CHAPTER-1 INTRODUCTION

Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to reimburse the occurrence of the insured individual's death or other event such as terminal illness or critical illness. The insured agrees to pay the cost in terms of insurance premium for the service. Specific exclusions are often written in the contract to limit the liability of the insurer, for example claims related to suicide, fraud, war, riot and civil commotion is not covered.

A claim on the policy is the demand for performance of the promise made by the insurer at the time of making the contract. The insurer is obliged to perform his part of the contract if the insured has performed his.

Claim settlement is one of the most important services that an insurance company can provide to its customers. Insurance companies have an obligation to settle claims promptly.

Both the quality of the service and cost of claims is the responsibility of the claims department. The department has to look after the proper mix of the two. The cost of claims must not exceed a given level in trying to render a very good service to the customer.

As the claims department is in direct touch with the customer, it has to ensure the quality of service. The claims department has the sole responsibility of managing claims. Claims management by far is the most complex issue in an insurance company.

It has become imperative for the claims department to provide quality service to the customers so that the corporate goals are achieved. The claims department, in effect, acts as an interface between the customer service quality and insurance companys objectives.

The disputes that might arise in case of an insurance contract are usually those that pertain to claim settlement. Where a policy holder or the beneficiaries are aggrieved by, the non-settlement of claim or delay in settling a claim or making of partial payment of sum assured, they can get a redressal of such grievances through the Insurance Ombudsman, the Consumer Forums set up under the Consumer Protection Act, 1986 or the civil courts.

This project covers the role that the Consumer Protection Act plays in life insurance claims.

CHAPTER-2

CLAIMS IN GENERAL

The insurer, to perform his obligation, examines the policy, which is the evidence of the contract, and other records to find out the following: -the obligations assumed under the contract that need to be performed:

This will not be the same in all policies since there are many types of polices and the risks or contingencies covered by them are different. It may be payment of the sum assured with or without bonuses, return of premiums with or without interest, periodical payments, waiver of future premiums etc.

-Performance by the policy holder:

At the outset the insurer will see if the premiums have been paid as stipulated. This will be indicated by the premium register maintained by the insurer. Whether or not evidence of age of the life assured has been produced and the age stands admitted are required to be seen.

If the age is not admitted, the insurer is entitled to for evidence of it. It is important because premium, the consideration for the contract, stipulated on the basis of age. Section 45 of Insurance Act specifically saves the right of insurer to call for it any time and adjust the terms the policy on the basis of the correct age ascertained A gross understatement of age might have been made with deliberate intention to defraud the insurer and that case Sec. 45 of the Insurance Act will not stand in the way of the insurer if he decides to repudiate liability.

-Happening of an event:

It may be survival of the life assured upto a particular age or date, his death during the term of the policy or his becoming permanently and totally disabled. When the policy covers accident

benefit, the cause of death becomes an important aspect; so also when death takes place within the period the suicide clause is operative, and

-Claimants-entitled to demand performance:

The effect of any notice of nomination, assignment or other dealings registered by the insurer; attachment or prohibitory orders, if any, received in respect of the policy, etc. will have to be carefully ascertained in this connection. The settlement of the claim may sometimes interposed by the insolvency or lunacy of the assured or the claimant, prohibitory orders from Courts notices from Income-tax or other authorities, aspects are relevant not only in connection with settlement of claims but also for other purposes such as assignment.

CHAPTER-3

CLAIM SETTLEMENT UNDER LIFE INSURANCE POLICIES

As regards the procedure to be followed while settling claim under any life insurance policy the insurer has comply with the regulations framed by the Authority, i.e, regulations 8 &11 of the Insurance Regulatory Development Authority (Protection of Policyholders Interests)

Regulations, 2002 which are framed with intention to protect the interests of the policyholders with emphasis on principle of Utmost Good Faith and ensure more transparency at every stage of servicing including settlement of claim. the insurer is required to settle a claim within 30 days of receipt of all documents including clarification sought by the insurer. However, the insurance company can set a practice of settling the claim even earlier. If the claim requires further investigation, the insurer has to complete its procedures within six months from receiving the written intimation of claim.

In a contract of life insurance, there are three common types of claims: Claim by maturity: claims may arise because of survival of the insured up to the end of the policy term, which is the date of maturity. This is normally paid in endowment assurance policies when the policy matures. Pure term plans do not have a maturity claim pay-out .Such policies are eligible for payment only as death claims, when the lifeassured dies during the policy term. Claim at periodic intervals - - survival benefits: claims may arise because of survival of the insured up to a specified period during the term. Such regular periodic payments are often made in money-back policies. Claim by death: claim may arise due to the death of the life assured during the term of the policy.

Maturity claims

A maturity claim is payable as per the terms of the contract at the end of the term of the policy, if the life assured lives up to that date.

