Reinsurance and Claims Life insurance companies offer life cover

 

Reinsurance and Claims

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Reinsurance and Claims
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DEFINITION AND PURPOSE OF REINSURANCE

Insurance companies accept risks from individuals and businesses for a stipulated sum of consideration. This risk-taking business exposes insurance companies to a potential loss worth millions of rupees. In nonlife insurance, this exposure can be from claims paid for small units of insured items or for a single large asset such as a factory or a commercial building.

In life insurance, the company is exposed to multiple small policies on different individuals and concentrated risks from a few large policies. Life insurance companies offer life cover to hundreds of individuals in Tsunami prone coastal areas, and also life insurance of Rs. 5 crores or even more to high net worth individuals. Claims need to be paid to large groups of insured people, who suffer from natural calamities, and also to highly insured individuals. Insurance companies are able to manage

such losses due to reinsurance. Reinsurance is a device by which one insurance company or insurer transfers all or a portion of its risk under an insurance policy or a group of policies to another company or insurer. Reinsurance is insurance which an insurer purchases. The company that issues the policy initially is called the direct-writing or primary company (ceding company);

Reinsurance and Claims

the company or organization to which the risk is transferred is called the assuming company or reinsurer. The act of transferring the insurance from the direct-writing company to the reinsurer is called a session. If the reinsurer transfers, all or a portion of the risk assumed from the primary company to one or more companies, the transaction is referred to as retrocession. Thus, the primary insurer cedes insurance to a reinsurer, which may then retrocede the coverage to still other companies.

The reinsurer charges a premium for the risk they undertake. The arrangement of premiums and claim payments for reinsurance agreements are discussed under the section on types of reinsurance. Catastrophes are the most important purpose of reinsurance. Diversification of risk is the means to cope with such losses. Insurance companies can insure an individual for a large sum assured, and then use reinsurance to shift part of the loss exposure to perhaps several other reinsurance companies.

Large losses are, thus, shared and excessive losses in one occurrence are less likely to cause financial instability of individual insurers. Without reinsurance, each insurer would be limited to its own financial ability to pay losses. Reinsurance enhances the financial strength of insurance companies by the spreading of losses. 1 Reinsurance serves other purposes as well.

Mandatory reserve requirements (regulatory maintaining of funds in a trust for benefit of policy owners) drains surplus and restricts growth. Insurance companies, therefore, have to invest a large amount of capital to fund growth and expansion as they cannot use all the premiums collected for administrative and distribution expenses.

This is a severe problem for newer or smaller companies. Reinsurance allows these companies to transfer the responsibility for maintaining reserves to a reinsurer, permitting them to increase their ability of underwriting new business. Another advantage of reinsurance is that insurance companies can take advantage of the reinsurer’s underwriting judgment, especially for substandard lives. Certain types of disease conditions are so infrequent that even large companies do not have any experience with them.

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The task of selection and classification of such risks cannot be evaluated with the same degree of confidence as the more common varieties of impaired risks. The underwriters in these cases seek the benefit of reinsurance. The reinsurance underwriters have a wider degree of exposure due to their dealings with multiple companies in many countries. The underwriters of the reinsurer provide support to the primary insurance company for common risks as well. In some cases, for insurance applications of important clients, underwriters take opinions from one or more reinsurers. This is to demonstrate the soliciting agent that the most favorable decision was taken.

Reinsurers offer many technical advisory services to new insurers or those expanding to new types of insurance or different territories. A company may also enter into a reinsurance agreement with another company to receive advice on actuarial matters, product pricing, underwriting and wording of policy documents. Small and recently organized companies or those in newly liberalized markets such as India, use the services of reinsurers for the above-mentioned reasons.

These companies cannot afford a large number of technically qualified staff to deal with all aspects of it,s operations. The lack of availability of experienced underwriters or actuaries is also a constraint in new markets. insurance limits the exposure of risk for the insurance company. As discussed earlier, some or all of the risk is transferred to the reinsurer.

