LI domain base knowledge terms

Created By –
Version: 1.0
K. S. Ramachandran
TABLE OF CONTENTS
TOPICS PAGES TOPICS PAGES
• Distribution channels in Insurance 3-5 • Assignment of Policy 54-56
• Client roles in Policy admin system 6-9 • Paid Up status 57-58
• Important terms (SA,Premium,Rider,PPT,PT) 10-16 • Surrender of Policy 59-61
• Products in Life Insurance 17-26 • Loan and foreclosure 62-64
• Proposal creation 27-31 • Partial Withdrawal 65-66
• Determining the risk of the proposal 32-34 • Claims 67-70
• Top Ups 35-36
• Fund value / Unit Linked statements 37-39
• Sections of policy document 40-41
• Suicide clause / Freelook cancellation 42-44
• Billing / Overdue / Lapse 45-47
• Lapse Reinstatement 48
• Minor Alterations 49-51
• Switching and Premium Redirection 52-53
2
DISTRIBUTION CHANNELS .….

• Knowledge of distribution channel is a must in order to know from which business channel the business is being
sourced. The hierarchies are different for each distribution channel and the commission structure is also different for
each channel
• Examples of distribution channel
Agency channel : Tied agent who is mapped to one company and composite agent who can cross sell products
across companies and across product lines as well. Eg Mr Naresh Kumar AG156754, Borivali branch
Bancassurance : This is a partnership between bank and insurance company wherein banks cross sell
insurance products of insurance companies. The designated bank staff needs to clear the
insurance institute exam and get a specified person (SP) code. Eg Mr Ashwin Gupta BG178654
AXIS Bank Thane (w) branch
Corporate Agent : These are mid sized firms (eg partnership firms) wherein the partnership deed needs to mention
that procuring insurance business is one of the main objects of this entity as a corporate agent
Eg : Ravi and associates CG890123
3
DISTRIBUTION CHANNELS .….

• Knowledge of distribution channel is a must in order to know from which business channel the business is being
sourced. The hierarchies are different for each distribution channel and the commission structure is also different for
each channel
• Examples of distribution channel (contd)
Brokers : Brokers are large organization which can cross sell insurance products of various companies, an application
form duly completed and declaration duly signed by at least two directors/partners needs to be submitted to IRDAI.
Once all the formalities are completed the broker firm receives a broker code from IRDAI using which the broker
can source and transact insurance business. Eg. Willis and company BA907865
POSP (Point of sale person) : POSP can work with only one insurer or intermediary. POSP needs to clear the exam
of IRDAI. Insurer with whom POSP is attached needs to issue a certificate to him and all relevant papers need to be
uploaded in IRDAI website and accordingly the code shall be allocated to the POSP. Eg Kiran Sharma PS904532 FGLI
Web Aggregators : Like policy bazar provide a list of insurance options available to a prospect based on some initial

4
DISTRIBUTION CHANNELS .….

• Examples of distribution channel (contd)

Web Aggregators : Like policy bazar provide a list of insurance options available to a prospect based on some initial
basic information captured from the prospect (eg name,age,gender,income etc)

Impact : HIGH. Distribution channels need to be properly tested as this will have a serious repercussions as
certain products are not allowed to be sold by certain channels and also commission structures are different

Key testing points : Each and every agent/intermediary code is unique (irrespective of channel), on inputting
intermediary code we need to check whether correct details (name,age,address) are getting fetched, check for the
branch of the intermediary, check whether the intermediary has been mapped to the correct channel or not,
check whether the intermediary code is valid or not, commission percentage to be checked

5
CLIENT ROLES IN LIFE INSURANCE .….

• Proposer / Policyholder /Policyowner

This is the first client which is generally created, the proposer is the person who owns the
policy and who agrees to pay the premiums for the policy. In case the proposer purchases
on himself / herself then it is called self proposed policy.
• Life Assured
The person on whose life the insurance proposal is taken is called Life Assured. In case of a self proposed
policy both the proposer and LA will be the same. LA should be related to the proposer.
• Premium Payor
The premium payor agrees to pay all the premiums for a policy in case the proposer is not willing to
pay premiums. In case of a demise of a premium payor a replacement can be made or proposer can
agree to pay future premiums.
*** Insurable interest needs to be checked while creating various client roles

6
CLIENT ROLES IN LIFE INSURANCE .….

• Nominee/s
Nominee is the custodian of the monies in case of a death of the Life Assured during the policy term.
Nominee can be a minor also. There can be multiple nominees. Nominee should be related to LA and
proposer.
• Appointee/s
Appointee needs to be appointed where ever nominee is a minor. Appointee needs to be related to the
nominee. Usually appointee is the legal guardian of the nominee. There can be more than one appointee
Appointee needs to get automatically cancelled when ever the nominee becomes a major.

