Insurance – in simple language it means to transfer risk to someone who is capable of handling it generally to insurer (Insurance Company).
The origin of insurance business started from London Lloyd coffee house.
1st Life insurance company in the world was Amicable society for Perpetual Assurance.
1st life insurance company to be set up in India was The Oriental Life Insurance company ltd.
1st Non-life insurance company established in India was Triton Insurance company ltd.
1st Indian insurance company was Bombay Mutual Assurance society ltd found in 1870 in Mumbai.
National Insurance company ltd. is the oldest insurance company founded in 1906.
In 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business.
The Life Insurance Companies Act 1912 made it compulsory that premiumrate tables and periodical valuation of companies be certified by an actuary.
The Insurance Act 1938 was the first legislation enacted to regulate the conduct of insurance companies in India.
Life insurance Business was nationalized on 1st September 1956 by merging 170 insurance companies and 75 Provident Fund societies and Life Insurance corporation of India ( LIC ) was formed.
Non – Life insurance business was nationalized in 1972 by amalgamating 106 insurers, General Insurance Corporation of India (GIC) & its 4 subsidaries was formed.
Malhotra committee and IRDA:- Malhotra committee – setup in 1993 to explore and recommend changes for development & it submitted the report in 1994.
IRDAI – Insurance regulatory and Development Authority of India was setup by an act IRDA Act 1999 as a statutory regulatory body for both life and nonlife
There must be an asset which has economic value (Car-physical; Goodwill-nonphysical; Eye-personal). These assets may lose value due to uncertain event. This chance of loss/damage is known as risk. The cause of risk is known as peril. Persons having similar risks pool (contribute) money (premium) together.
a)Primary burden of risk – losses actually suffered. E.g. Factory getting fire.
b)Secondary burden of risk – losses that might happen. Eg. physical/mental Stress strain.
The various types of techniques that can be used to manage risk are:
a)Risk avoidance – Controlling risk by avoiding a loss situation
b)Risk retention – One tries to manage the impact to risk and divides to bear the risk and its effects by oneself.
c)Risk reduction and Control – This is a more practical and relevant approach than risk avoidance. It means taking steps to lower the chance of occurrence of a loss and / or to reduce severity of its impact if such loss should occur.
Insurance is a risk transfer mechanism.
Don't risk a lot for a little. E.g. there is no need to insure a ball pen as its cost is not high.
Don't risk more than what we can afford to lose. E.g. we cannot afford to not insure our house as its cost is high.
Don't insure without considering the likely outcome. E.g. can anyone insure a space satellite?
Insurance refers to protection against an event that might happen whereas Assurance refers to protection against an event that will happen
Employees state insurance corporation, Crop Insurance Schemes (RKBY), Rural insurance schemes.
Janata Personal Accident, Jan Arogya
Customers provides the bread and butter of a business and no enterprise can afford to treat them indifferently.
The role of customer service and relationships is far more critical in the case of insurance than in other products.
Because Insurance is a Service. Insurance is a Intangible good.
It is necessary for insurance companies and their personnel, which includes their agents, to render high quality service and delight the customer.
The Secret for success in insurance sales is commitment to serving their Customers.
Customer lifetime value may be defined as the sum of economic benefits that can be derived from building a sound relationship with a customer over a long period of time.
Communication can take place in several forms – Oral; Written; Non-Verbal; Body Language.
A) Making a great first impression
B) Body Language - refers to movements, gestures, facial expressions. The Way we talk, walk, sit and stand.
Is where we consciously try to hear not only the words but also, more importantly, try to understand the complete message being sent by another.
Grievance redressal mechanism – IRDA has various regulations in order to render the consumers grievances/complaints which come under protection of policy holder”s interests regulation 2002.
Integrated grievance management system (IGMS) - IRDA has launched an integrated grievance management system (IGMS) which acts as a central repository of insurance grievance data and as a tool for monitoring grievances in the industry. Policy holders can register on this system with their policy details. Complaints are then forwarded to the respective insurance company.
The consumer protection act 1986 - the act was passed “to provide for better protection of the interest of consumers and to make provision for the establishment of consumers disputes”.
The complainant had made a previous written representation to the insurance company and the insurance company had :
An applicant seeking appointment as a „ Composite Insurance Agent shall make an application to the Designated Official of respective life, general, health insurer or monocline insurer .