A portion of the risk is usually retained with the insurance company. This portion differs from company to company, and is based on the volume of insurance in force, the number of surplus funds, and the proficiency of the underwriting personnel. Even large companies limit the amount of insurance that they retain on an individual life. The amount of risk that an insurance company assumes on an individual is called a retention limit. This limit ranges from Rs. 10 lakh in small, recently established companies to well over Rs. 1 crore in the larger companies.

Retention limits also vary for different types of policies within an insurance company. The retention limits depend on the plan, age at issue of the policy, sex and the substandard classification. Retention tends to be smaller at older age groups and for plans under which the risk element is relatively large. Since reinsurance companies charge a premium for each policy they reinsure it is in the insurance company’s interest to retain as much risk as possible. Retention limit is usually increased as new companies gain confidence in their underwriting capabilities and their insurance in force and amount of surplus funds increases.

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To remain competitive, a company must be in a position to accept applications for large amounts of insurance. Thus it is essential for companies to have reinsurance agreements to transfer insurance in excess of the amount that they are willing to retain at their own risk, to the reinsurer. In some reinsurance arrangements, all policies of substandard insurance are transferred to the reinsurer.

This arrangement is put in place when the primary insurer does not take the risk of insuring any substandard life. New companies operating in risky markets use this to protect their interest while not compromising on the outreach of their products. All applications of substandard risks are sent to a reinsurer for underwriting, while standard applications are underwritten by the life insurance company itself.

A variation of this arrangement is to reinsure all substandard insurance policies that fall within a class above a stipulated percentage of anticipated extra mortality, such as 200 percent. Reinsurance agreement is an agreement between the two organizations.

The policy owner is not a party to the reinsurance agreement. Neither the policy owner nor the financial advisor is aware of the life insurance company’s specific reinsurance arrangements. Reinsurance operates in the background as a separate contract between the primary insurer and the reinsurer. For the policy owner,

the life insurance company that issued the policy is the only point of contact for claims settlement. The primary insurer is responsible for paying the entire claim from a legal standpoint as well. The share of claim if payable by reinsurance is reimbursed to the insurance company later.

In life insurance, reinsurance has two specific purposes finest, to transfer all or a specific portion of a company’s liabilities and second to accomplish certain broad managerial objectives, including favorable underwriting results and the reduction of surplus drain from writing new business

TYPES OF REINSURANCE

  • The two methods often more insurance arrangements between insurers and reinsurers are proportional and nonproportional reinsurance The difference between the two is the manner in which the claim payout is shared among the two organizations
  •  Proportional Reinsurance
    Proportional reinsurance is the most common and the basic type of reinsurance Under this type of reinsurance, the claim under the reinsured policy is shared by the primary company and the reinsurer in a proportion determined in advance The manner in which a claim payment is shared depends on whether the proportional reinsurance plan is a yearly renewable term insurance or a coinsurance in the yearly renewable term plan, the primary insurance company purchases term insurance on a yearly renewable basis from the reinsurer The term insurance purchased is equal to the net amount at risk of each insurance policy (over and above the retention limit of the company) that is sold by the insurance company.

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    The insurance company pays a premium to the reinsurer for coverage of this frisk The primary company or the reinsurer prepares a schedule of the amount at risk for each policy year sunder the face amount being reinsured. The reinsurer quotes a schedule of yearly renewable term premium rates that will be applied to the net amount at risk year by year. If there is a claim, the reinsurer is liable to only pay the net amount of risk (face amount fewer policy reserves The reserves under the policy are held by the primary insurer and, in the event of the insured’s death,

    it is added to the reinsurer’s remittance to make up the full payment due under the reinsured portion of the original policy. The primary insurer is solely responsible for payment of the amount below the retention limits of the coverage it retained Box 6.1 illustrates the yearly renewable term reinsurance plan with an example

BOX 6.1 Yearly Renewable Term Reinsurance

The policy of Ra. 10 lakh
Retention limit Rs. 2 lakh

Primary insurer retains reserves for a portion of policy reinsured: Reinsurer charges premium on the at-risk portion of reinsured amount; Rs. 8 lakh is reinsured In case of
claim:
Reinsurer liability is limited to Rx. 8 lakh minus policy reserves
Primary insurer liability for a claim is the full amount retained (Rs 2 lakh), plus the reserve for the reinsured portion.