Example

Naresh has taken an Endowment insurance policy of Rs. 500,000 for 10 years for a premium of Rs. 7,333. If he lives up to the end of the term of the policy, i.e. 10 years, he can demand maturity claim as per the terms of the policy.

Maturity claim requires the following documents for settling the claims: original insurance policy document discharge form, duly stamped, signed and witnessed proof of age in case the policy was issued without the age proof where age was not admitted at the time of policy inception document of assignment, in case of any assignment

The maturity claim is equal to the sum assured plus bonus and other guaranteed addition (if any). Any debt or charge under the policy, such as loan, loan interest, outstanding premium (due but not paid), etc. will be deducted.

The discharge voucher will show the gross amount of claim, the deductions, if any, and the net amount payable. The gross amount normally consists of the basic sum assured or the paid up value, the bonus payable, any excess deposit lying in the said policy account and return of excess premiums collected, if any.

Insurers generally initiate action on their own, well in advance from the maturity date so that the policyholder receives the claim cheque on the date of maturity. When maturity claim is paid, the insurance contract is revoked and then there is no insurance cover with the policyholder. There is
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another alternative for payment of maturity claims which is known as settlement option. Under the settlement option the policyholder can choose to receive the claim amount in installments spread over a specified period as per mutual agreement with the insurer.

If at the time of claim the original policy document is not found, insurers may be willing to settle the maturity claim on the basis of an indemnity bond unless the circumstances warrant more caution.

Periodic survival benefits

The Money Back plans promise payment of part of the SA (sum assured) at specific intervals, during the term of the policy. The surviving policyholder is paid on a specified pre-determined periods a percentage of the sum assured as periodic survival benefit. As in the case of maturity claims, the specified amounts are paid on the due dates, after deduction of the outstanding loan interest, outstanding premium, X charge etc.

Survival benefit claims require the following documents: discharge form duly stamped, signed and witnessed original policy document If the policyholder dies after the due date, but before settlement of claim, the rights for that survival benefit vest in the estate of the deceased policyholder. The claim amount is then payable to the legal heirs of the policyholder. The insurer may settle the claim on the basis of an indemnity bond or ask for a declaration of title from appropriate judicial authorities. Will (if any) has to be probated.

Death claims

The payment of the sum assured amount in case the insured person dies, is called death claim. It is necessary to scrutinize all documents submitted by the heirs of the deceased person. An insurance contract comes to an end after paying the insurance claim. Insurance agents should
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help the heirs of the deceased person to receive the insurance claim by submitting proper documents in time.

Procedure to be followed in case of death claim

The following is the procedure to be followed for receiving death claims:

i) Intimation of death

The first step is to send an 'intimation of death' to the branch office of the insurance company from where the policy was issued.

The intimation should be sent in writing by any of the below mentioned persons: the nominee the assignee of the policy the relative of the deceased policyholder the employer an agent or the Development Officer The letter of intimation of death should contain the following information: name of the life assured a statement that the life assured is dead the date of the death the cause of death the place of death the relationship of the claimant with the assured the policy number Certificate of death issued by the Municipal authorities/ Public record office that maintains these records (mandated by certain insurers at the point of claim intimation, itself)

As soon as the branch office receives the intimation of death and is satisfied about the genuineness of the intimation, it verifies the status of the policy and sends the necessary claim forms along with instructions regarding the procedure to be followed and requirements to be fulfilled by the claimant.

ii)

Submission of proof of death

The proof of death is a certificate issued by the Municipal Death Registry or by a Public Record Office which maintains the records of births and deaths in the locality. Other statements or certificates are also required to be given in the prescribed claim form, such as: a statement by the doctor who last treated the deceased a certificate by the hospital where the policyholder died a certificate from the employer where the policyholder last worked a certificate of cremation or burial (this is generally called in "early claim" cases) iii) Submission of age proof

The claimant should submit an age proof of the policyholder in case it was not submitted earlier. The following documents are generally accepted as valid age proof: Birth certificate School certificate Certificate relating to baptism ceremony among Christians Passport (which is within the validity period)

iv)Proof of title of the claimant

If the policy has been assigned in a valid manner or the nomination is subsisting at the time of death, no proof of title is needed. In case there is no valid nomination or assignment, the claimant will have to produce satisfactory evidence of title to the estate of the deceased, from a competent judicial authority.
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The authority may be the Administrator General or a court, and should grant: a succession certificate; or letters of administration; or letters of probate; or a registered will

A Succession Certificate is issued by a competent court on the question of right to the property of the deceased. The Succession Certificate is issued on application and should specifically provide for disbursement of policy monies. If, however, the deceased has left a will, a probate (process of validation of will) of the will is required along with the copy of the will. v) Payment of the policy

When all the formalities are completed, the insurance company issues a discharge form for completion which is to be signed by the person entitled to receive policy money. Such person can be: the nominee, if nomination was made under the policy the assignee, if the policy was assigned the legal representative or successor

According to the IRDA regulations, a life insurer has to process the death claim without delay. The insurance company sends the cheque for the amount due to the person entitled to receive it, within 30 days from the date all formalities were completed (for non-early claims, as early claims would need to be investigated by the insurers before they pay out the claim)

Death Claims are classified into two categories:

a) early claims and

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b) non early claims

Early claims

Claims arising within two years of the date of commencement or revival are termed as 'early death claims'. They are also referred to as 'premature death claims'.