Impact : HIGH. As the rights in the back end system are based on client roles, hence the tester needs
to understand which all roles to be created and how they are linked

7
CLIENT ROLES IN LIFE INSURANCE .….

• Example
(a) Husband / Wife taking on himself / herself : Proposer and LA will be same
(b) Husband taking a policy on wife, : Proposer and LA will be different
Father / Mother taking a policy on children,
Working children taking policy on dependent parents
© Mother taking a policy on child and father pays premium : Proposer, LA and premium payor
Father takes a policy on child and grand parents pays premium
(d) Husband takes a policy on self and wife/mother is nominee : Proposer, LA and nominee
Wife takes a policy on self and husband is the nominee
Father takes a policy on child and mother is the nominee
Mother takes a policy on child and father is the nominee

8
CLIENT ROLES IN LIFE INSURANCE .….

• Key points / Aspects to be tested

• Check for policy owner as a premium payor.
• In case premium payor created then check for non payment of premiums by proposer.
• In case of a self proposed policy check whether Proposer and LA are same
• LA, Premium payor should be related to the policyowner
• Check for nominee relationship with the LA and check for %, age of the nominees
• Nominee is a minor check for appointee who has to be a major.
• Check for appointee relationship with nominee
• Test for cancellation of Appointee when ever the nominee becomes a major

**** While creating a client dedupe is mandatory to avoid creating duplicate clients (Generally done on
(Name, Gender, Aadhar card, PAN Card, contact number)

9
IMPORTANT TERMS IN INSURANCE .….

• SUM ASSURED : The amount which is agreed in advance between the insurer and the insured which is to be paid
by the insurer either to the nominee on the death of LA or to the LA if he/she is alive on maturity date. SA follows
the principle of indemnity.
• Example : SA is generally given in ranges 5 lacs to 1 crore.
• Impact : HIGH, since this is one of the important components of premium calculation we need to ensure that the SA
taken for testing is within the given range of values. SA is generally agreed by the customer at the time of taking a
proposal.
• Key points / aspects to be tested
• Testing for limits of SA
• Age band restriction for SA to be checked
• Premium change with change in SA to be checked for a given age band
• Alterations in SA after issuance to be checked
• In Unit Linked products SA to be calculated basis age criteria and premium multiplier
10
IMPORTANT TERMS IN INSURANCE .….

• INSTALMENT PREMIUMS : Amount which is agreed to be paid by the proposer in advance to the insurer at agreed
intervals (frequencies) in order to get the agreed sum assured.
• Example : 1000 (monthly), 2,700 (qtrly), 5,500 (half yearly) and 11,000 (annually)
• Impact : HIGH. Premiums are the base of a life insurance product and their computation has to be done correctly.
They mainly vary with age of the LA.
• Key points / aspects to be tested
• Premiums limits to be tested for various age categories
• Change in premium along with change in Sum assured to be checked
• Modal premiums to be verified
• Change in premium along with change in frequency to be checked
• Additional premium to be checked in case the premium is loaded.
• Change in premium to be verified in case any changes done in any of the premium rating parameters.

11
IMPORTANT TERMS IN INSURANCE .….

• PREMIUM PAYING TERM : The term for which premium needs to be paid during the policy term. In certain plans
PPT can be less than or equal to policy term.
• Example for a regular pay PPT is 15 years, Limited pay option : 5 pay,10 pay,15 pay
• Impact : The system should not ask for premiums after the policy has acquired fully paid up status
• Key points / aspects to be tested
• PPT limits to be tested
• Depending on pay type premium to be verified
• Check for status of the policy once all the premiums have been paid
• If riders are available PPT of both base and riders to be checked.
• Validate that PPT is not greater than PT

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IMPORTANT TERMS IN INSURANCE .….

• POLICY TERM : The term (period) till which the policy will run till its maturity date is called policy term
• Example : If policy has been issued on 10th May 2010, Maturity date is 10th May 2020 PT will be 10 years
• Impact : HIGH, As maturity of the policy depends on the policy term and maturity payout needs to be done on this
date
• Key points / aspects to be tested
• Verify whether maturity date is getting calculated basis the policy term
• Check for terminal bonus calculation on maturity date
• Check whether premium / term gets revised with change in policy term
• Check for maturity status of the policy at the end of policy term

13
IMPORTANT TERMS IN INSURANCE .….

• BONUS : Amounts which are paid out of the profits of the company to the policyholders who have purchased with
profit policies. Bonuses are generally paid in endowment, whole life, unit linked plans
• Example Simple Reversionary bonus : It is usually a percentage of the basic sum assured under the policy which is
added to the sum assured. Usually declared on an annual basis.
If Rs 1,00,000 is SA and 9% is SRB declared for this year then Rs 9000 will be added to base SA
• Compound Reversionary bonus : Calculated on Compound Interest basis. CRB is added to the existing SA including
vested bonus.
• Continuing the above example if CRB is being tested and 8% is CRB declared in current year then bonus will be
calculated on 1,09,000 *8%.
• Terminal bonus : Bonus which is payable at the end of the policy term along with the SA.
• Interim bonus : Declared for policyholders to make payments for policies that get concluded between two valuation
dates. Eg if there is a maturity/death claim on 15th Sept of a year then bonus is calculated and settled basis the
interim bonus rate as the processing cannot wait till the completion of FY.

14
IMPORTANT TERMS IN INSURANCE .….

• RIDERS : Additional benefit provided to the policyholder by the insurance company on payment of additional
premium to get additional risk cover.
• CI/Accelerated CI rider : Here the rider SA is paid in stages depending on the criticality of the patient
eg CI SA is10 lacs payable 1st stage 15%, 2nd stage 20%,3rd stage 25% and final stage 40%,
• ADB rider : Payable in case death, disability of the LA caused due to an accident. In case death, disability happens on
account of reasons other than accident then nothing is payable under ADB rider.
• WOP rider : WOP rider kicks in on the death of the premium payor wherein depending on the product /company
either all the future premiums are waived by the insurer or they are waived for a specific period. Eg If a policy has 2
lacs SA, PPT and PT is 10 years, Premium 5000, annually, If policyholder dies after 3 years, then as per product the
balance 7 years premium can be waived.
• Term rider : Rider which is payable on maturity date at the end of the policy term along with SA.
Eg Base SA 5 lacs, Term rider 2 lacs, PT 10 years. At the end of the term if LA is alive then 7 lacs is paid.