Under the coinsurance plan, the primary or the face amount insurance-above the retention limit is completely ceded (transferred) to the reinsurer. The reinsurer accumulates and holds the policy reserves for the amount of insurance ceded. The reinsurer is responsible not only for the net amount at risk but also liable for the payment of its pro-rata share of the cash surrender value and other surrender benefits

it is customary for the reinsurer in the coinsurance arrangement to reimburse the primary insurer for the expenses attributable to the amount of insurance reinsured This reimburse takes the form of a ceding commission, which includes an allowance for commissions paid to the soliciting agent of for the ceding company, taxes paid, and a portion of the overhead expenses of the ceding company,

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Therefore, in effect, the reinsurer is simply substituted for the primary company with respect to the amount of insurance reinsured. The primary or ceding company remains able to the policy owner for the full amount of any benefits if the reinsurer becomes insolvent or otherwise cannot pay its share of claims. The primary or ceding company pays the reinsurer a pro-rata share of the gross premiums collected from the policy owner The main features of coinsurance reinsurance arrangements are given in
Box 6.2.

BOX 6.2 Main Features of Coinsurance Plan Reinsurance

Coinsurance plan reinsurance

  • Proportional sharing of premiums
  • Proportional sharing of reserve liability
  • Proportional sharing of dividends (if a policy is participating)
  • Reinsurer issues ceding commission to the primary insurer for acquisition costs incurred on the portion reinsured
  •  Non-proportional reinsurance
     great bulk of life reinsurance is transacted on the basis of proportional reinsurance where the transaction is on a per-policy basis In the non-proportional insurance the reinsurer’s liability is based on the mortality experience of all or a specified portion of the primary company’s business, rather than to an individual or specific policies. This approach is called non-proportional reinsurance because the proportion in which the primary company and the reinsurer will share losses is not determinable in advance.This type of reinsurance coverage is available in three forms-stop-loss reinsurance, catastrophe reinsurance, and spread-loss reinsuranceNonproportional reinsurance is more widely used in nonlife insurance Stop-loss arrangements reinsurance indemnify the primary company mortality loss exceeding the percentage regarded as the normal or expected mortality. For example,the reinsurer becomes able only if the primary company aggregate mortality exceeds by more than 10 percent of the normal mortality, which, of course, is defined in the agreement Under frame agreements, the reinsurer indemnifies the primary company for only a specified percentage (for example, 90 percent) of the excess mortality.

    This arrangement encourages careful underwriting by the primary company Under most agreements, the reinsurer’s ability during any contract period, generally a calendar year, is limited to a predefined amount. f the mortality for the contract period is less than the defined levels the reinsurer makes no payment to the primary company.The premium for stop-loss reinsurance is negotiated between the two parties using sophisticated actuarial techniques This coverage is popular because it provides protection against adverse mortality experience arising out of an unexpectedly large number of small claims or an expected increase in the average size of claims.The unit cost of production under this approach is less than under proportional insurance and, therefore, a company can reduce its total outlay for reinsurance using this method. Another advantage of this type of non-proportional insurance is the ease of administration because of the absence of the individual policY records 1he main features of stop-loss reinsurance are listed in Box &33Ox

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  • 6.3 Main Features of Stop-loss Reinsurance
    Stop-loss Features

    • A reinsurer assumes all losses over an agreed threshold (exceeds normal claims
      expectation) and terms negotiated.
    • Price and terms negotiated

    Catastrophe and was first developed for nonlife insurance. It usually provides for payment by the reinsurer of some fixed percentage, ranging from 90 to 100 percent, of the aggregate losses (net of conventional reinsurance) in excess of a stipulated limit in connection with a single accident or a catastrophic event such as an airplane crash, explosion, fire or hurricane Catastrophe reinsurance services supplement to proportional reinsurance agreements The reinsurer’s liability level say be expressed in terms of amount or number of lives The contract usually covers period of one year and limits the liability of the reinsurer for that period.

