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Title: Order
Reference No.: IRDA/Life/Ord/Misc/258/11/2011
Date: 28/11/2011
in the matter of M/s Life Insurance Corporation of India
Order in the matter of M/s Life Insurance Corporation of India
The Insurance Regulatory & Development Authority, 3rd Floor,
Parishram Bhavanam, Basheer Bagh, Hyderabad
In Chair: Sri J Hari Narayan, Chairman, IRDA
A personal hearing was given to M/s Life Insurance Corporation of India (hereafter referred as Life Insurer) on October 17th, 2011 with regard to the show cause notice issued based on the complaint lodged by Ms. Padma Patro and subsequent inspection carried out by IRDA.
Sri D K Mehrotra, Current-in-charge and Sri K Ganesh, Executive Director (CRM) were present. On behalf of IRDA, Sri G. Prabhakara, Member (Life), Sri V Jayanth Kumar, Joint Director (Life), Smt Yegna Priya Bharath, Joint Director (C A D), Sri D V S Ramesh, Deputy Director (Life) and Sri T V Rao, Deputy Director (C A D) were present.
The findings on the explanations offered by the Life Insurer to the issues raised in the Show Cause Notice dated 09th August, 2010 are as follows.
Issue:
A complaint lodged by Ms Padma Patro, was registered by IRDA on 21st April, 2009 regarding partial settlement of death claim. The complaint was forwarded to the Life Insurer on 21st April, 2009. Difference of death claim was settled by LIC of India on the orders of Ombudsman on 24th March, 2010.
As a sequel to the captioned complaint an inspection was carried out by IRDA on 31st May, 2010 which revealed no specific violations in respect of the complaint under reference. However, it is noticed during the course of inspection, that the Life Insurer had taken more than 6 months to repudiate the group insurance death claims in respect of 24 cases and to complete the investigations in respect of 263 individual claims during the year 2009 - 10. It was also noticed that a number of maturity claims were settled beyond 6 months. On these findings an explanation was called for from the Life Insurer on 16th June, 2010 for violating the provisions of Regulation 8 (3) of IRDA (Protection of Policyholders Interests) Regulations, 2002.
In its response dated 06th July, 2010, the Life Insurer furnished information in respect of Group Insurance death claims and submitted that post inspection by IRDA, there were only 14 repudiated death claims as on 31st March, 2010 and out of these, only two cases were repudiated beyond 6 months. On examining the response a Show Cause Notice dated August 09th 2011 was issued to the Life Insurer for breach of the obligations cast on an Insurer under Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 leading to delay in completing Investigations in time and also for delays beyond six months in repudiating the death claims.
In reply, the Life Insurer submitted that Claim settlement has always been its prime focus and as it handles large volumes of claims, some delays occur in early claim settlement due to unavoidable dependence on external authorities like Doctors, hospitals, police departments. It was also submitted that LIC exercises abundant precaution to ensure that the claim amount goes only to genuine and legitimate claimants. It further submitted that during Financial Year 2009-10, only 32 early claim investigations were pending beyond 6 months.
On the request of the Life Insurer, the Authority granted a personal hearing on 17th October, 2011.
The Life Insurer during the course of personal hearing submitted that it processes very large volumes of claims transactions year on year and in spite of such large volumes, its performance matches global standards. While efforts have been taken to settle all the claims, including death claims at the earliest, there was some delay in a few cases. It also submitted that it has been very conscious that no claim should be repudiated without proper justification and therefore some delays have occurred in a few cases. It has further submitted that the Life Insurer has initiated measures in rural areas to educate the claimants for timely submission of documents while lodging the claim and claim investigation is one of the priorities of its personnel. It is also further submitted that it is constantly reviewing its claim settlement position to improve the same.
In order to protect the interests of the policyholders and also to ensure timely settlement of claims the IRDA has notified Protection of Policyholders’ Interests Regulations, 2002. As per Regulation (8) there under where warranted, an insurance company shall initiate and complete such investigation at the earliest and in any case not later than 6 months from the date of lodging the claim. The claim shall also be paid or be disputed, giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required.
On examining the documents and submissions of the Life Insurer it is observed that though the Life Insurer had a track record of settling substantial number of death claims annually, yet there were 300 cases as at 31st March, 2010 where investigations were pending beyond 6 months. It is also noticed that 1424 maturity claims were pending for more than 6 months during 2009-10. Despite huge number of death claims being handled by LIC, there is still scope for LIC to improve the claim settlement performance and adhere to the provisions of the above referred Regulations. While the inability of the life insurer to complete all the death claim related investigations and decide on the admissibility or otherwise of a death claim within the time frame of six months is in violation of the provisions of Regulation (8) of IRDA (Protection of Policyholders’ Interests) Regulations, 2002, cognizance has been taken of the large volumes being handled and comparatively better track record of the Insurer in claim settlement.
Decision:
In light of the above the issue is not pressed. The Authority advises the Life Insurance Corporation of India to expeditiously complete all the claim investigations within the stipulated time frame and also put in place effective systems to settle the claims promptly in accordance to the provisions of within referred regulations.
Dated 28th November, 2011
Hyderabad
J. Hari Narayan
Chairman