Example Jatin had taken life insurance on 30th November 2004. He died of sickness on 31st March 2006. If Jatin's heirs lodged a death claim with the insurance company on 30th April, 2006, it would be considered an 'early claim', as the claim had arisen within two years of the date of commencement of the insurance policy.

Documents required in case of early claims

In case death occurs in less than two years from the date of commencement of policy, the following documents are required: Policy document Discharge voucher Assignment deed, if any Age proof document (if age is not admitted) Proof of title of claimant Statement by the doctor who last treated the deceased Statement by the hospital where the policyholder died Statement from the employer about the leave, if any, taken by the life assured on grounds of sickness Certificate of cremation or burial

Early claims are to be dealt with cautiously. It is assumed that a person, who is accepted as good for life insurance, is not likely to die within two years. Therefore, when an early claim occurs, there is a need to make sure that there was na attempt to defraud the insurance company.
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Enquiries are made to confirm that no information was suppressed. This is done both to ensure the genuineness of the claim and safeguard the interests of the community of policy holders.

The decision to admit the claim is taken on the basis of information gathered during enquiries and the evidence collected. The insurer can deny liability under an early claim on the ground that material information had been suppressed at the time of proposal. A misrepresentation is adequate to repudiate liability, in case of early claims. However, insurers usually do not repudiate the contract only on grounds of misrepresentation unless there is evidence to the contrary.

In India, Section 45 of the Insurance Act, 1938 states that two years from the date of policy, the insurance company cannot question the contract unless certain conditions are fulfilled. The Supreme Court of India, in the case of Mithoulal Nayak vs Life Insurance Corporation of India (Lie), summarised the three conditions: The information in doubt must be material. The suppression must be fraudulently made by the policyholder. The policyholder must have known at the time of making the statement that it was false.

The onus of proving that these three conditions are satisfied is on the insurer. Thus, the repudiation of a death claim is done by insurers only after obtaining evidence in support of the fact of suppression.

Example

We know that leave taken on medical grounds is material information. This does not necessarily mean that the claim can be repudiated on this reason, as he had disclosed it on his proposal form. Before coming to any conclusion, insurers would try to confirm whether the reason/ illness for which the life-assured had taken leave and which was not disclosed in proposal form, was material to the terms of acceptance of the policy. Based on this, the insurance company would take a decision of admitting or repudiating the claim. This may warrant a claim investigation.
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Non-early claims

Claims arising after more than two years of the date of risk or revival or reinstatement are nonearly claims.

Example

Lalit had taken a life insurance policy on 22nd May, 2005 from LIC. He died on 24th October 2009. Now, if his heirs had lodged a death claim with the LIC on 30th December, 2009,. it would be considered a 'non-early claim' as the claim had arisen after two years from the date of commencement of the insurance policy.

Once the insurer is satisfied about the genuineness of the intimation, the status of the policy is verified and the documents are called for. In respect of non-early claims, the normal documents required would be: Original policy document Discharge voucher duly completed, signed, stamped and witnessed Deeds of assignment, if any Claimant's statement giving details of cause of death, nature of illness suffered, treatment, cremation etc. Age proof document, if not submitted earlier Proof of title of claimant Original death certificate

Example

Many policyholders perpetrate fraud by cheating or lying on paper (proposal form)

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A fraud involves policy owners lying and reporting many claims on a single injury in health claims.

The policy holder does not declare that he is suffering from a disease.

The insurer can repudiate such claims in the case of any malpractice being proved true.

Death due to accident or unnatural causes

If death was due to accident or unnatural causes, following additional documents would be required,based on the mode of death (e.g. poisoning, murder, drowning, vehicular accident etc.): Post-mortem report Police inquest report Panchanama report Magistrate's report/Coroner's verdict Forensic report

Chemical Analysis report of viscera (organs).The above mentioned documents would be required in early as well as non-early death claims.

While settling accident benefits under a life insurance policy, the insurer has every right to ensure that the cause of death is an accident. The cause that is directly responsible for the death in life insurance is called Proximate Cause or 'Causa Proxima' and the other causes are called remote causes. When an insured loss occurs due to more than one cause, then it needs to be ascertained whether the loss had arisen directly due to the peril insured upon or due to some other cause.