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IMPORTANT TERMS IN INSURANCE .….

• Impact : Riders are directly associated with risk and hence need to be tested properly.
• Key points / aspects to be tested
• Verify whether the specific rider is available under the plan
• Check entry / exit criteria
• Check rider premium calculations based on rider SA selected
• Verify that consolidated premiums paid against all the riders cannot exceed the base premium amount
• Verify that consolidated rider SA should not exceed the base SA
• Check for addition / deletion of the rider during the policy term
• In case of CI and ADB (disability) verify that the policy continues after payout of partial amount.
• In WOP rider check whether the policy continues after WOP rider is triggered and system does not ask for
subsequent rider

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PRODUCTS IN LIFE INSURANCE .….

• Term Assurance plans : (Generally available from 18 years to 65-70 years)

• These are the simplest form of insurance and these products provide only risk cover.
• There is no savings component in this plan, hence premiums are cheaper.
• These products provide necessary collateral backups for any loan availed by the policyholder.
• At younger ages approx. till age 30 premiums are quite less for a large sum assured which can be upto 1 crore
• Premiums need to be paid for the entire term till maturity.
• Certain riders are available in this plan (eg CI rider, Term rider)
• SA is payable only on death of the LA during the policy term to the nominee and in case LA is alive on
maturity no amount is payable.
Types of plans
• Level Term Insurance Return of Premium
• Increasing term insurance Decreasing term insurance
• IMPACT : HIGH. Product details need to be understood in details along with various features available

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PRODUCTS IN LIFE INSURANCE .….

• Endowment plans : (Generally available in the age band of 18 – 65 years)

• These plans provide both savings and risk cover.
• Premiums are comparatively higher due to the inbuilt savings component.
• In these products premiums can be paid for a term which is equal to or less than policy term
• Riders are available in these plans and generally the max term of the rider is till the PPT.
• Bonuses are generally available in these plans as these are with profit plans.
• SA plus bonus is payable both on death and maturity.
• Under survival benefit (money back) plans the policy owner can receive a part of the SA at agreed intervals.
• Policyowner has the option to surrender the policy after paying the stipulated premium for minimum years
• Loan facility is available under these plans.
• IMPACT : HIGH. All the features of the products need to be understood and tested.

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PRODUCTS IN LIFE INSURANCE .….

• Whole Life plans : (Generally available in the age band of 18-99 years)
• Most importantly these plans cover the entire life of the policy owner.
• These plans provide both savings and risk cover.
• Survival benefit available in terms of bonus option selected (Cash bonus, paid up additions)
• Paid up additions are additional guaranteed amount payable on death or maturity which ever is earlier
• Bonus and riders are available under these plans as these are with profit plans
• SA plus bonus plus guaranteed payments (if any) are payable on death or maturity which ever is earlier.
• In these products premiums can be paid for a term which is equal to or less than policy term
• Riders are available in these plans and generally the max term of the rider is till the PPT.
• Policyowner has the option to surrender the policy after paying the stipulated premium for minimum years
• Loan facility (depending on the insurer) is available under these plans.
• IMPACT : HIGH As these are long term plans comprehensive testing needs to be done taking all the features into
consideration
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PRODUCTS IN LIFE INSURANCE .….

• Child Plans : (Generally available from couple of months to 60-65 years)

• Child plans are exclusively meant for cases where child (LA) is a minor and these plans also fall under
endowment product category.
• In child plans the parent is the policy owner / proposer
• These plans provide both savings and risk cover.
• Bonus and riders are available under these plans as these are with profit plans
• The risk in these policies commence on the deferment date (while child becomes a major)
• WOP riders are generally available in these plans.
• SA plus bonus payable once LA become major both on death and maturity which ever is earlier.
• Generally only premiums paid are returned in case death happens of LA when he/she is still a minor.
• Policyowner has the option to surrender the policy after paying the stipulated premium for minimum years
• IMPACT : HIGH, Child plans need to be understood specifically with respect to risk commencement and payouts

20
PRODUCTS IN LIFE INSURANCE .….

Key Points / aspects to be tested : (Traditional products)

• Client creation to be done based after checking for insurable interest (blood relations). Dedupe is mandatory.
• Check for entry and exit age criteria both for base plan and rider (if selected)
• Check for SA limits based on the age band selected
• Premium calculation to be majorly verified based on the age, SA, frequency of payment selected.
• Regular pay, limited pay, single pay options to be tested.
• In case of loading done check the additional premium calculation
• Specific to child plans need to check the deferment of risk part.
• Verify removal of appointee on nominee becoming a major
• Percentage share to be checked in case of multiple nominees
• Bonus calculations to be checked depending on the type of bonus selected
• Refund payment processing to be checked where ever initial premium amount received is in excess of requirement

21
PRODUCTS IN LIFE INSURANCE .….

• Key Points / aspects to be tested : (Traditional products)

• Verify whether the system is calling for the right category of medicals based on sum assured
• Rider features and payouts to be checked. (eg CI is payable during the policy term itself)
• Proposal withdrawal and refund of money to be verified on account of non fulfillment of requirements
• Postponement of the case and again reintroduction of the new proposal from the same client to be checked after
the end of the stipulated period
• Declinature of a proposal to be verified and refund payment processing of the amount lying in suspense to be
checked
• GST calculations to be checked for accuracy
• Stamp duty calculations to be checked for accuracy.

