Ref: IRDA/Life/Ord/Misc/258/11/2011

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INSURANCE REGULATORY ANDDEVELOPMENT AUTHORITY

Order in the matter of Mis 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 Mis Life Insurance Corporation of India (hereafter referred

as Life Insurer) on October lih, 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 0 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 0 V S Ramesh, Deputy

Director (Life) and Sri TV 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.

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 L1Cof 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.

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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 L1Cexercises 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 6months.

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,

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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 L1C,there is still

scope for L1Cto 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.

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