Composite Agency Application Form I-B.
Insurance Agency Examination : An applicant shall pass in the Insurance Agency Examination conducted by the Examination Body in the subjects of Life, General, or Health Insurance
Disqualification to act as an Insurance Agent: The conditions for disqualification shall be as stipulated under Section 42 (3) of the Act
An insurance policy is a contract between 2 parties – Insurer (Insurance Company) and Insured (Policy holder) as per Indian Contract act 1872.
For any contract to be a valid contract following elements should be there –
In Life Insurance – Insurable interest should be present at the start of policy.
In Non-life Insurance – Insurable interest should be present both at the start and during claim.
In Marine Insurance – Insurable Interest should be present at the time of claim.
E.g Mr. Mahesh earns Rs.120000 per annum and spends Rs.24000 on himself. Therefore net earnings for family in case of Mr. Maheshâ€Ÿs death is Rs.96000 per annum. Suppose rate of interest is 8% then HLV = 96000/ 0.08 = 12,00,000.
Financial Planning is a process to identify his goals; assess net worth; estimating future financial needs; and working towards meeting those needs.
Short term – buying LCD Television; family vacation.
Medium term –buying a house
Long term – Childrenâ€Ÿs education/ marriage; post-retirement provision.
It is a process in which clients current and future needs are considered and evaluated along with his risk profile and income assessment. Financial planning includes – Investing, Risk management, Estate planning, Retirement planning, Tax planning and financing daily and regular requirements.
The right time to start financial planning is when one starts receiving his 1st salary.
From a marketing standpoint, a product is a bundle of attributes.
The difference between a product (as used in a marketing sense) and a commodity is that a product can be differentiated. A commodity cannot.
There is no fixed term of cover but the insurer offers to pay the agreed upon, death benefit when the insured dies, no matter whenever the death might occur.
A term insurance policy comes handy as an income replacement plan.
It is typically an endowment plan with the provision for return of a part of the sum assured in periodic installments during the term and balance of sum assured at the end of the term .The unique selling proposition (USP) of term assurance is its low price, enabling one to buy relatively large amounts of life insurance on a limited budget.
These plans provide a death benefit that decreases in amount with term of coverage e.q. a 10 years decreasing term policy may offer a benefit of Rs. 1, 00,000 for death in first year with amount decreasing by Rs. 10,000 on each policy anniversary, top finally come to zero at the end of the ten years.
Plan is of decreasing term insurance designed to provide death amount that related to the decreasing amount owned on mortgage loan in such loans, each equated monthly Installment (EMI) payment leads to a reduction of outstanding principal amount.
New traditional products will give a higher death cover.
The savings or cash value component in traditional life insurance policies is not well defined.
It is not easy to ascertain what would be rate of return on traditional life insurance policies
The cash and surrender values (at any point of time), under these contracts depend on certain values (amount of actuarial reserve and the pro-rata asset share of the policy)
Finally there is the issue of the yield on these policies
Major sources of appeal of the new genre of products that emerged worldwide are :
Universal Life Policy was first introduced in the USA.
Universal life insurance is a form of permanent life insurance characterised by its flexible premiums, flexible face amount and death benefit amounts, and the unbundling of its pricing factors.
This fund invests major portion of the money in equity and equity related instruments.
This policy was first introduced in the United States in 1977. Variable life insurance is a kind of “Whole Life” policy where the death benefit and cash value of the policy fluctuates according to the investment performance of a special investment account into which premiums are credited. Theoretically the cash value can go down to zero, in which case the policy would terminate.
Unit linked plans, also known as ULIP emerged as one of the most popular and significant products, displacing traditional plans in many markets. These plans were introduced in UK, in a situation of substantial investments that life insurance companies made in ordinary equity shares and the large capital gains and profits they made as a result.
Unit linked policies thus provide the means for directly and immediately “cashing on the benefits of a life insurer’s investment performance.
Section 6 of the Married Women’s Property Act, 1874 provides for security of benefits under a life insurance policy to the wife and children. Section 6 of the Married Women Property Act, 1874 also provides for creation of a Trust.
It can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business.