22
PRODUCTS IN LIFE INSURANCE .….

• Unit Linked plans : (Generally available from 18 years to 60 years)

• As the name suggests these are linked plans (linked to the stock market)
• These plans provide risk, savings and investment cover.
• SA is calculated basis the age criteria of less than or more than 45 years, and subsequently a multiplier is used
on the annual premium basis regular premium / single premium payment
• Bonus and riders are available in these plans
• The customer has to select the fund of his/her choice in which he/she wants his/her money to be invested.
• Charges are applicable in Unit Linked plans
• Premium allocation charges : Deducted upfront from premium received and only balance amount invested
• Mortality charges : For providing risk cover, deducted as a % of units balance on every month versary.
• Fund Mgmt charges : Deducted every day as a % of units balance at the time of declaring the NAV.
• Policy admin charges : For administration of fund, deducted as a % of units balance on every month versary

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PRODUCTS IN LIFE INSURANCE .….

• Unit Linked plans : (Generally available from 18 years to 60 years)

• There is a lock in period of 5 years in Unit Linked plans.
• In these products premiums can be paid for a term which is equal to or less than policy term.
• Policy owner has the option to surrender within the lock in period but the policy will get into discontinuance
• Loans are not available in Unit Linked plans.
• Top Up is a feature which is available in Unit Linked plan.
• Switches / premium redirection are additional features available in Unit Linked plans.
• Partial withdrawal from the fund value is allowed during the policy term as per the policy T&C
• In case the policyholder stops paying subsequent premiums then the policy will get into discontinuance status.
• In case of a death or on maturity the higher of the SA and Fund value is paid along with the bonus amount.
• IMPACT : HIGH. Since these are market linked plans where volatility is high the testing needs to be done keeping in
mind the additional features available in this product
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PRODUCTS IN LIFE INSURANCE .….

• Key Points / aspects to be tested : (Unit Linked products)

• Most of the pointers mentioned for traditional products hold good for Unit Linked as well
• In addition, following points need to be checked for Unit Linked products
• NAV of the date of issuance needs to be verified so that units can be checked
• Along with issuance batch job, unit deal batch job to be run and verified
• Fund value calculation to be verified. (Given day’s NAV * Number of units)
• Verify whether the amount has been invested in the correct funds or not.
• Verify that the various charges deducted are as per the product guidelines.
• Bonus calculation in terms of addition of units to be verified.
• Verify that the mortality, admin, FMC charges are getting deducted on policy issuance.
• In case there is a inbuilt top up, then allocation of top up after necessary deduction to be verified.
• Generation of fund statement on policy issuance to be verified and all parameters to be checked

25
PRODUCTS IN LIFE INSURANCE .….

• Pension Plans : (Generally available from 18 years to 55-60 years)

• Pension plans are investment plans that lets you allocate a part of your savings to accumulate over a period of time.
• The contributions need to be made on a regular basis till the maturity.
• One third of the commuted value can be withdrawn on maturity.
• For the balance the policyholder needs to purchase annuities from the same insurer / different insurer.
• Provides a person with steady income after retirement.
• Retirement & Pension Plans provide you with financial security so that when your professional income starts to ebb,
you can still live with pride without compromising on your living standards.
• These are pure savings plan and do not provide for risk cover.
• Generally no bonus / riders are available under this plan.
• Do not have any surrender value / loan facility
• IMPACT : MEDIUM. No risk cover involved
26
PRODUCTS IN LIFE INSURANCE .….

• Key Points / aspects to be tested : (Pension plans)

• Client creation will be different based on the purchase of annuity by policy owner and for whom he is purchasing
• Role of nominee remains the same
• Entry and exit age criteria to be verified
• SA (Notional) if any to be verified
• Contribution whether regular, single to be verified
• Policy term to be verified and status on maturity to be checked
• Fund statement to be generated and sent to the policyholder.
• Payout of 1/3rd commuting amount on maturity to be verified along with the purchase price of annuities.
• Payment on death before maturity to be checked as per product guidelines
• In case pension and annuity plans are linked then we need to test the various annuity options as well.

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PROPOSAL CREATION

• Client / Contract Creation :

Salutation Email ID Occupation
First Name Date of Birth Industry
Middle Name Gender Source of Income
Last Name Nationality KYC details
Communication address Marital Status PEP /REP
Mobile Number Education qualification Existing policies
Nominee details

• Proposal Creation
• Plan Details : Plan variant opted, Sum Assured, Instalment premium, Premium paying term, policy term, frequency,
payment method
• Rider Details : Rider Sum assured, Rider Premium, Rider term
• Fund details (ULIP) : Fund names along with %, Fund strategy (Automatic trigger based, Fund based), Type of Partial
withdrawal (Systematic, Normal)
• Death Benefit option : Lumpsum, instalments (5 years, 10 years, 15 years)

28
PROPOSAL CREATION

• Life to be Assured’s family history : Family member names, age, If alive details of any sickness, if deceased then
exact cause of death required.
• Parents/Husband’s insurance details (Total Sum Assured) : In case of child plan & housewives
• Details of life insurance policies held/ proposals applied with life insurance companies (incl the present company)
• Life Style questions and personal medical history of the LA
• Height in cm or by feet and inches and weight in kgs (required to calculate BMI)
• Details and exact nature of hobbies
• Medical questions pertaining to ailments, surgery, treatment, medication
• Any surgery,medication,medical investigation required in the last 3 years
• Any ailment by birth (congenital disease)
• Smoker / Non smoker category (Pipe, cigar, cigarette, beedi, gutka)
• Drinker category (beer, hard liquor)
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PROPOSAL CREATION

• For Female Life to be Assured only

• Whether pregnant at present
• Details of duration in weeks as on date
• Details of last delivery
• Any complications during pregnancy
• Payment method by which First Premium is going to be made
ECS NEFT Cheque Cash
(Account type, Account Number, Bank Name, Bank Branch, IFSC Code, MICR Code, Premium Amount)

