LIC MOVES TO CURB FRAUDULENT CLAIMS

Chennai: The state-owned life insurer Life Insurance Corporation of India (LIC) has decided to introduce strict norms for agents in a move to arrest fraudulent and early claims (arising after first year of the policy). The corporation found that early claims arose due to poor underwriting and moral hazards.

A senior LIC executive said the corporation had identified agents with a high incidence of early claims.

An index file called "watch-listed agents" has been created to track these agents' records. Whenever a new business proposal is registered by these agents, a message will flash on the screen saying "the agent has a history of adverse early claim experience".

The corporation has looked into agent-wise early claim ratios for the last 4 years and zeroed in on 1,767 agents after getting confirmation from the respective branches.

Every claim has been a matter of great concern for the corporation. In 2006-07, LIC settled total claims worth over Rs 127.93 crore. The corporation settles more than 45,800 claims on every working day or 2.21 claims a second.

Several analytical exercises have been carried out at various levels to understand the pattern behind early claims and pinpoint the sources of leakage. The corporation has centralised its claim processing system to manage claims worth over Rs 20,000 crore out of the total one crore policies annually.

LIC has introduced differential underwriting rules for watch-listed agents. Proposals submitted by such agents would be registered only after 100 per cent implementation of know your customer (KYC) norms.

Such agents will only be allowed to procure business under the medical and non-medical (special) categories, but not under the non-medical (general) category.

If the case is non-medical (special), a duly signed certificate will have to be procured from the employer of the prospective policy buyer and attached with the records of leave taken on medical grounds in the last five years.

Medical examinations would have to be conducted by third party administrators (TPAs), irrespective of the sum assured, or by examiners and specialists in the LIC panel in the absence of TPAs.

The policy buyer must provide his photo identity during the medical examination. The policy documents will be handed to the insured on the basis of photo identification or sent by post.

Source: T E Narasimhan
Business Standard