What are the different types of Life Insurance frauds in India and how to avoid those?

Insurance Samadhan is regularly getting calls of the customers who have been sold insurance but by fraud. We would like to list down the types of major frauds that customers report to us:

Types of Major Life Insurance Frauds in India

1. Looking for Loan: You search online for loan and share your number on few websites. You get a call from fraudster posing as bank or financial house employee offering loan. The fraudster offers loan easily and at low interest rates. He convinces you to buy policy and instead of loan EMI pay the premiums. The proceeds of the policy will go for repayment of the loan. For eg you need a loan of 5 lacs for 10 years, they will offer a policy with premium of Rs 50000 for 10 years. This looks easy and affordable. You get into the trap and fill all the forms to buy the policy. They also convince you not to talk about loan in the policy else company will charge commission. So, now you have signed all documents and the verification call is guided, policy gets issued and the now you wait for loan amount to hit the bank account. After 14-15 days when you call the fraudsters and he tell you that the file is stuck as GST needs to be paid. They will sell another policy and if you don’t buy, they will say they are trying to get file cleared. The Freelook period gets over in this follow up for loan and now you have an Insurance Policy. We have seen sometimes they sell 5-6 policies of different companies in lieu of getting the loan. The money is gone!
2. Bonus on old policy: You receive a call from IGMS/IRDA claiming that there is bonus in one of your old lapsed policy. You remember buying a policy few years back which you did not continue. So, you are convinced that there can be bonus on that policy. They tell you to claim the bonus and the lost money, you need to buy a new policy to take a code and then once the money is transferred to the new policy, you can cancel the same and get your money. Sounds very convincing! This is a trap to get you a new policy as IRDA/ IGMS never calls any customer. The Insurance companies always try to stop these frauds and they do a verification call. They ask you about such offers but the caller told you that if you disclose the insurance company will deduct commission and you believe them. You signed all documents and you agreed to the verification call. The caller asks you to wait for 15-30 days for transfer to be effective and you lose your freelook period. Now you have an Insurance Policy and you feel helpless.
3. Free Gold Coin: You get a call that Insurance company is offering a special scheme on the Insurance policy. They will offer you Gold coin once you get the policy document. You sign all documents and attend the verification call. Your freelook period is lost in waiting for Gold coin and now instead of gold coin you have an insurance policy.
4. Free Health Insurance: You are told that you are selected for a free health Insurance with your life Insurance policy. You will be given voucher equal to the premium you have paid and you can use it for your medicines and OPD consultations. Beside this your health insurance policy will cover you for any hospitalisation. You sign the documents, verified call is again guided as you care for your commission.

Also Read: How to report Insurance Fraud?

In all these frauds the root cause is that as customer we surrender to the additional money being offered or benefits. While IRDA and Insurance company are doing all checks to stop such frauds. They call you and explain the product. Most companies are asking if some other benefit besides what has been explained in the call is being offered to check, but we conveniently ignore it and fall in trap of the fraudsters.

Insurance Samadhan is trying to create awareness about insurance as we feel this is the most important protection for your family. In case you have suffered any fraud, we shall be happy to assist you in filing your complaints at the various forums and try to get you the best resolution.

To reach us at InsuranceSamadhan.com –

Call us at – 844 844 0626

Mail us at – corporate@insurancesamadhan.com

Register your insurance complaint here

Reinsurance Definition, Types, Benefits and How it works

 

In our last two blogs, we have been covering protection of PolicyHolder' interest. We have covered all IRDA provisions for protection and why policyholders should feel safe.

But still one area worries every one that is what will happen to Insurance companies if more people die or fall sick. How will Insurance Companies honour the claims? So Policyholders should not be worried because Insurance companies insure their business under reinsurance. In this blog, we are covering this fear of policy holders by understanding the concept of reinsurance.