Proof of title of claimant

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Proof of the title of claimant claiming the policy money is important so that the benefits are paid to the person legally entitled to receive payment. Otherwise, the insurer will get involved in disputes between rival claimants. If the policyholder is alive, the claimant is the policyholder himself. If there is a death claim, the claimant is the nominee under Section 39 of the Insurance Act If there is no nomination, the claimant is the legal heir, who needs to prove their identity through a succession certificate or a probate of will, if a will exists. If the policy is assigned, the claimant is the asignee.

Nomination

The facility of nomination is provided to ensure easy and fast transfer of insurance money to the insured person's legal heirs. However, many a times, it is seen that there are a lot of problems in determining the succession rights, and legal suits go on for a long time. Nomination is a good way to solve this problem.

The proposer can nominate somebody in his immediate family to accept all the insurance benefits after him, at the time of taking an insurance policy. It is important to note that the nominee is not the owner of the entire policy amount. He is paid the amount only as a representative of the legal heirs and it is the nominee's duty to distribute the money properly among all the legal heirs.

Example

Ram had nominated his son Suresh in his insurance policy. However, Suresh died, a month ago so now Ram needs to nominate some other person in his family as nominee as per Section 39 of the Insurance Act. This will ensure that there arise no disputes at the point of claim settlement.

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Claim Concession

Strictly, if premiums are not paid, the policy lapses and no further payments would be due under the policy. Therefore, no claim can be entertained on a lapsed policy.

However, insurers do take a liberal and humane view in these matters. E.g.: The LIC of India allows the following privileges or concessions: Claims Concession: If under a policy at least three full years' premium is paid and if the subsequent premium remains unpaid and the death claim arises within six months of the first unpaid premium, the claim is settled in full, as if the policy had remained in full force. Extended claims concession: Similarly, if under a policy at least five full years' premium is paid and if the subsequent premium remains unpaid and the death claim arises within twelve months of the first unpaid premium, the claim is settled in full, as if the policy had remained in full force. Note: In both the above cases, the policy monies will be paid after deducting the outstanding premiums with interest thereon and the premiums falling due till the next anniversary of the policy.

Presumption of death Adequate proof of death:

Following documents are considered adequate proof of death:

In Case of natural death

A death certificate from the Municipality or other competent body, a certificate of

cremation or burial can also be obtained In case of death by accident while travelling by Certificate from the concerned carrier or any air or rail or natural calamities other organization or authority having relevant

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information, if body not found In case person is missing while on board a ship Certificate of the captain of the ship / shipping company

Presumed to be dead Sometimes, a person is reported missing without any information about their whereabouts. The Indian Evidence Act provides for presumption of death in case a person has not been heard of for 7 years. If a nominee or assignee or a legal heir contends that the life assured must be presumed to be dead, it would be wise to ask for a decree (an official order) from the competent court that the assured should be presumed dead. It is necessary that premiums are paid till the date of decree presuming death of the life assured.

Example

In case of maturity claims, if it is reported that the insured person had been missing for some time, the claim will continue to be a maturity claim and not a death claim till the death is proved. However, since the title is with the insured person, any other person like an heir to claim the policy proceeds, death will have to be proved. The procedure will be the same as for presuming death.

The insurer may consider payment of a claim in case of presumed death, even within 7 years, if circumstantial evidence is available to show that the life assured would not have survived a fatal accident or hazard.

The insurer may also settle the claim on getting an Indemnity Bond to protect its interest, in case the presumption of death is later found to be wrong. When the insurer takes the responsibility for such action on its own, without a decree from a court, there is a risk that some other claimant to the estate may raise a challenge later. The insurer will not be able to avoid getting involved in the dispute and having to defend its action.

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Insurance Riders

Riders provide additional insurance cover with a basic insurance policy. A rider is an additional optional benefit with a basic insurance policy. Insurance companies offer various types of riders, which are useful in increasing insurance protection by adding a small premium on the basic policy.

The following are the characteristics of riders: Riders are voluntary and not compulsory. Riders need additional amount of premium. They are useful for monetary benefits in case certain untoward event occur. No single rider will have a premium that exceeds the basic premium of the policy selected.

Although riders call for extra premium, they are better than having different insurance policies with large premiums.

There are many types of riders, but here, we will discuss only two types of riders: Accidental Death Benefit (ADB) Permanent Disability Benefit

Accidental Death Benefit Rider

Accidents happen by chance, but there is always a possibility of them. Accidental death is all the more unfortunate due to its unexpected nature. The family members of the deceased face critical and financial crisis. In such situations, Accidental Death Benefit Rider is useful. The premium for this benefit is nominal. Accident does not only mean road accident, it can be any sudden, unpredicted event with violent outward force resulting in an injury to body or death.

Conditions when Accidental Death Benefit Rider Claim will generally be paid.
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Death or injury was caused by outward, violent and visible means

Some of the Conditions when Accident Death Benefit rider claim will be paid

Death was caused solely and directly and independently of all other causes from the accident

Death occurred within 120 days of the accident or such other period as may have been mentioned in the policy.