Keyrnan is a term insurance policy where the sum assured is linked to the profitability of the company rather than the key personâ€Ÿs own income. The premium is paid by the company. This is tax efficient as the entire premium is treated as business expense. In case the key person dies, the benefit is paid to the company. Unlike individual insurance policies, the death benefit in keyman insurance is taxed as income.
A key person can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.
It is an insurance policy that provides financial protection for home loan borrowers. It is basically a decreasing term life insurance policy taken by a mortgagor to repay the balance on a mortgage loan if he / she dies before its full repayment.
Price for insurance.
Pricing refers to the process of calculating the rate of the premium that will be charged on insurance policy.
It is normally expressed as a rate of premium per thousand of Sum Assured.
The policyholder can pay the premium in a number of ways:
Types of Premiums :Arriving at the rate is performed by an Actuary
Higher the mortality rate, higher the premiums would be.
Higher the interest rate assumed, lower the premium
Life insurance companies may offer certain types of rebates on the premium that is payable. Two such rebates are
Addition to net premium. Example: Administration charges, medical expenses, processing fees, profit margin bonus etc.
Every Life insurance company is expected to undertake a periodic valuation of its assets and liabilities:
Surplus is the excess of value of assets over value of liabilities. If it is negative, it is known as strain.
Surplus = Assets – Liabilities.
Bonus is paid as an addition to the basic benefit payable under a contract.
Thus free-look period of 15 days is available as privilege to policy holder in order to take decision to be continued or not.
An Insurance contract commences when the life insurance company issues a FPR. The FPR is the evidence that the policy contract has begun.
FPR contains the following informations :
The company may require a moral hazard report from an official of the insurance company.
It is the evidence of the contract between he assured and the insurance company.
If the insured person loses the original life insurance policy document, the insurance company will issue a duplicate policy without making any changes to the contract.
It has to be signed by competent authority and stamped according to Indian Stamp Act
Policy schedule: – It contains Policy ownerâ€Ÿs name & address, DoB, Age, Plan & Term, Whether the policy is Par / Non Par, Mode of Premium, Policy no, DOC, DOM, SA , Premium paid, nominee, details of riders etc.,
Standard provisions: – These are normally present in all LI contracts.These provisions define the rights and privileges and other conditions viz; days of grace, non-forfeiture in case of lapse.
Specific policy provisions : – These may be printed on the face of the document or inserted separately in the form of an attachment.
Eg: A clause precluding death due to pregnancy for a lady who is expecting at the time of writing the contract
The “Grace Period” clause grants the policyholder an additional period of time to pay the premium after it has become due.
The standard length of the grace period is one month or 31 days computed from next day after due date.
The premium however remains due and if the policyholder dies during this period, the insurer may deduct the premium from the death benefit. If premiums remain unpaid even after the grace period is over, the policy would then be considered lapsed and the company is not under obligation to pay the death benefit but for the amount under Non Forfeiture provisions.
If the policy premium has not been paid even during days of grace , the policy is deemed to be lapsed.
Reinstatement is the process by which a life insurance company puts back into force a policy that has either been terminated because of non-payment of premiums or has been continued under one of the non-forfeiture provisions
If premiums have been paid for at least 3 consecutive years, the accrued Surrender Value will be paid.
It is a percentage of paid up value. Surrender value as a percentage of premiums paid is called Guaranteed Surrender Value.
Transfer the rights of the property ( Policy).