**After completion of all the details a contract number / proposal number is generated (company to company it can
vary)

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PROPOSAL CREATION

• IMPACT : HIGH. A proper and complete proposal needs to be made so that accurate decision can be taken by the
insurance company
• Key points / Aspects to be tested
• Plan details with respect to SA, Term, Premium, Age needs to be populated as per the product BRD
• Premium to be verified based the age, SA, term etc
• Rider details to be captured (check for inbuilt rider) like SA, Term, Premium etc
• Settlement of some of the riders during policy term to be verified
• Fund details depending upon the product, mandatory along with withdrawal options
• Family history details to be verified to check whether many deaths have happened at younger ages
• Existing policies with their current policy status necessary to ascertain proper risk on a particular life.
• All types of frequencies and payment methods to be verified
• Life style & medical questions to be mandatorily verified to ascertain extra mortality requirements
• Female life questions to be checked to see whether any test case / proposal needs to be postponed.

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DETERMINING THE RISK OF A PROPOSAL..….

• Risk of a proposal is determined after considering the data which has been entered in the proposal / test case.
• Hence capturing the data accurately in proposal / test case is of prime importance.
• Risk can be analyzed in 2 ways either through STP rule engine or through manual underwriting.
• Risk can be decisioned using STP rule engine in case the test case / proposal falls within Non Medical Limits.
• Parameters which are generally checked

Age LBD of the Life to be assured BMI of the Life to be assured

Type of Insurance plan Details and exact nature of Hobbies

Sum Assured incl rider SA requested Smoker / Non Smoker details

Occupation (exact nature of duties) Drinker details

Nationality Existing policies with their present status

Family history details Medical history

Pregnancy questions - Female lives

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 DETERMINING THE RISK OF A PROPOSAL

• In case all the parameters mentioned in the grid are met the test case / proposal can be processed through STP rule
engine. Eg (NM limit is SA-10 lacs, Age 18-30 yrs, riders-nil etc , test case SA 7.5 lacs, Age 25, no rider).
Such a case will get passed through the rules engine.
• Each and every parameter needs to be tested to check whether it meets/fulfills the NM criteria.
• Even if one parameter exceeds the limit the entire case will be treated as STP fail.
• The STP failed cases are routed to NSTP queue which requires Manual Underwriting.
• Risk of the cases lying in underwriting queue are underwritten basis medicals and further financial evidences
• Medicals are called basis the consolidated SA (including existing policies). As per medical grid medicals will increase
with increase in age and higher SA.
• Financial evidence will be called for to check the propensity to pay of policy owner for high premium cases.
• UW decision taken basis the TSUC or TSAR for the given test case / proposal.
• In case there are no other outstanding's and complete premium has been paid then the risk will be accepted and
policy will be issued.

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DETERMINING THE RISK OF A PROPOSAL

• Impact : HIGH. The risk assessment is done in STP/UW module hence it has a direct impact on acceptance of a
proposal.
• Key points / Aspects to be tested
• Each and every parameter to be verified to check whether it is within NM limit
• Entry / exit limits for each parameter to be validated
• Medicals triggering to be verified
• Financial documents triggering to be verified
• Rating parameters for extra mortality, hobbies etc to be checked
• Pending requirements (if any) to be verified
• Various UW decision to be checked (Accept, Loading, Postpone, Decline)
• Finally check for complete premium receipt

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TOP UPS

• Top Ups are additional premium paid by the policy owner to enhance his / her fund value.
• Top Up payments can be made only if regular premiums have been paid up to date and policy is in IF status
• All Top Up payments have a lock in period of 5 years.
• Top up payments are generally not allowed in the last 5 years of the policy.
• Total Top up premiums paid cannot be more than 105% of cumulative premiums paid.
• Different types of top ups :
• Single premium top up which is generally issued at the time of issuance of the policy.
• Adhoc top up can be paid at any time during the policy term.
• Regular top up needs to be paid at the requisite frequency during the policy term.
• Example : Proposer A purchases a ULIP policy for a SA of 8 lacs, PT 5 years, PPT 5 years. Premium 9,000, Annual
Mode. NAV 12.45890 Units 600 , FV 7,475. In case A has paid all the premiums up to date he can pay 3,000 as Top
Up Premium. If he gets additional 3500 as FV then his total FV after top up would be 10,975.

35
TOP UPS

• IMPACT : HIGH. Top Ups need to be tested separately along with regular premiums hence knowledge of the
allocation and other charges is required. It has a direct relation to the total fund value on any given day.
• Key points /Aspects to be tested :
• Check the status of the policy while testing top up transaction.
• Verify the lock in period of 5 years from the date the top up is applied.
• Check the allocation of units against the specified fund at the given day’s NAV
• After every top up check whether a fund statement is generated and sent to customer
• Verify that the system is not allowing registration of top up in case premiums are overdue
• Verify that system is not allowing registration of top up in the last 5 years of the policy term
• Test and check that where ever regular option has been selected, are the regular top ups coming.
• Verify that total top up premiums paid cannot be more than the stipulated cumulative premium payment.