    The coverage is attractive to insurance companies which have a concentration of risks in one location as in a group insurance policy. The risk covered s usually accidental deaths attributable to a catastrophic occurrence while the reinsurer’s liability under a catastrophe type of agreement ts high, the probability of loss was perceived to below and relatively inexpensive prior to the large scale terrorist attacks, since 2001. in recent times, premiums have increased and this cover has become comparativelý limited and is carefully undertaken in the spread-loss reinsurance agreement,

    the reinsurer collects an annual premium of a certain minimum amount from the insurance company. Some portion of this premise (say 20 percent) is allocated to expenses and profit by the reinsurer and the balance is credited to a refund account During any calendar year when the primary company’s aggregate death claims (net of conventional reinsurance payments) exceed a specified limit, the reinsurer pays the claims in excess of the limit, but adjusts the premium to reflect the claims experience According to the spread loss agreement,

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    the amounts of the claim paid by the reinsurer for a given year (plus the 20 percent) must be returned to the reinsurer by the primary company in the next 5 years The main purpose of this type of reinsurance is to spread the financial effects of unfavorable mortality experience in any one year over aa period of S years In this arrangement the risk is minimal and the to the reinsurer calculation of the premium paid no the reinsurer is completely different from the other two form of-proportional insurance

6.3 REINSURANCE agreements

Arrangements between ceding insurers and reinsurers are generally formalized by a reinsurance agreement (also called a reinsurance treaty) Such agreements describe the classes of risk that will be subjected to reinsurance, the extent of the reinsurer’s liability and the procedures by which the transactions are to be carried out. These agreements are broadly classified as either facultative or automatic

6.3.1 Facultative Agreement

Under the facultative agreement, the primary insurer may offer risks to the reinsurer on an individual case basis The primary company is under no obligation to offer and the reinsurer is under no duty to accept a particular risk. Each risk is considered on its merits The arrangement derives its name from the fact that each party retains the faculty to do as it pleases with respect to each

Under the facultative specific risk arrangement, the primary company submits a copy of the application from the insured, together with all supporting documents, to the prospective reinsurer. The agreement normally provides that the reinsurer will phone, telegraph or facsimile its acceptance or rejection of the primary company

6.3.2 Automatic Agreement

The automatic agreement binds the primary insurer to offer and the reinsurer to äccept all risks that fall within the purview of the agreement sets forth a schedule of the primary insurer’s limits of retention and provides that whenever the primary insurance company issues a policy for an amount in excess of the limit for each policy, the excess amount is to be reinsured automatically,

The primary company does not submit the underwriting papers to the reinsurer, and the reinsurer does not have the option of accepting or rejecting the risk The maximum amount that can be transferred automatically to the reinsurer depends on the ceding company’s quality of the underwriting staff, as well as its limits of retention.

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Reinsurers commonly accept up to four times the primary .company’s retention limits, under the automatic agreement. If the retention limits of the primary company are fairly high, the reinsurer may limit its obligation to an amount equal to the primary company’s limit.

Any amount over the automatic limit is handled on a facultative basis The agreement also usually includes jumbo clause specifies that if the total amount of insurance in force on my
applicant’s life including policies applied for exceeds a specified amount, reinsurance is not automatically affected After the primary insurer collects the first premium and issues the policy,

it prepares a formal cession of reinsurance (in duplicate), which gives the details of the risk and
schedule of reinsurance premiums, including the ceding commission, if any. The primary company sends a copy of the cession form to the reinsurer. The cession form describes the basis on which the reinsurance is being affected

6.4 CLAIMS SETTLEMENT

A claim is a call upon the insurer to honor the contract signed between them and the life insured and to deliver on the promise made in the contract Unlike other consumer products which can be used soon after purchase, benefits from the life insurance policy can be used by beneficiaries at the death of policy owner or by policy owners themselves if they survive till the end of the policy term (maturity).

