Policy Servicing

New Business

Issuing a New Life Policy to a client is known as known as New Business. The following are the tasks to be carried out.

Proposal
Underwriting
Premium Calculation
Policy Issue

Proposal

The proposal is the beginning of the New Business. The client who is getting insured will submit the proposal to the Agent or to the Life office. The proposal has the following information

Proposal details

This contains the basic details like Name, Address, Date of Birth, Sex, Occupation, Family history, Annual Income, Policy Plan, Sum Assured, Agent Name, Previous policy details.

Medical certificate

This consists of the medical fitness of the person who is getting insured. This will be taken into account in order to fix the premium in addition to other factors.

Age Proof

The date of birth certificate is the proof to check the eligibility criteria of the person for taking the policy. The policy plan will have Minimum and Maximum age criteria for entry.

Agent Confidential Report

Agent will have to provide the confidential report regarding the correctness of the proposal details. This is to avoid any frauds.

Deposit

A minimum amount will have to deposited along with the proposal as a commitment by the client. The minimum amount depends on the Sum Assured and plan of the policy. The Client will submit the proposal to the agent or Life office. The following initial scrutiny of the proposal will be done by the insurer administration before passing it to the Underwriter.

Proposal Details
Previous policy history
Client status
Declined policies
Age

Underwriting

This is a process performed by the insurer, on receipt of a proposal, to decide whether or not to accept the risk, and if so, on what terms. An underwriter is the person authorized to accept, reject or fix terms for accepting a risk. The underwriter looks for factors adversely affecting the longevity of the life assured, such as health, occupation, industry and life style.

Policy Issue

Once the underwriter decision is known then a letter is sent to the Client for his consent / approval because insurance is a contract between the proposer and the Life office which has to be agreed by both the people. This Letter of consent is sent only when there is a change in the terms of the policy or premium based on Extra Mortality rating applied by the Underwriter. Once the Proposer gives his consent then Premium is calculated based on the Plan, Underwriter loading, accident benefit extra, age , occupation , sum assured , frequency and other options. The initial deposit is adjusted with the first premium if the premium deposit is equal to the proposal deposit. If the installment deposit is less than the first premium then the deficit amount is called for from the client. If there is a excess in deposit then the extra amount is refunded. After all this activity the Proposal becomes the Policy. The Policy is printed and sent to the Client along with Premium advice and Specific Terms and conditions as applicable to this policy.

Endorsements

A lot of details can be changed by the policyholder when the policy is in force, with the consent of the insurer and as per the provisions laid out in the policy contract. All changes to policy terms like additional benefits, additional premiums, increased or decreased term, fund switches, indexation changes, and date of birth change are called Policy Endorsements.
A lot of other details that do not affect the terms of the policy but alter data held for the policy like bank account details, address details can also be altered when a policy is in force. This is called General Amendments.

Claims

A claim is one of the most important event in the Life cycle of a Policy
In Life Insurance there are two types of claims. They are

Maturity Claims
Death claims

Maturity Claims

The Life Insurance policy can be Term assurance and also Savings. At the end of the term the Insured can make a Claim. This is called Maturity Claim. All Maturity processing starts a few weeks before the maturity date as life offices endeavor to release the cheque, so that it reaches the policy holder on Maturity date. Normally the Claim processing for Maturity claims will start four to six weeks before the due date. The Policy status should be in ‘In force ‘. Once Maturity processing starts then the policy status is updated to ‘Maturity Intimation’. This tells the Life office that the Maturity proceedings have started against this policy.
Four to six weeks before the maturity date, the Maturity value is calculated and a letter is sent to the policyholder stating the amount, listing the requirements for payment and enclosing a claim form. On receipt of the completed claim form and all required documents the cheque will be sent out. For whole life policies, when the insured person attains an age of 85 then it is taken as end of life and claim is settled.
The Maturity processing will involve the following activities

Maturity value
Maturity requirements
Validate requirements
Cheque preparation

Death Claims

Whenever an Insured person suffers a risk his nominees / survivors / Legal heirs can make a claim. Normally a death claim will be initiated by the claimant or the solicitors of the deceased when the life assured dies. On receipt of a death claim the life office will calculate the amount payable. In case of with profit policies this will include the bonuses declared till date and also any terminal bonus. For Unit Linked policies it will be the higher of the Guaranteed Minimum Death benefit or the bid value of units held by the policy holder.
A Claim form, a letter stating the claim amount and request for documents to settle the claim will be sent .The main requirements are proof of death, proof of entitlement by the claimant, proof of age ( if age is not given at proposal time ) . On receipt of the completed claim form and all required documents the cheque will be sent out. If the claim is with in three years of its inception then it is called a Early claim which requires a lot of investigation before it is settled because there is a possibility that the contract could have been entered knowing the possibility of early death. Likewise if there is a suicide clause in the policy which is operative for one year and the cause of death is suicide then no amount is payable.
Normally if it is a ordinary claim and all documents are correct then it will be settled in one week. If it is a accident claim or early claim requiring investigation then it may take between one to three months. If the claim has legal problems then it may take anywhere between 6 months to 1 year. If no person makes a claim then the claim is written off.
If the client has more than one policy then all policies of the policy holder are taken up and processed simultaneously. A single voucher / cheque for the amount of all the policies is issued.
The Processing of Death claims involves

Receive Death intimation
Claim Admission
Process Accident cases
Process Illness cases
Calculate Death benefit

Premium Calculation

The Premium Calculation for each Plan is very Complex and critical because the very survival of the Life office depends on it. The Premium rates have to be competitive as compared to other Life office products and it should bring profits to the Life office. The Premium Rate table or the Commutation table is calculated by the Actuary. The Department where an Actuary works is called the Actuary Department. Actuary is the person who is key to the Life office and he is responsible for designing new Plans and its associated Premium Rate Tables.
Premium Rates depends on the Mortality rate and Life Expectancy of the people of a particular country or region.
The average number of years a person aged X is bound to live is called Life Expectancy. By finding out the number of claims from survivors of Policy holders in the last two years and the age of the people who have died the Mortality rate tables are created. Each Life office has their own set of Mortality rate tables. These tables are used by the Actuary for calculation of Premium Rate tables.