36
FUND VALUE / UNIT STATEMENTS

• A Unit Linked fund is an investment fund that is divided into a number of equal units. The value, or price, of
the units depends on the value of the investments that make up the investment fund, such as shares, bonds,
property and cash. ..
• Fund value, is the total value of units that you hold in funds. Fund Value = (Number of equity fund units x NAV of
equity fund as on a particular date)
• Fund value will fluctuate daily basis the volatility in the NAV.
Sample Fund Value statement (on policy issuance)

(Policyholder name,details,policy number,plan details,premium,SA etc will be in the top section)

Transaction Transaction Amount Unit Prices Units Units Fund value
date description (in Rs) NAV (in Rs.) allocated / cancel Balance amount (in Rs)

10-Aug-19 Premium invested 11,000.00 27.79950 395.69 395.69 11,000.00

10-Aug-19 Mortality charges (0.35%) 27.79950 -1.38 394.31 10,961.50
10-Aug-19 Admin charges (0.15%) 27.79950 -0.40 393.91 10,950.50
10-Aug-19 GST 27.79950 -0.71 393.20 10,930.70

10-Aug-19 Closing Balance 393.20 10930.20

37
FUND VALUE / UNIT STATEMENTS

• Premium Allocation charges : The charges which are deducted upfront from the premium payment made and only
the balance is invested in the stock market. (eg Premium is 15,000 and PAC is 30%, only 10.500 will be invested)
• Mortality charges : The cost of providing risk cover is deducted on every monthly anniversary as a % from the unit
balance
• Administration charges : The day to day cost of running the fund is deducted on every monthly anniversary as a %
from the unit balance
• Fund Management charges : Adjusted while declaring the NAV on a daily basis
• Switching charges : Switching charges are charged either as an absolute amount or as a deduction from the units
once the free switched which have been provided are over
• Partial withdrawal charges: Charged for each and every partial withdrawal made either as an absolute amount or as
a deduction from the units.
• Surrender charges : Charged as a % of Fund value and very high in the initial years and subsequently starts reducing
and eventually will be minimal towards the end of the policy term. (eg 85% - 90% after 1st year)

38
FUND VALUE / UNIT STATEMENTS

• IMPACT : HIGH, Knowledge of Fund value statement is a must as it reflects the outcome of testing a UL product
• Key points / Aspects for testing
• Insured Details, Address, Policy details, Premium, Frequency details population to be verified.
• Date of the transaction is very important to check
• NAV for the date of transaction has to be verified
• Each and every charge which is getting deducted has to be verified
• Calculation of the number of units basis the NAV to be verified
• Mortality charges to be verified on every monthly anniversary
• Administration charges to be verified on every monthly anniversary
• Allocation to be checked in case single premium top up also done at the time of issuance.
• Mortality and admin charges to be checked in case single premium top up also done at the time of issuance.

39
SECTIONS OF POLICY DOCUMENT

• Welcome letter
• FPR (First Premium receipt)
• Policy schedule
(a) Policy number (b) Name and address of proposer and life assured © Date of proposal
(d) DOB and age of LA (e) Commencement date of insurance (f) Plan and term (g) Sum Assured
(h) Frequency of payment (i) Installment premium (j) Date of last payment of premium
(k) Name of the nominee (l) Date of maturity (m) Conditions and privileges not applicable
(n) Additional or special conditions (o) Stamp duty is calculated as 20 paise per 1000 sum insured.
• Policy Terms and conditions
• Copy of the proposal form and all communication done with the customer.
• Copy of the signed sales / business illustration
• Ombudsman details
• Servicing forms (POS and Claims)

40
SECTIONS OF POLICY DOCUMENT

• IMPACT : LOW. Does not have any direct relation with any calculations, this activity is post policy issuance
• Key points / aspects to be tested
• Verify that the policy is in Inforce status.
• Verify that all the documents in the sequence are available post issuance of the policy
• Validate the DMS integration once the policy is issued
• Integration with CRM application post issuance of the policy
• Check and verify the formatting of the policy.
• Validate the stamp duty calculation appearing in the policy schedule
• Check for all related annexures related to servicing
• Check whether the policy docs are being generated and sent via hard copy, email, sms etc.
• Depending on the insurer the policy dispatch date and policy received date to be captured to check the free look
period.
41
SUICIDE CLAUSE / FREELOOK CANCELLATION

• Suicide clause
• If the Life Assured (whether sane or insane) commits suicide at any time within 12 months from the risk
commencement date, in this scenario generally the insurer will pay 80% of the premiums paid excluding extra
premiums if any, provided the policy is Inforce.
• If the Life Assured (whether sane or insane) commits suicide at any time within 12 months from the date of revival
of the policy, in this scenario generally the insurer will pay 80% of the premiums paid till the date of death excluding
extra premiums if any, or surrender value shall be payable.
• No amount is payable in following scenarios
• Where child is a minor (Age is co. specific) at the time of revival of policy.
• Where the policy is in lapsed status and has not acquired Paid Up Value
• Example If policy has been revived on 15th Oct 2019 then in case death claim has been received on 27th Jan 2020
and reason is suicide then the above condition shall apply.
• Impact : Medium. Since these cases are clearly tracked the processing part is also fairly simple.

42
SUICIDE CLAUSE / FREELOOK CANCELLATION

• Free look period is the period of 15-30 days from the receipt of policy bond by the customer. Within this period the
policyowner can approach the insurer to cancel his/her policy stating that he is not satisfied with the policy terms
and conditions.
• Free look cancellation : Once the freelook request is received by the insurer within the free look period the refund is
processed after deducting the necessary expenses.
• FLC calculated as Initial premium received less proportionate risk premium (from RCD till cancellation date) less
medical expenses (if any) less stamp duty paid.
• Once the FLC is processed in the system the system status changes to FLC.
• Depending on the insurer FLC can be done for the present policy and amount can be transferred to a new proposal.
• Example PCD 15th July 2019, RCD 15th July 2019, Dispatch date 17th July 2019, Policy received date 25th July 2019
• Depending on the insurer Freelook period will range from 8th August 2019 to 23rd August 2019
• IMPACT : MODERATE. Based on the flexibility provided by the insurers testing to be done for payouts after
considering various deductions