Types of Assignment :
On assignment, nomination is cancelled, except when assignment is made to insurance company for a policy loan
|Basis of Difference||Nomination||Assignment|
|What is Nomination or Assignment||Nomination is the process of appointment of a person to receive the death claim||Assignment is the process of transferring the title of the insurance policy to another person or institutions|
|When can the nomination or assignment be done?||Nomination can be done either at the time of proposal or after the commencement of the policy.||Assignment can be done only after commencement of the policy.|
|Who can make the nomination or assignment||Nomination can be made only by the life assured on the policy of his own life.||Assignment can be done by owner of the policy either by the life assured if he is the policyholder or the assignee|
|Where is it applicable?||It is applicable only where the Insurance Act, 1938 is applicable||It is applicable all over the world, according to the law of the respective country relating to transfer of property.|
|Does the policyholder retain control over the policy?||The policyholder retains title and control over the policy and the nominee has no right to sue under the policy||The policyholder loses the right, title and interest under the policy until a re-assignment is executed and the assignee has a right to sue under the policy.|
|Is a witness required?||Witness is not required.||Witness is mandatory.|
|Do they get any rights?||Nominee has no rights over the policys||Assignee gets full rights over the policy, and can even sue under the policy.|
|Can it be revoked?||Nomination can be revoked or cancelled at any time during the policy term.||The assignment once done cannot be cancelled, but can be reassigned.|
|In case of minor||In case the nominee is a minor, appointee has to be appointed.||In case the assignee is a minor, a guardian has to be appointed.|
|What happens in case of the nominee’s or assignee’s death?||In case of nominee death, the rights of the policy revert to the policyholder or to his legal heirs.||In case of conditional assigneeâ€Ÿs death, the rights on the policy revert back to the life assured, based on the terms of assignment. In case of the absolute assignee death, his legal heirs are entitled to the policy.|
|What happens in case of death of the nominee or assignee after the death of the life assured and before the payment of the death claim||In case the nominee dies before the settlement of death claim, the death claim will be payable to the legal heirs of the life assured.||In case the assignee dies before the settlement, the policy money is payable to the legal heirs of the assignee and not the life-assured who is the assignor|
|Can creditors attach the policy||Creditors can attach the insurance policy which has a nomination in it.||Creditors cannot attach the policy unless the assignment is shown to have been made to defraud the creditors.|
If the insured person loses the original life insurance policy document, the insurance company will issue a duplicate policy without making any changes to the contract.
The claim may be settled on furnishing an indemnity bond with or without Surety
Policy holder may seek to effect alteration in policy terms and conditions. It is subject to the consent of both insurer and insured. Normally alterations may not be permitted during 1st year of policy Except for some simple ones like change of mode of payment of premium, change in name, address, request for grant of DAB or PDB etc
The process of insurers to decide whether the proposal to be accepted or rejected depending from the proposal information and insurers requirements and procedure is known as underwriting.
Upper limit of sum assured for e.g. Cases above 5lac may need to undergo medical.
Entry level of age. Proposers above 40-45 age may compulsory need medical.
Term of the policy. Insurer might restrict term up to 20 yrs. or maturity age till 60.
Class of lives. Depending upon work area insurer might call for medical.
the medical factors that would influence an underwriter decision. They may often call for a medical examiner report.
Family history – 3 factors are taken into consideration in order to understand family history of the proposer
Heredity – certain diseases can be transmitted from one generation to another.
Average longevity of family – if parents have died early due to cancer, heart trouble.
Family environment – the environment in which the family lives.
Build – for a given age & height there is a standard weight, if the standard weight is too high or too low then such proposals need to be checked.
Blood pressure – another indicator to know personal characteristic.
Average pulse rate should be 72 and varying between 50-90.
Urine-specific gravity – one urine indicates the salts in the body. Its mal-functioning can be indicated through its test.
A claim is a demand that the insurer should make good the promise specified in the contract.
Forms to be submitted by nominee; assignee or legal heir on death are claim form;
certificate of burial or cremation; treating physicians certificate; hospitals certificate;
employers certificate; certified court copies of police reports in case of accidental death;
death certificate issued by municipal authority.
if it is detected by insurer that the proposer had made any incorrect statements or had suppressed material facts relevant to policy, the contract becomes void. All benefits under the policy are forfeited.
a policy which has been in force for 2yrs cannot be disputed on the ground of incorrect or false information. The insurer will have to prove in order to repudiate a policy after 2yr period.
the Indian evidence act 1872 deals with presumption of death; under this act if an individual has not been heard off or seen for 7yrs then they are presumed to be dead. It is necessary that premiums should be paid till the court decrees presumption of death.
It is included in the IRDA (protection of policy holderâ€Ÿs interests) regulation 2002.
Insurer will call upon the primary documents which are normally required.
Any query or requirement of additional documents are to be asked within 15days.
A claim is to be paid or be disputed giving all relevant reasons within 30days.
In case of any dispute over the claim, it shall initiate and complete within 6 months from the time lodging the claim.