Public take insurance to cover the risk of an uncertain event and feel safe. In the same way, insurers buy insurance for their business and feel safe. Their business is to pay a claim if an insured event occurs. This system of Insurers buying insurance is called Reinsurance. This protects Life, Health and General Insurance by reducing their exposure to a specific risk. For example, Life Insurers calculate the premium on the standard mortality table expecting an average mortality claim however It is possible that claim exceeds budget then Insurance companies would have difficulty in paying claim. So Insurers follow a system that all risks beyond a standard risk are insured under reinsurance. For example, in life insurance all death cover over Rs 50 lakhs may be covered under reinsurance. In health insurance all cases over Rs 10 lakh may be covered under reinsurance. Same way, general insurance covers all large cases under reinsurance. So reinsurance shares the claim as per an agreed formula if such claim happens and insurance companies maintain their solvency.

What is Reinsurance?

Reinsurance means an insurance for insurance companies. Insurance companies cover the risks for individuals and businesses. Reinsurance covers the risk of excessive claims due to different reasons for insurance companies.

How many types of Reinsurance?

There are two types of reinsurance:

1. Treaty Reinsurance

2. Facultative Reinsurance

Hence the concept of reinsurance must reassure Policy Holders that all claims will be paid even if an extraordinary event happens. For example, Pandemic Covid 19 is causing extra cases of death and patients but such extra burden will be shared by reinsurers. These reinsurers are large international organization’s who are collecting premiums from across the world.

How Reinsurance Works?

For awareness, few terminologies of Reinsurance are given below:

1. Ceding Party: Insurers who are buying reinsurance or a party who is sharing the loss.

2. Treaty Reinsurance: Reinsurance for a specific period. Cover all risk (written or not written) for a given period.

3. Facultative Reinsurance: Reinsurance for specific cases as per given agreement i.e all cases beyond Rs 50 lakhs.

4. Proportional Reinsurance: Here reinsurer agrees to insure risk by taking a proportion of premium collected.

5. Non Proportional Reinsurance: Here reinsurer pays only if claim exceeds an agreed limit for example insurer will pay the claim till Rs 50 lakh and anything beyond Rs 50 lakh will be paid by reinsurer.

All Insurance companies operate under the system of reinsurance which is regulated by IRDA. IRDA ensures business solvency by keeping a regular check on total cover provided and cover under reinsurance.

Insurance Samadhan has handled over 13000 cases in last 20 months and aims to build a grievance free eco system for the growth of Insurance Business.

To reach us at InsuranceSamadhan.com –

Call us at – 844 844 0626

Mail us at – corporate@insurancesamadhan.com

Register your insurance complaint here

Health and Life Insurance online sales spurts in India due to Covid-19 Pandemic

 

Lockdown by the government to protect its citizens and prepare to handle the crisis has resulted in people staying home for a long period. During these fearful times, while people made losses in their businesses, took salary cuts or lost their jobs, they thought about protecting their families against the coronavirus. This has also resulted in an increase in the need to buy health insurance and Life Insurance policies. Never before people have realised the importance of having insurance as a protection for their family in case of unexpected events like covid or untimely death.

The hospital bills of covid treatment ranges from 2 Lacs to 15 lacs depending on the severity of the condition. People are already under financial distress and need for hospitalisation in case they catch the infection is adding to the distress. Though the Government is claiming low mortality rates in India, looking at the number of people suffering life style diseases like Hypertension and Diabetes which is the high-risk category currently, the risk is definitely more. If the number of infected increases and our government medical facility starts to stress- out as in other countries, the cost of treatment in private set up may increase all based on demand and supply.

People are realising the need and looking at various options to buy online. Though in the past people preferred meeting face to face and understand the product, now due to social distancing norms they are preferring online channels.

Also Read: Health & Life Insurance Coverage for Coronavirus in India

The companies are providing the complete details online like the product feature and benefits, Premium quotations, on call advisory, strong chat pod for customer support.

The proposal form is filled online and a softcopy of the policy is sent on the registered mail

The crucial part of the policy issuance is the medical underwriting which requires the medical tests which depends on the age of the Life insured and the sum assured he has applied for. In these times most companies have revised the guidelines to adjust to the current situation or are resorting to tele consultation with a medical expert. But where physical tests like blood tests, ECG, Treadmill tests are required the company is keeping in touch with the customer and fixing appointments to reduce the risk.