Claims for riders are payable on the occurrence of the insured event such as an accident in case of
accident rider or one of the stated illnesses in case of critical illness riders The Daems settlement process follows established procedures to ensure timely payout to the claimant (beneficiary or policy owner) The insurance company makes sure that the payment is made to the rightful
person and, therefore, the process involves establishing the identity of the claimant and verifying the occurrence of the event.

Most life insurance companies in India have similar requirements for claims processing The list of documents required is communicated to the company’s sales personnel regularly These include proof of death and original policy documents To protect the rights of the claimants, the and regulatory 1RDA (insurance Development Authority) regulation, drafted in the year 2002, specify the time within which a life insurance company is required to respond to claims.

As per this regulation’s (Clause 803) applicable to a life insurance policy, a claim under a life insurance policy should either be paid or be disputed giving all the relevant reasons within 30 days from the date of receipt of all relevant papers and clarification requited

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6.4.1 Types of Claims

Claims can arise on individual policies due to death or maturity, Mathsrity claims arise in specific time intervals of the policy in case of money back policies or survival to the end of the term of the policy. Types of claims are enumerated in Box6.4.

BOX 6.4 Types of Claims

Death claims
wither without riders
Term rider
 Accidental death benefit rider
Survival claims
Critical illness
Disability claims
Waiver of premium rider
Maturity claims
Intermediate benefit
Money-back plans

6.4.2 Claims Process

The process of claims with regard to death or rider claims is discussed here. The maturity claims are considered routine and computer systems trigger payout automatically to the policy owner. The claims process for death claims involves a series of steps as follows

(1) Intimation
(2) Registration
(3) Investigation
(4) Processing
(5) Decision
(6) Communication

Intimation of claim

The claim process begins when the insurance company receives the written intimation of a claim from the beneficiary, The insurance agent plays an important role to ensure that such an intimation written and signed by the beneficiary along with being required forms are made as soon as possible. Along with the intimation a preliminary questionnaire duly Sled in, is requiredThis questionnaire comprises some basic details of the policy and the nature of the claim.

The intimation letter and the form can be submitted at the nearest branch of the life insurance companies. The branch which receives the claim forwards the claim to the claims department in the head office of the company for further processing

Intimation of claim

The claim process begins when the insurance company receives the written intimation of claim from the beneficiary The insurance agent plays an important role to ensure that such an intimation written and signed by the beneficiary along with  my required forms is
made as soon as possible Along with the intimation a preliminary questionnaire duly fled in, required This questionnaire comprises some basic details of the policy and the nature of the claim.

The intimation letter and the form can be submitted at the nearest branch of the life insurance companies The a branch which receives the claim, forwards the claim to the claims department in the head office of the company for further processing.

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Registration of claim

After the claim intimation is received by the claims department, the first step is a verification of the status of policy,.The claims to process personnel checks if all the policy premiums were paid on time and the policy is in-force The coverage of the policy, the benefit definitions, and conditions are also checked 1f preliminary.

shocking shows consistency between the insured event condition and the cause of the claim, the claim is registered and the claim number is allotted. Claims investigation and processing For the processing of the claims, the claims departments require certain documents from the claimant.

The following list enumerates documents that are commonly required along with the claimant’s statement when filing a life insurance claim
(1) Original policy documents
(2) Death certificate
(3) Documentary evidence of age if the age
was not admitted at the time of issuing the policy
(4) Photo identification of the claimant
(5) Evidence of title to the deceased estate if the policy is not nominated, assigned or issued under MwPA (Married Women’s Property Act, 1874)
(6) 1f death is due to an accident, the FIR Information Report),
investigation reports and driving license

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A letter is sent informing the claimant about the documents required to process the claim. If the documents are not received in time, reminders are sent for requisite documents every 15 days. if there is no response from the claimant, the claim file moves into dormancy status Claim is not closed,

but no further action is taken by the claims team and the claims Processing commences on receipt of the requisite documents In case of suspected nondisclosure more documents are obtained. A thorough investigation is also done and attending doctors at the time of death are questioned before the insurance company decides to settle the claim