Claim is ready for payment but cannot be done due to lack of proper identification, the life insurer shall hold such amount and shall earn interest as per schedule banks saving accounts rate (effective from 30days following the submission of all papers and information).
On delay of payment of claim on its completion would earn an interest of 2% above the prevalent rate of interest.
An agent shall render all possible service to the nominee, legal heir or the beneficiary in filling up the claim form accurately and assist in submission of these at insurer office. Apart from discharging obligations, goodwill is generated from such a situation where by there exist sample opportunity for the agent to procure business or referrals in future.
Health is a state of complete physical, mental and social wellbeing and notmerely the absence of disease.
Health is the Word Derived from the “Hoelth”. Which means the soundness of the body.
Primary health care refers to the services offered by the doctors, nurses and other small clinics which are contacted first by the patient for any sickness, that is to say that primary healthcare provider is the first point of contact for all patients within a health system.
Primary Health care centres are set up both by Government and private players.
Government primary health care centres are established depending upon the population size and are present right up to the village level in some form or the other.
Secondary health care refers to the healthcare services provided by medical specialists and other health professionals who generally do not have first contact with patient.
Most of the times, the patients are referred to the secondary care by primary health care providers/ primary physician.
Tertiary Health care is specialized consultative healthcare, usually for inpatients and on referralfrom primary/secondary care providers.
e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk pregnancy specialists etc.
Introduced by ESI Act,1948.
All workers earning wages up to Rs. 15,000 are covered under the contributory scheme wherein employee and employer contribute 1.75% and 4.75% of pay roll respectively; state governments contribute 12.5% of the medical expenses.
The benefits covered include:
Introduced in the year 1954.This scheme is for central government employees including pensioners and their family members working in civilian job.
The contribution from employees is quite nominal though progressively linked to salary scale –Rs.15 per month to Rs.150 per month
It covers all systems of medicine, emergency services in allopathic system, free drugs, pathology and radiology, domiciliary visits to seriously ill patients, specialist consultations etc
In 1986, Mediclaim Policy was introduced to provide coverage for the hospitalization expenses up to a certain annual limit of indemnity with certain exclusions such as maternity,pre-existing diseases etc.
Private players are introduced into the market in year 2001.
Today, more than 300 health insurance products are available in the Indian market.
Established : 5000 population ( Rural), 3000 population ( Hilly, Tribal and backward areas).
One female worker and one male worker.
Rural hospitals have also been set up andthese includes the sub-district hospitals called as the sub-divisional / Talukhospitals / specialty hospitals (estimated to be about 2000 in the country)
Speciality and teaching hospitals are fewer and these include the medical colleges (about 300 in number presently) and other tertiary referral centres. These are mostly in district towns and urban areas but some of them provide very specialized and advanced medical services.
India has a large pharmaceutical industry, which has grown from a Rs10 crore industry in 1950 to a Rs 55,000 crore business today (including exports). It employs about 5 million people, with manufacturing taking place in over 6000 units.
National Pharmaceuticals Pricing Authority (NPPA) – Regulator for the Pharmaceutical Industry
Insurance Companies especially in the general insurance sector provide the bulk of the health insurance services.
Insurance Regulatory and Development Authority of India (IRDAI)
General Insurance and Life Insurance Councils
Insurance Information Bureau of India.
“Health insurance business” or “health cover” means the effecting of insurance contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, including assured benefits and long-term care, travel insurance and personal accident cover.
Health insurance products can be broadly classified into 3 categories:
The guidelines now provide for standardization of:
Basic Health insurance Policy – Mediclaim policy.
Mediclaim continues to be the largest selling health insurance in the country.
Hospitalization indemnity products protect individuals from the expenditure they may need to incur in the event of hospitalisation.
1. Inpatient hospitalization expenses :
All expenses may not be payable and most products define the expenses covered which normally include:
2. Daycare procedures ( within 24 hrs of hospitalisation) – Eye surgery, Chemothreaphy, dialysis.
3. Pre and post hospitalization expenses :
4. Pre hospitalization expenses : Pre hospitalization expenses could be in the form of tests, medicines, doctorsâ€Ÿfees etc. Such expensesrelevant and pertaining to the hospitalization are covered under the health policies.
5. Post hospitalization expenses :After stay in the hospital, in most cases there would be expenses related to recovery and follow-up.