43
SUICIDE CLAUSE / FREELOOK CANCELLATION

• Key points / Aspects to be tested

• While testing for suicide system policy status to be verified.
• While testing for suicide 1 year period from RCD or revival to be checked
• While testing for suicide payout calculations to be checked
• Check for minor and policies with lapse status.
• Freelook period timelines to be checked based on dispatch and receipt.
• Freelook cancellation payout to be checked.
• Payment processing to be checked after processing of FLC transaction
• Validate whether the system changes to FLC from INFORCE.
• Verify if transfer of amount into new proposal is successful where ever insurer allows
• After processing completion of suicide and FLC transactions verify that no further updations are possible in these
policies
44
 BILLING / OVERDUE / LAPSE

• Billing is also called renewal benefit billing which is a process to generate renewal bills based on the frequency of payment agreed
by the insured with the insurer.
• Depending on the frequency of payment the renewal bills need to be generated 12 time,4 times,2 times or once in a year.
• Renewal notice shows the amount due from the customer as on a particular date and is subject to change in case of any changes in
statutory payments.
• Overdue notices are generated and sent to the customer in case the payment has not been received on the due date
• Depending on the frequency of payment insurer’s allow a grace period (additional time) of 15-30 days from the due date to
facilitate the policyholders to make their renewal payment.
• Lapse notice is generated and sent to those customers whose payments have still not been received after the grace period.
• When the system acquires lapse status the risk cover under the policy ceases and the LA is no longer under risk cover.
• In ULIP policies in case of non payment of premiums the policies will get into Discontinuance status – without risk cover
• In ULIP policies DC fund needs to be created from the existing FV and charges to be deducted on every month versary.
• Example : RCD 10th May 2019, Quarterly mode, Next due 10th August 2019 , Policy will lapse on 10th September in case renewal
payment is not made.

45
BILLING / OVERDUE / LAPSE

• IMPACT : MODERATE. Renewals are usually standard in nature and need to be tested basis the payment frequency
• Key points / Aspects to be tested
• Check on the number of days before which the renewal process needs to commence (eg T – 30 days)
• Check whether the communications are successfully sent to the policyholder through various modes (hard copy,
email. SMS, contact center)
• Check on the number of days gap in which overdue notice and lapse notice needs to be generated and
communicated.
• Validate that notices are being generated for policyholders whose payments have already been received.
• Check policy status when the policy owner fails to make a payment after completion of grace period.
• Verify that no batch jobs are subsequently run in the policy after acquiring lapse status.
• Verify that the policy is not getting into lapse status for cases where payment method is “direct debit /SI”
• Verify that no risk cover is provide once the policy acquires lapse status.

46
BILLING / OVERDUE / LAPSE

• In ULIP policies check whether DC fund has been created when the policy acquires DC status.
• Verify whether DC charges, admin charges are get deducted on every monthly anniversary.
• Verify that no batch jobs are subsequently run in the policy after acquiring discontinuance status.
• Verify that no risk cover is provide once the policy acquires discontinuance status.
• Constantly monitor the unit balance at the end of every policy anniversary

47
LAPSE REINSTATEMENT

• The process of reviving a lapsed policy is called reinstatement of policy.

• Revival quotation needs to be generated with the below information;
• Overdue instalment premiums amount till date
• Overdue interest on overdue premiums till date
• Medical report if required
• Medicals to be undergone (if any)
• Once the formalities are completed the policies are reinstated with effect from the first overdue due date.
• For ULIP policies the NAV will be of the date on which the amount has been received from the customer
• Verify whether the risk cover has commenced after reinstating the policy.
• Any batch jobs (specific to insurer) to be run to bring the policy up to date.
• Check for premium adjustment, overdue interest adjustment once the policy is reinstated.
• Validate that the policy status changes to IF from Lapse/Discontinuance on reinstatement of the policy
• For ULIP policies verify whether the mortality charges and policy admin charges are getting deducted every month and
discontinuance charges should not get deducted after revival

48
LAPSE REINSTATEMENT

• Underwriting decisions to be tested at the time of reinstating the policy

• Accept at original terms
• Loading / Rate up the case
• Call for further medicals
• Postpone the case
• Decline the case.

**** Check that the revival/reinstatement is happening within the maximum time entitled for both traditional and Unit
Linked plans

49
MINOR ALTERATIONS (SERVICING)

• Alteration request which are normally received from the policyholders on an ongoing basis,
• Correction / Change in Salutation, Name, Address, Phone Number, Email Address.
• Change in DOB of LA, either increase or decrease in age.
• Addition / Deletion of rider (at a later date after policy issuance)
• Change in nominee, nominee age, relationship (eg from mother to wife)
• Change in frequency of payment (eg from quarterly to half yearly)
• Change in payment method (from cash to SI)
• Change in policy owner (if required)

• IMPACT : Moderate / Low (Depending on the request type). Need to be executed in the correct module as these
changes will have impact over multiple policies in case the policy holder has multiple policies.

50
MINOR ALTERATIONS (SERVICING)

• Key Points / Aspects to be tested

• Any request pertaining to client for corrections in name, address, contact nos etc to be done at the client level and
also verify that the changes have been correctly done.
• Change in DOB depending on the insurer can be done either prospectively or retrospectively. In case the age
increases wit the change then additional premium would be required, and if it decreases refund will have to be
processed.
• Change in nominee details needs to be done with an effective date and once the processing is completed
verification needs to be done whether the changes have got effected in all relevant policies.
• Addition / Deletion of riders depending on the insurer can be processed prospectively or retrospectively.
• In case of addition, additional premium needs to be receipted, check rider SA, term and in case of deletion
proportionate refund amount to be processed after deducting the number of days for which cover had been
provided.
• Check the policy status while processing change in frequency, revised premium to be verified along with change in
Bill to date.