Death due to injuries resulting from riot, civil commotion, rebellion, war, racing, hunting, mountaineering, scuba diving, bungee

jumping, para gliding, river rafting, etc.,

Death is caused by international self-injury, attempted suicide, insanity, immorality or while under the influence of intoxicating liquor, drugs or narcotic substances

Some of the conditions when Accident Death Benefit Rider claim would not be paid

Death as a result of committing any breach of law.

Death due to employment in military service, police duty.

Death due to an accident when the life assured was engaged in aviation or aeronautics other
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than a fare-paying passenger in air craft licensed to carry passengers.

There is a maximum limit of sum assured up to which the accident death benefit is made available. Some companies have limits of up to Rs. 10 lakhs, not on each policy but on all policies put together on a single life. If there is any doubt on the circumstances of the accident, enquiries similar to those conducted in the case of early claims are made.

Permanent Disability Benefit

Accidents do not always result in death. In case of disability, the policyholder is unable to earn their normal livelihood. They become a burden on the family. In such situations, Permanent Disability Benefit is useful. It is neither a death claim nor a maturity claim. The policy does not end with the settlement.

Example

A series of seizures (strokes) disabled Parmeet and ended his working life. However, disability insurance came to his aid and Parmeet got some financial compensation for the disability. Although unable to work, Parmeet got the required assistance from disability insurance and was able to support himself and his family.

Post Maturity Option

Some insurers offer policyholders an option to collect the maturity benefit amount in installments over a period of years. This option is also known as the settlement option. The option may be exercised at the commencement or at any time during the term of a policy. Alternatively, the policyholder can opt for part of the benefit amount being paid in monthly installments over a selected period and a lump sum at the end thereof.

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Precautions

Following are the points to be noted: A person declared as "lunatic" is not competent to enter into any legal transactions and therefore not competent to sign a contract. If the nominee or beneficiary as per the probated Will is a lunatic, a guardian of that person has to sign on his behalf. Payments of claims to non-residents will have to comply with the Foreign Exchange Regulations. If the policy had been financed through an HUF (Hindu Undivided Family) fund, the money will have to be paid to the Karta of the HUF.

Furthermore, the IRDA Regulations require that: The insurer should ask for the requirements in case of death claim at one time, and not as piecemeal. The decision to admit or to repudiate a claim should be made within 30 days of receipt of all papers. Investigations ,if necessary should be completed within 6 months Interest at 2% above the saving bank interest rate will be payable for delays in settling claims. Interest at the bank savings account rate will be paid if there is delay on the part of the claimant.

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CHAPTER-4 REJECTION OF CLAIMS

It is very difficult to generalize why claims are rejected. It would depend from case to case. However, the life insurance claims are normally rejected because of following reasons: -Policy not in force at the time of mishappening. -Incomplete claim documents or lack of basic documents. -Misrepresentation or concealment of material fact when the proposal form. -Suspected fraud to take claim amount.

If claim is made within 1st year or so, there is possibility that term plan was bought intentionally for making the claim and as such insurance company will investigate to make sure that claim was not fraudulent. The most common reason life insurance companies use to deny claims is that there was a material misrepresentation in connection with the insurance purchase. The claim regarding material misrepresentation may arise out of the original application for the insurance or from an amendment to the application or in an application for reinstatement. A material misrepresentation sufficient to deny a claim cannot be just any incorrect statement. A material misstatement is almost always one that if it had been disclosed would have meant refusal by the insurer to issue the policy. The most commonly alleged misrepresentations involve an applicant's medical history. Delays in processing claims can sometimes result from legal questions regarding whether the policy was currently in force as of the date of death, or, if the death was a result of foul play, any possibility that the beneficiary may have played a role in the death Life insurance applications ask many questions about the insured persons health history. The insurer typically requires the insured to have a physical examination before the policy is issued. If the insured dies within the next two years, the insurer will look very closely at the application,

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obtain the insureds medical records, and decide whether the insured made any errors in the application about his or her health history. If so, the insurer will probably deny the claim. Many life insurance policies pay benefits only if the insured died as the result of an accident, or pay additional benefits for death caused by accident rather than illness. Insurers often deny accidental death claims with the excuse that the death was not really accidental. The insurance company often claims that a death was not accidental because the decendents actions were so reckless that death was a foreseeable risk and thus not accidental. This excuse is used repeatedly by insurers in denying claims that involve drinking and driving.

Often, these denials are wrongful and the excuses are not legitimate. It is important for any person who makes a life insurance claim to know that they are not automatically stuck with an unfair claim denial, no matter what the insurance company or the policy itself says.

Life Insurance policies and Accidental Death policies often contain exclusions that preclude coverage under certain conditions. Typical exclusions include death caused by suicide, commission of a felony, intoxication, or in the case of an accidental death policy, exclusion for a death caused by illness or treatment thereof.