This benefit is not commonly used by policyholders, an individual health policy also has a provision to take care of expenses incurred for medical treatment taken at home without being admitted to a hospital.
This cover usually carries an excess clause of three to five daysmeaning that treatment costs for the first three to five days have to be borne by the insured.
The cover also excludes domiciliary treatments for certain chronic or common oilments such as Asthma, Bronchitis, Chronic Nephritis and Nephritic Syndrome, Diarrhoea and all type of Dysenteries including Gastroenteritis, Diabetes, Mellitus, Epilepsy, Hypertension, Influenza, Cough and Cold, fevers.
“Any condition, ailment or injury or related condition(s) for which you had signs or symptoms, and/or were diagnosed, and/or received medical advice/treatment within 48 months prior to the first policy issued by the insurer.”
Exclusions for Pre-existing disease – 48 months from the day of Inception of the policy.
Waiting periods : Depending on the product, waiting periods of one / two / four years apply for diseases such as Cataract, Benign Prostatic Hypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital internal disease, Fistula in anus, piles, Sinusitis and related disorders, Gall Bladder Stone removal, Gout and Rheumatism, Calculus Diseases, gout and rheumatism, age related osteoarthritis, osteoporosis.
The maximum amount of cover under a health policy remained at Rs 5,00,000 for a very long time.
Anyone wanting a higher cover was forced to buy two policies paying double the premium. This led to the development of the Top-Up policies by insurers, which offers cover for high sums insured over and above a specified amount (called threshold).Senior citizen policy :
Coverage :People over 60 years of age.
Sum Assured :Rs.50,000 to Rs.5,00,000.
Entry age is mostly after 60 years and renewable lifelong.
1. HOSPITAL DAILY CASH POLICY
2. CRITICAL ILLNESS POLICY
The critical illnesses covered vary across insurers and products, but the common ones include:
Long termcare means all forms of continuing personal or nursing care for people who are unable to look after themselves without a degree of support and whose health is not going to get better in future. There are two types of plans for long term care:
a)Pre-funded plans which are purchased by healthy insured to take care of their future medical expenses and
b)Immediate need plans which are purchased by a lump sum premium when the insured is requiring long term care.
Following are the features of Jan ArogyaBima Policy:
i) This policy is designed to provide cheap medical insurance to poorer sections of the society.
ii) The coverage is along the lines of the individual Mediclaim policy. Cumulative bonus and medical check-up benefits are not included.
The policy is available to individuals and family members.
iii) The age limit is five to 70 years.
Children between the age of three months and five years can be covered provided one or both parents are covered concurrently.
The sum insured per insured person is restricted to Rs.5,000 and the premium payable as per the following table.
This policy is available to groups of 100 or more families. In recenttimes evenindividual UHISPolicies were made available to the public. Benefits under this policy are Medical Reimbursement, Personal accident cover, Disability cover,
4. PradhanMantriSurakshaBimaYojana (PMSBY)
5. PradhanMantri Jan DhanYojana (RMJDY)
6. Personal Accident and disability cover
Types of disability which are normally covered under the policy are:
Underwriting is a process of risk selection and risk pricing.
Underwriting is the process of assessing the risk appropriately and deciding the terms on which the insurance cover is to be granted.
The job of the underwriter is to classify the risk and decide the terms of acceptance at a proper price. It is important tonote that acceptance of risk is like giving a promise of future claim settlement to the insured.
Factors which affect chance of illness :Age, Gender, Habits, Occupation, Family history, Past illness or surgery, current health status.
i.To prevent anti-selection that is selection against the insurer
ii.To classify risks and ensure equity among risks
The term selection of risks refers to the process of evaluating each proposal for health insurance in terms of the degree of risk it represents and then deciding whether or not to grant insurance and on what terms.
Anti-selection(or adverse selection) is the tendency of people, who suspect or know that their chance of experiencing a loss is high, to seek out insurance eagerly and to gain in the process
While factors like age, gender, habits etc. refer to the physical hazard of a health risk, there is something else that needs to be closely watched. This is the moral hazard of the client which can prove very costly to the insurance company.
A) Proposal Form
This document is the base of the contract where all the critical information pertaining to the health and personal details of the proposer (i.e. age, occupation, build, habits, health status, income, premium payment details etc.) are collected.