Claims decision

Once all the documents are received, the claims department decision on the claim. The decision depends on whether the documents are in order and meet the specifications of the policy conditions. Claim personnel is assigned cases depending on their experience anil seniority. Small
nonmedical claims are evaluated and approved by junior claim officers while large claims are decided by those with experience and expertise in dealing with complex cases Life insurance companies follow strict timelines to ensure that the decisions are taken within a reasonable time
In reinsured cases,

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the insurance companies consult the reinsurers for cases which are out of ordinary, though the reinsurance agreement stipulates that any settlement made by the primary insurer with a claimant is binding on the reinsurer, notwithstanding whether the reinsurance was originally automatic or was accepted facultatively by the reinsurer

The claims can be settled for less than the face amount in case of a misstatement of age or can be even declined in case the insured event is excluded (such as suicide in the first year of the policy) Claims are sometimes investigated especially-if occurring in fist to three years of the commencement of the policy to ensure that there is no fraud involved

Communication of decisions
Claim settlement cheque along with covering letter/letter of declination s sent to the claimant directly or in some cases, through the salesperson, The cheque is accompanied by an acknowledgment form, which must be signed by the claimant and returned to the insurance company. Life insurance is a long-term contract.

The relationship between the insurance company and the policy owner is not that of a one time
customer and the vendor. It is a life long client relationship with the policy owner. The
claim payment technically marks the end of the contract and the file of the client is closed For the insurance salesperson,

the relationship does not and as there are other important financial at vice needed by the beneficiaries at this stage such as investing the claim amount inappropriate assets, and the need for insurance on the beneficiaries themselves

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REVIEW QUESTIONS

 6.1 Fill in the blanks with the appropriate term
1.  …………is a device by which one insurance company transfers all or a
portion of its risk under an insurance policy to another company?

2. In………the claim under the reinsured policy is shared by the primary company and the reinsurer in a proportion determined in advance

3.coinsurance is a type of reinsurance where the ……. accumulates and holds where the policy reserves for the amount of insurance ceded.

4. …………….. arrangements indemnify the primary company mentality loss exceeding the percentage regarded as the normal or arrangements indemnify the expected mortality.

(5) Under the ……… primary insurer may offer risks to the insurer on an individual case basis.

6. claims can arise individual policies due to death or…….

6.2 Give the answers in brief.

(a) what are the purposes of reinsurance?
(b)What is proportional reinsurance?
(c) What facultative reinsurance agreement?
(d) What is the regulation that protects the rights of policyholders with respect to claims settlement?
(e) what are the steps involved in the claim process?

Answers

6.1
(a) reinsurance
(b) proportional
(c) reinsurer
(d) Stop-loss reinsurance
(e) facultative agreement
(f) maturity

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CASE STUDY

The following is a case decided by the High Court of Delhi. The background and facts of the case are stated hereunder.

CASE: Smt. Krishna Wanti Puri vs. Life Insurance Corporation of India
AIR 1975 Del. 19

Background and Facts of the Case

Dharam Pal Puri insured his life with LIC and took out four policies, first being on 12 October 1959. He died on 5 August 1964, and his widow claimed the sum assured on the four policies. The deceased was admitted to a hospital on 4 August 1964 where it was diagnosed as suffering from mitral stenosis and auricular fibrillation, which caused his death.

LC repudiated he claim on the ground that Dharam Pal Puri was suffering from heart disease for many years and that he knew about his ailment at the time of taking the policies He had fraudulently suppressed these facts and had not disclosed it in the application form that he was suffering from a binary disease.

Arguments
The questions pertaining to the general state of health and specific heart-related questions were answered in negative by the insured in the application form to prove the fraudulent concealment and material suppression of facts, LC examined three doctors Dr. Padmavati, De. Vk Dewan and Dr. Santosh Singh and obgainesiicatssfrom them which stated the medical condition of the deceased Dr. Padmavati deposed in the court that she had examined the deceased in May and September 1959 and that the deceased suffered from mitral stenosis and auricular fibrillation. She also said that the deceased was suffering from this disease since 1946 according to the statement made by him to ber.