The exclusions in the policy are often misapplied by the insurance company to deny coverage. There are numerous issues that may be raised to defeat these exclusions including statutory limitations; causation requirements; and the fact that there is often more than one cause of death and determining whether the excluded cause is the predominant cause or just a contributing cause of the loss.

According to the Insurance Regulatory and Development Authority (IRDA), of the 7.62 lakh life insurance claims filed in 2010-11, nearly 15,000 were rejected by insurers.

This means 15,000 families were denied the money that the policyholders had thought would reach them if they died.

The insured amount of the rejected policies adds up to Rs 244.77 crore.

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Though 2011-12 figures are still being compiled by IRDA, unaudited figures individually sourced from insurance companies show that roughly 16,000 insurance claims ended up in the rejection bin last year.

The rejection ratio (rejected claims as a percentage of the total claims received and pending during the year) of some companies, especially those which started operations a few years ago, is alarmingly high. Aegon Religare rejected 45% of the claims. Future Generali, IDBI Federal and DLF Pramerica rejected one of every fifth claim raised. In comparison, LIC has a rejection ratio of 1.1%.

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CHAPTER-5 PROTECTION OF INTERESTS OF CONSUMERS

CONSUMER PROTECTION ACT, 1986

To provide for the better protection of the interest of consumers and to make provisions for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and other connection matters, the Consumer Protection Act 1986 was passed in 1986 by the Parliament. It was amended from time to time.

The Act is divided into four chapters. Chapter I deals with short, title, commencement and applications, definitions and makes it clear that this act is not in derogation of any other law. Chapter II relates to establishment and running of Consumer Protection Councils at the Central and State levels. The objects of the Council are to promote and protect certain rights of consumers. Chapter III provides for the establishment of Consumer Disputes Redressal Agencies at three levels viz.(i) the District level (ii) the State level and (iii) at the National level. In addition the procedure for receipt and disposal of complaint, appeal, enforcement of Orders of various forums, penalties are provided for. Chapter IV concerns with other miscellaneous aspects such as protection of action taken in good faith by the members of various forums, power to remove difficulties, power to make rules etc. The Consumer Disputes redressal Agencies are quasi-judicial machineries. The objective of the Consumer Protection Act is to protect the interests of consumers by providing for speedy settlement of consumer's complaint. The objective of the Act is to provide for better protection of the interests of consumers and for that purpose it has provided for setting up District, State and Central levels quasi-judicial machinery for disposal of consumer complaints. These forums grant reliefs of specific nature and award compensation to consumers. Salient Features of the Act are:

a) It covers all the goods & services.

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b) It is applicable to all the sectors i.e. private, public and government. c) It provides redressal machinery which is simple, speedy and less expensive. d) The Act is in addition to and not in derogation of the provisions of any other law for the time being in force.

"CONSUMER" IN RELATION TO SERVICES

"Consumer" in relation to services under the Act has been defined in section 2(d) as any person who hires or avails of any services for consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose.

"SERVICE" UNDER THE ACT.

As life insurance is primarily a service rendered to the insuring public, it is pertinent to refer to the definition of "service" in section 2(o) of the Act. "service" means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy board or lodging or both, housing construction, entertainment, amusement or purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.

"DEFICIENCY" DEFINED.

As life insurance is a service offered, the shortfall or lack of service may become the cause of complaints. It is called as 'deficiency' and the expression is defined under Section 2(g) of Act. It means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance in relation to any service.

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UNFAIR TRADE PRACTICE" DEFINED:

The Act makes a detailed list of unfair trade practices under Section2(r). As far as life insurance is concerned unfair trade practice may include

i) ii)

false representations as regards standard, quality or grade of service. representation that the service have sponsorship, approval, performance,

characteristics, uses or benefits which such services do not have. iii) representation that the seller or the supplier has a sponsorship or approval or affiliation which they do not have. iv) making a false or misleading representation concerning the need for or the usefulness of any services. v) making a representation of a warranty of services or repeat or continue a service until it has achieved a specified result and such warranty or promise is misleading or will not be carried out. vi) vii) viii) misleading the public concerning the price of services. giving false or misleading facts disparaging the services of another person. permitting the publication of any advertisement for the sale or supply of services at a bargain price which are not intended to be offered at such price. ix) permitting the offering of gifts prizes etc. with the intention of not providing them as offered etc. x) refuse to sell or provide any service with an intention to raise the cost of such service. TRADE PRACTICES" DEFINED:

RESTRICTIVE

Section 2(n) defines "Restrictive trade practice" as "a trade practice which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions and shall include-

a) delay beyond the period agreed to by a trader in supply of such goods or in

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providing the services which has led or is likely to lead to rise in the price;

b) any trade practice which requires a consumer to buy, hire or avail of any goods or as the case may be, services as the condition precedent to buying, hiring or availing of other goods or services."