B) Age Proof
C) Financial documents
Knowing the financial status of the proposer is particularly relevant for benefit products and to reduce the moral hazard.
D) Medical reports
Requirement of medical reports is based on the norms of the insurer, and usually depends upon the age of the insured and sometimes on the amount of cover opted.
E) Reports of sales personnel
Sales personnel can also be seen as grassroots level underwriters for the company and the information given by them in their report could form an important consideration.
Claims management in insurance
Insurance is a promise and the policy is a witness to that promise.
Insurance is the claims paying ability of the insurance company.
Customer : The person who buys insurance is the first stakeholder and„receiver of the claim.
Owners : Owners of the insurance company have a big stake as the „payers of the claims. Even if the claims are met from the policy holders funds, in most cases, it is they who are liable to keep the promise.
Underwriters : Underwriters within an insurance company and across all insurers have theb responsibility to understand the claims and design the products, decide policy terms, conditions and pricing etc.,
The regulator (Insurance Regulatory and Development Authority of India) is a key stakeholder in its objective to:
Maintain order in the insurance environment
Protect Policy holders Interest
Ensure long term financial health of insurers.
Service intermediaries known as Third Party Administrators, who process health insurance claims.
Insurance agents / brokers not only sell policies but are also expected to service the customers in the event of a claim.
They ensure that the customer gets a smooth claim experience, especially when the hospital is on the panel of the TPA the Insurer to provide cashless hospitalization.
The health insurance loss ratio of various insurers ranges from 65% to above 120%, with major part of the market operating at above 100% loss ratio”.
This means that there is a great need to adopt sound underwriting practices and efficient management of claims to bring better results to the company and the policyholders1. Management of health insurance claims 2. Challenges in Health insurance : Common perception – “Health insurance is not for Healthy People”
Lack of awareness about the Health insurance Products.
Health care delivery systems focus only on top 20 Cities in india.
Lack of reliable data
Price sensitivity to buying.
A claim may be serviced either by the insurance company itself or through the services of a Third Party Administrator (TPA) authorized by the insurance company.
Claim intimation is the first instance of contact between the customer and the claims team. The customer could inform the company that he is planning to avail a hospitalization or the intimation would be made after the hospitalization has taken place, especially in case of emergency admission to a hospital.
Registration of a claim is the process of entering the claim in the system and creating a reference number using which the claim can be traced any time. This number is called Claim number, Claimb reference number or Claim control number. The claim number could be numeric or alpha-numeric based on the system and processes used by the processing organization.
Once a claim is registered, the next step is to check for the receipt of all the required documents for processing. It must be appreciated that for a claim to be processed following are the most important requirements:
Billing is an important part of the claim processing cycle.
Room, board and nursing expenses including registration and service charges.
Charges for ICU and any intensive care operations .
Operation theatre charges, anaesthesia, blood, oxygen, operation theatre charges, surgical appliances, medicines and drugs, diagnostic materials and X-ray, dialysis, chemotherapy, radiotherapy, cost of pacemaker, artificial limbs and any medical expenses incurred which is integral part of the operation. Surgeon, anaesthetist, medical practitioner, consultant’s, specialists fees.
Ambulance charges .
Investigation charges covering blood test, X-ray, scans, etc.
Medicines and drugs .
Many hospitals have agreed package rates for treatment of certain diseases. This is based on the ability of the hospital to standardize the treatment procedure and use of resources. In recent times, for treatment at Preferred Provider Network and also in case of RSBY, package cost of many procedures has been pre-fixed.
The most important code set used is the World Health Organization (WHO) developed International Classification of Diseases (ICD) codes.
While ICD is used to capture the disease in a standardized format, procedure codes such as Current Procedure Terminology (CPT) codes capture the procedures performed to treat the illness
The heart of claims processing in any insurance policy, is in answering two key questions:
Is the claim payable under the policy?
If yes, what is the net payable amount?
Pre-existing illnesses refer to “Any condition, ailment or injury or related condition(s) for which insured person had signs or symptoms and/or was diagnosed and/or received medical advice/treatment within 48 months prior to his/her health policy with the company whether explicitly known to him or not.”