For the KYC process, e-KYC is being adopted which can be easily done online without a need to physically meet the customer, simplifying the process at this time. There is no need to copy of address proof, age proof and photographs to get the insurance policy.

Insurance is the most important protection for your family and should be considered at all times. With easing out of buying procedures, build the portfolio of protection for your family.

Even your lapsed policy can have a surrender value and you can also consider to revive your policies by paying the old dues in these times.

Insurance Samadhan has also designed Policy health meters to understand the health of the insurance policies that you currently hold and can reach out to us with respect to any questions on your current life insurance or health insurance.

At InsuranceSamadhan.com, we have helped resolve over 12,600 customer grievance cases in the past related to all types of Insurance products.

To reach us at InsuranceSamadhan.com –

Call us at – 844 844 0626

Mail us at – corporate@insurancesamadhan.com

Register your insurance complaint here

Keyman Insurance Policy: Definition, Documents & Benefits of Key Person Insurance in India

In InsuranceSamadhan.com’s A-Z Blog series on Insurance topics, we try to provide all vital information related to the Insurance sector and demystify certain myths related to the sector. In today's blog, we are sharing detailed information regarding – Keyman Insurance Policy – and everything that one needs to know.

Life Insurance on main earning members secures family future income in case of untimely demise of earning members. However, the same untimely demise can jeopardize a running business if the continuity of business is dependent on the contribution of this person.

So the future of family as well as business can be ensured through timely insurance of the main person or persons. In business houses, this person is called a Key Person and a business house has insurable interest in this key employee.

Ashok Private Limited was a software development company and they hired Manish and Ajay on very high salary and sent them to the USA for a specialized training on Artificial Intelligence. Total money spent on them exceeded over Rs 5 Crore.

Manish died in a road accident causing major financial loss to Ashok Pvt Ltd because many clients threatened to leave who were working with Manish.

Luckily accountant of Ashok Pvt Ltd and had opted for Key man insurance on life of Manish and received Rs 5 crore on death of Manish. Ashok Private Limited paid ex gratia payment of Rs 2 crore to the family of Manish and kept Rs 3 Crore as reserves for loss compensation.

What is Keyman Insurance?

It is a provision allowed under law that an Employer can insure its key employee to protect the business interest of the firm in case of death of an insured employee.

The keyman can be decided on the basis of its importance in business running like having a specialized skill or designation etc. Keyman Insurance is a concept under which a policy is taken.

Which plan can be sold under Keyman Insurance?

Only a Term Insurance can be sold under Keyman Insurance. Earlier Saving linked Policy was sold but it has been stopped.

Which type of firms can buy Keyman Insurance?

• Public Limited and Private Limited Firms on key employees who are having less than 51% shares and key person along with family can not hold more than 70% share.

• Partnership Firms can have Partnership Insurance on all partners.

• Proprietary firms on key employees, firms can not take keyman on proprietor.

Sum assured under Keyman Insurance Policy

It should be justified on the basis of 10 times of annual income or 3 times of gross profit and 5 times of net profit.

However any amount is possible if it can be justified e.g. a new firm can also go for keyman or a loss making firm can also plan keyman.

Taxation of Keyman Insurance Policy:

All paid premiums are treated as business expenses under section 37.

All claims are treated as income in books of the firm however the firm can give an ex gratia payment to the family of the deceased. So it nullifies the impact on income of firms and exgratia payment on death is tax free in hand of the family.

Documents Required for Keyman Insurance Policy:

• Memorandum and Balance Sheet of the firm.

• 3 years ITR of the firm and insured.

• Board Resolution of a firm seeking keyman insurance with clarity on how death claim will be treated.

• Keyman questionnaire justifying sum assured.

So Keyman Insurance should be opted by all business houses for efficient risk management.

If you are facing any issue related to Keyman Insurance Policy, you must reach Insurance Samadhan who has experts team to guide you. We shall be pleased to support your case on technical and legal grounds.

To reach us at InsuranceSamadhan.com –

Call us at – 844 844 0626

Mail us at – corporate@insurancesamadhan.com

Register your insurance complaint here