MANNER IN WHICH COMPLAINT IS TO BE MADE:

A complaint in relation to any service provided or agreed to be provided may be made to the appropriate forum by, i) ii) iii) the consumer to whom the services are provided or agreed to be provided, any recognised consumer association of which the consumer is a member one or more consumers with the permission of the Forum where there are numerous consumers having a common cause, or iv) v) the Central or the State Government. the heir or legal representative of a deceased consumer in writing within two years from the date on which the cause of action has arisen.

THE THREE-TIER SYSTEM OF REDRESSAL OF COMPLAINTS:

The Act envisages three tier system of Redressal of Complaints The District Forum is the lowest agency in the hierarchy having the pecuniary jurisdiction upto Rs.20 lakh. The State Commission has the pecuniary jurisdiction upto Rs.l crore. The National Commission is at the apex having the pecuniary jurisdiction of above Rs.l crore. Appeals lie from the lowest forum to the higher forum and then to Supreme Court. Appeal is to be filed before, the higher forum within 30 days from the date of receipt of the order. Though there is no provision of filing of second appeal, revision petition can be filed before next higher forum, limitation being 90 days.

The forums have been vested with the powers of a Civil Court under the Civil Procedure Code, 1908 in their disposal of the complaints. Penalties have been provided under section 27 where the person who fails or omits to comply any order of any forum, shall be punishable with
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imprisonment for a term which shall not be less than one month but may extend to three years or with fine which shall not be less than two thousand rupees but may extend to ten thousand rupees or both. In this respect it is to be noted that the forums are vested with the powers of a Judicial Magistrate of the first class for the trial of the offences under the Act. IMPLICATIONS OF CONSUMER PROTECTION ACT TO LIFE INSURANCE INDUSTRY:

Consumer: As per the definition in the Act consumer is a person who buys or hires services for a consideration. The policyholder in a contract of life insurance is a consumer. A beneficiary of the policy under M.W.P. Act, a nominee under sec.39 of the Insurance Act 1938 and an assignee under Section 38 of the Insurance Act, 1938 are in the category of Consumers. In LIC of India Vs. Shri Chatur Bohari Lal (Appeal no.29/1989) the Rajasthan State Commission held that nominee is a consumer and nonpayment of claim moneys within a reasonable time entitles a nominee to file a complaint.

The Act itself has clarified that insurance is included in the definition of 'service' made available to potential users. The expression "deficiency" in service concerns any fault, imperfection shortfall in the quality, nature and manner of performance etc. in relation to any service. It may normally concern prompt issuance of receipts, transfer of policy files from one office to another, quick settlement of loan, maturity and death claims etc. Quality of service may touch on such areas such as extending courtesy to clients while handling enquiries etc. Restrictive Trade Practice: A trade practice is an extension of service of a particular kind as a condition precedent to buying or hiring other services. Linking two types of service is to be reexamined so that the service contract does not conflict with the provisions of law in that regard. Unfair trade practice: This is an extremely delicate area and insurers and their representative have to study in depth many business practices and messages set out in advertisements to avoid

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embarrassments later. Perhaps, it is a fertile ground for acts of commission or commission by the sales force while negotiating an insurance sale.

CASE LAWS: 1. LIFE INSURANCE CORPORATION OF INDIA Vs. MANI RAM1, Respondent filed a complaint under Consumer Protection Act, 1986 alleging that his son had been insured withthe appellant-insurance company on August 21, 1995 and premium amount was paid on the same day. His next installment was due on August 21, 1996. The insured however died in an accident on August 2, 1996, Respondent accordingly requested the appellant company to pay the insurance claim amount. As appellant refused to pay any amount he approached District Forum. Appellant resisted the complaint on the ground that policy had elapsed due to non-payment of premium within the prescribed period. District Forum allowed the claim holding that though the policy was back dated to April 28, 1995, as the premium was paid on August 21, 1995, the next premium became due on August 21, 1996, and since insured met with an accident on August 2, 1996, the insurance company was liable. State Commission and National Commission upheld the order of the District Forum.

Held: payment of premium due had to be made within a grace period of one month. If such payment was made within the said period, the policy would be treated as valid and the assured would be paid the amount to which he was entitled after deducting the premium amount. But it was also made clear that if the premium was not paid before the expiry of the days of grace, the policy would lapse.

