust has been created, the beneficiaries under such MWP Act policy can claim the policy money, provided they all are major and competent to contract.
• If the trustee relinquishes his right, then the official trustee has to make the claim.
• If all the beneficiaries have deceased, only the legal heirs of the Life Assured can claim.
• If the Life Assured has divorced the wife before his death, the provisions of the MWP Act still will prevail, provided the document of divorce decree allows this. The courts will have to decide whether the wife can claim the policy moneys.
• If the payment of premium was made by the HUF funds, then the KARTA of the HUF can make a claim, who will be the senior most living male member of the family.