A typical health insurance policy covers illnesses only after an initial 30 days (except accident related hospitalization).
There are lists of illnesses such as Catract, Hernia, Hydrocele, Fistula, Sinusitis, Piles, Knee/Hip JointReplacement – One year/Two year/ more than a year depends upon insurance company.
The policy lists out a set of exclusions which in general can be classified as:
The expenses incurred in treating an illness can be classified into:
Expenses for cure and Expenses for care .
The order of arriving at the final claim payable is as follows:Step I
List all the bills and receipts under the various heads of room rent, consultant fee, etc.Step II
Deduct the non-payable items from the amount claimed under each headStep III
Apply any limits applicable for each head of expenseStep IV
Arrive at the total payable amount and check if it is within sum insured overallStep V
Deduct any co-pay if applicable to arrive at the net claim payable
Once the payable claim amount is arrived at, payment is done to the customer or the hospital as the case may be. The approved claim amount is advised to the Finance / Accounts function and the payment may be made either by cheque or by transferring the claim money to the customer bank account.
Processing of a claim requires the scrutiny of a list of key documents. These are:
The experience in health claims show that 10% to 15% of the claims submitted do not fall within the terms of the policy. This could be because of a variety of reasons some of which are:
Few examples of frauds committed in health insurance are:
Outpatient treatment converted to in-patient / hospitalization to cover cost of diagnosis, which could be high in some conditions.
Claims are chosen for investigation based on two methods:
Cashless settlement process by TPA
“Third Party Administrators or TPA means any person who is licensed under the IRDAI (Third Party Administrators – Health Services) Regulations, 2001 by the Authority, and is engaged, for a fee or remuneration by an insurance company, for the purposes of providing health services.
Step 1 A customer covered under health insurance suffers from an illness or sustains an injury and so is advised admission into a hospital. He/she (or someone on his/her behalf) approaches the hospital insurance desk with the insurance details such as:
Step 2 The hospital compiles the necessary information such as:
The TPA studies the information provided in the cashless authorization form. It checks the information with the policy terms and the agreed tariffwith the hospital, if any, and arrives at the decision on whether the cashless authorization could be provided and if so, for how much amount it should be authorized.
The TPA could ask for more information to arrive at the decision. Once the decision is made, it is communicated to the hospital without delay.
Both forms have now been standardized under IRDAI Health Insurance Standardization Guidelines; refer to Annexure at the end).
The patient is treated by the hospital, keeping the amount authorized by the TPA as credit in the patientâ€Ÿs account. The member may be called on to make a deposit payment to cover the non treatment expenses and any co-pay required under the policy.
When the patient is ready for discharge, the hospital checks the amount of credit in the account of the patient approved by the TPA against the actual treatment charges covered by insurance. If the credit is less, the hospital requests for additional approval of credit for the cashless treatment. TPA analyses the same and approves the additional amount.
Patient pays the non-admissible charges and gets discharged. He will be asked to sign the claim form and the bill, to complete the documentation.
Hospital consolidates all the documents and presents to the TPA the following documents for processing of the bill:
TPA will process the claim and recommend for payment to the hospital after verifying details such as the following:
Customer must make sure that he/she has his/her insurance details with him/her. This includes his: TPA card, Policy copy, Terms and conditions of cover etc
The services that an insurer expects out of the TPA are as follows:Provider networking services
The TPA is expected to build a relationship with a network of hospitals across the country, with the objective of providing cashless claim payments for health claims to the insured persons.Call centre services
The TPA is usually expected to maintain a call centre with toll-free numbers reachable at all times including nights, weekends and holidays i.e. 24*7*365.
The call centre should be accessible through a national toll free number and the customer service staff should be able to communicate in the major languages normally spoken by the customers.
“Cashless facility” means a facility extended by the insurer to the insured where the payments, of the costs of treatment undergone by the insured in accordance with the policy terms and conditions, are directly made to the network provider by the insurer to the extent preauthorization approved.
Personal accident is a benefit policy and covers accidental death, accidental disability (permanent / partial), Temporary total disability and may also have add-on coverage of accidental medical expenses, funeral expenses, educational expenses etc. depending on particular product.
Claims manager should mark caution and check following areas on receipt of the notification of the claim:
The covers under the policy can be broadly divided into following sections.
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