The material date was not the date of deposit/payment of premium amount which was August 21, 1995, but the date of policy which was April 28, 1995. Since it was yearly, the payment was due on April 28, 1996, but the assured was entitled to grace period of one month up to May 28, 1996. Neither the premium was paid on April 28, 1996 nor on May 28, 1996. As per condition No. 2, policy lapsed on May 28, 1996. In the eyes of law, there was no subsisting policy, on August 2,
1

2005 AIR 3349

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1996. Insurance Company was therefore wholly justified in rejecting the claim of the complainant and no exception can be taken against such a decision. 2. LIC Vs. Lily Rani Roy2

The petitioner had purchased life insurance policy from the LIC and the premiums were paid regularly. Maturity of the said policy was in 1978. However, claim was not filed. The petitioner filed claim after 13years of maturity. LIC rejected the payment on the plea that claim was time barred and hence cannot be paid. Roy filed a complaint with the consumer council on grounds of deficiency in service. LIC pleaded that the records are maintained only for 5 years and the claim notice received from Roy was far beyond that time. After examining the facts, the state forum declared that the claim being time barred, Roy is not entitled to it. Roy then approached the National Commission. The commission verified the terms and opined that though the payment of claims is time barred, the LIC shouldve given notice to that effect. As it failed to create this awareness, LIC failed in its duties and that amounted to deficiency in service and hence was made liable to make the payment of the claim.

3. LIC of India (Petitioner) Vs. Smt Sushma Singh (Respondent) (Appeal allowed) Life insurance policy- fifth half yearly premium due on 28-6-89 was not paid even during the grace period of 30 days-policy lapsed- policy holder murdered-doubt in the date of death of deceased-according to post mortem report the deceased died before the 19-8-1989-held the life assured had expired before the 10-8-89 and the policy had lapsed on the 28-6-89 and as such no claim was maintainable under the policy of insurance-no deficiency in service in refusing to pay double accident benefit under the policy.

1997 (1) CPJ 46 NC

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CHAPTER-6 REGULATORS ROLE

Insurance companies cannot mechanically reject claims on technical grounds, such as delay in intimation and submission of documents, particularly if the delay is due to unavoidable circumstances, according to the insurance regulator.

Besides benefiting policyholders, whose claims for settlement are rejected on technical grounds, the regulatory move will also help the industry curb unnecessary expenses on litigation and court settlement.

The Insurance Regulatory and Development Authority (IRDA) has issued a circular to this effect to life and non-life insurance companies as it has received many complaints on rejection of claims.

The regulator said policyholders should intimate and submit the required documents to their insurance company within the stipulated time so that the insurer can start post-claim activities such as investigation, loss assessment, provisioning and claim settlement.

However, when there is delay in intimation or submission of documents due to unavoidable circumstances, the regulator has emphasised that this should not prevent settlement of genuine claims.

The reduced litigation will lower costs for both, the insurer and the policyholder The regulator has asked the companies to incorporate additional clauses in policy documents to assure customers that their claims can be rejected only on the basis of sound logic and valid grounds.

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CHAPTER-7 CONCLUSION

In recent years a large number of cases are being filed before the various consumer forums. Even though the proceedings before the forums are of a summary kind under the Act, in some cases where detailed evidence are needed, some of the forums have exercised their jurisdiction. The proceedings before the forum are much less expensive as compared to civil court. There is a time frame within which the Forums are to hand down their decision. There is every possibility that in future, more consumers will choose these forums for redressal of their grievances and complaints instead of civil courts, although Section 3 of the Act provides that the Act shall be in addition to and not derogation of the provisions of any other law for the time being in force. In case of insurance related disputes, its usually the Insurance Ombudsman or the consumer forums that are approached. There are only 12 Ombudsman centres in the country. Whereas, there are consumer forums at district, state & national level across the length and breadth of the country. Hence, the consumer forums have more outreach. Moreover, the Ombudsman deal only with claims related disputes. Whereas, the consumer forums deal with other disputes related to insurance contracts also. Hence, the scope of dispute handling tends to be wider in case of the consumer forums. However, the consumer forums are often criticized for their lack of efficiency. Ombudsman is considered highly efficient as it deals only with insurance related and more so with claim related disputes. Whereas, the consumer forums deal with a plethora of disputes and are not just restricted to insurance dispute settlement. Hence, the efficiency of these forums tends to be low. Despite the criticism, the consumer forums are in a way, a superior method of resolving life insurance claim disputes in comparision to the Ombudsman.

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BIBLIOGRAPHY 1. http://www.google.co.in/search?hl=en&biw=1280&bih=685&noj=1&sclient=psyab&q=lic+vs.+lily+rani+roy&oq=lic+vs.+lily+rani+roy&aq=f&aqi=&aql=&gs_l=serp.3...13641 94.1375044.0.1375280.67.36.0.0.0.11.452.4487.19j2j9j1j1.35.0...0.0.nwhsEjhvxxI 2. http://www.lifeinscouncil.org/consumers/claims-process 3. http://www.apnapaisa.com/insurance/life-insurance-india/claims.html 4. http://www.capitalmarket.com/personal/insurance/insurance.asp?opt=licclaim 5. http://www.polity.org.za/article/the-impact-of-the-consumer-protection-act-on-insurance2009-09-11 6. http://consumer.indlaw.com/updates/judgments.aspx 7. Indian Institute of Insurance books.

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