She stated that she did not see the patient after September 1959. As regards the nature of the disease, she said that the patient’s talent was a serious form of the disease and could be detected with a stethoscope check by a general practitioner and did not require an electrocardiograph.

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The other doctor De. Dewan attended the deceased when he was admitted to the hospital on 4 August 1964. He stated that Dharam Pal Puri suffered from the very ailment that De. Padmavati mentioned for five to seven years before his death as told to him by his brother when he was admitted to

the hospital Dr. Santosh Singh was the Registrar of the hospital where the deceased was admitted and also attended on him. Dr. Santosh Singh had signed two reports dated 31 October 1964, both of which stated that Dharam Pal Purs died as a result of heart failure.

It also stated that the deceased was suffering for about 7 years before his death from the disease, Dr. Santosh Singh, another certificate of hospital treatment dated 24 October 1964, and a report dated 28 November 1964 where he mentioned that a relative of the deceased had informed him that Dharam Pal Puri had been suffering from the disease only for the last one year. The relative also produced another certificate allegedly signed by De. Santosh Singh stated that the deceased had been suffering from the disease for the past 15 years In the court, the conflicting reports gen by De Santosh Singh came under scrutiny.

Dr. Santosh Singh said that he could not say which of these certificates were correct without referring to the original records of the hospital The court examined the records of the hospital and saw overwriting on the records. The years of suffering from the ailment were altered in the records from 7.5 years written earlier to 1.5 years.

Based on the evidence of these three doctors LIC lawyers urged in the court that LIC was entitled to avoid all policies of dated 24 October 1964, and a report dated 28 November 1964 where he mentioned that a relative of the deceased had informed him that Dharam Pal Puri had been suffering from the disease only for the last one year.

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The relative also produced another certificate allegedly signed by Dr. Santosh Singh which stated that the deceased had been suffering from the disease for the past 1.5 years. In the court, the conflicting reports were given by Dr. Santosh Singh came under scrutiny.

Dr. Santosh Singh said that he could not say which of these certificates were correct without referring to the original records of the hospital. The court examined the records of the hospital and saw overwriting on the records. The years of suffering from the ailment were altered in the records from 7.5 years written earlier to 1.5 years.

Based on the evidence of these three doctors LIC lawyers urged in the court that LIC was entitled to avoid all policies of Dharam Pal Puri on the grounds of fraud and suppression of material facts. Smt. Krishna Wanti Puri’s lawyers argued that Dr. Padmavati’s statements should not be believed as the original hospital record could not be produced.

The court did not disbelieve the testimony of Dr. Padmavati as she was a doctor of repute and had no motive to perjure herself. Also, the court was of the view that the production of original records at this stage could not be insisted upon since Dr. Padmavati saw the patient in 1959, and the court case took place in 1970. With the passage of time, the records maintained by the hospital where she’saw the patient was.

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destroyed as a matter of routine practice.

The claimant’s lawyers then argued that no reliance should be placed on the testimony of Dr. V.K. Dewan and Dr. Santosh Singh as they were never told by the deceased that he was suffering from heart trouble for the last seven years. The deceased was brought to the hospital in an unconscious state by his a brother who gave his past medical history to

the attending doctors.

The court was of the opinion that the brother was the best person to give the past history to the doctors. The court also thought that brother’s statement at the time the deceased was admitted to the hospital was possibly true as at that moment he wanted to save the life of his brother and would tell the truth. On Cross-examination of the two witnesses, the brother of the deceased, and the wife of the deceased, both denied the prior medical

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History.

The claimant’s lawyer lastly argued that before issuing insurance policy LIC had got the deceased examined by three doctors. All these three doctors appeared in the witness box on behalf of the corporation. They deposed that in their opinion the decease to verify facts at the time of a claim inquiry and the avoidable mistakes related to a medical examination at the time of issue of policy.