51
MINOR ALTERATIONS (SERVICING)

• Key Points / Aspects to be tested (to be continued)

• The next bill to date should accordingly change depending on the revised frequency.
• Premium shortfall (if any) to be collected depending on the frequency change.
• Payment method change, to automated payments to be done after considering the registration process.
• Communication letters in case of rejection of payment method also to be tested.
• Verify if the mandate list contains the details of the policy where payment method change has been effected.
• Policy status to be checked / verified (should be Inforce) to effect payment method change.
• Payment method change will always be effective from the next billing date
• In case of SI/ECS bounce the payment method should automatically be changed to cash / cheque.
• For processing of any minor alteration the policy should be in Inforce status

52
SWITCHING & PREMIUM REDIRECTION

• Switching is a feature available in Unit Linked plans only for IF policies.

• By using switching feature the policyholder can switch from one or more existing fund to another fund/s.
• Certain free switches are available and after that each switch is chargeable.
• In a switch transaction the entire fund value / units or a part of it can be transferred from the existing fund to
another fund.
• Certain insurers mention the number of switches allowed in a year as well.
• After a switch unless specified the amounts received subsequently will continue to be received in the old fund.
• In premium redirection the policyholder can redirect his/her funds from the existing fund to a new fund.
• Once premium redirection has been done all the subsequent amounts will be received in the new fund..
• IMPACT : HIGH. Since these transactions are having a direct impact on the fund value / units they have a high
impact.

53
SWITCHING & PREMIUM REDIRECTION

• Example : A policyholder has 10 units of FV Rs 1000 in high risk fund, he can switch (transfer) either 5 units or Rs 500
(FV) from High risk to Moderate risk fund
• Key Points / Aspects to be tested
• Policy should be in In force status.
• Charges to be checked for every switch after exhausting free switches which have been allowed.
• Verify units transferred along with the fund value based on the NAV rate for that date.
• Verify whether the subsequent payments are being received in the old fund itself.
• Test switching basis % of units and % of fund value
• Test premium redirection to see whether the entire fund value / units is getting transferred to the new fund
• Verify whether the units / fund value have got reduced to the extent of the switch in the old fund.
• After both the transactions fund value statement to be verified to ensure they are reflecting the updated unit
balance and fund value.
54
ASSIGNMENT OF POLICY

• Assignment of policy takes place when the rights, title, ownership of the policy gets transferred from the assignor to the
assignee.
• The present Policyowner (assignor) ceases to be the owner of the policy once the policy is assigned.
• Assignor should be major and competent to contract.
• Assignment can be done only on the issuance of the policy.
• Assignment can be done with or without consideration.
• There are 2 types of assignment.
• Absolute assignment
The rights, title and interest of the assignor passes completely to the assignee.
This assignment is generally done for valuable consideration. (Eg Policy assigned by grandparents to grand children, policy
assigned by a debtor to a creditor after taking a loan)
• Conditional assignment
In this the rights, title and interest in the policy automatically revert back to the assignor on the occurrence of
specified conditions. E.g. Policy assigned after taking loan from any financial institution which can be repaid.

55
ASSIGNMENT OF POLICY

• Example :
• In case a policyowner has taken any loan from an institution he / she can conditionally assign the policy in favor of
the institution and once the loan is fully repaid the policy ownership can get reassigned to the original policyowner.
• In case the grandparents wants to gift a policy to their grandchild out of love and affection then they can absolutely
assign the policy in favor of the grand child once the policy is issued.
• IMPACT : Moderate. Assignment are structured requests wherein the policy owner is very clear that he /she wants
to assign the policy on issuance. The concept has to be understood while testing.
• Key Points / Aspects to be tested
• Check that the status of the policy is IF while processing assignment transaction.
• Verify that the assignor is a major at the time of assigning the policy.
• Verify the relationship between the assignor and assignee.
• Verify the type of assignment
• Check that in absolute assignment the policy does not get reassigned back to the assignor.

56
ASSIGNMENT OF POLICY

• Check that in conditional assignment the policy gets reassigned back to the assignor on fulfillment of the condition
• Validate that the assignee has the complete ownership of the policy.
• Check that assignment once done cannot be cancelled.
• Check the age & all relevant details of the assignor at the time of assigning the contract.
• Check that assignee details are appearing along with the previous policy owner details on successful completion of
assignment transaction.
• All intimations after assignment needs to be sent to assignee as well.
• While testing for assignment we need to have the start date and end date (where ever applicable)

57
PAID UP STATUS OF POLICY

• In Traditional products with regular premiums option the policy acquires paid up status if three consecutive full
year’s premium has been paid and the policy owner stops paying after that.
• In Traditional products with limited premiums option the policy acquires paid up status if two consecutive full year’s
premium has been paid and the policy owner stops paying after that.
• In Unit Linked products once the policyowner stops paying after the lock in period of 5 years he can convert his /
her policy into reduced paid up policy.
• Once the policy acquires paid up status the Sum Assured is proportionately reduced based on the number of years
paid.
• In case of a reduced paid up policy the risk cover will cease on the policy acquiring RPU status.
• In case full premiums have been paid and the policy term continues then the policy acquires fully paid up status.
• Example : Endowment policy, Sum Assured 10 lacs, PT 10 years PPT 10years, RCD 10/4/2015. Premium paid for3 yrs
Accordingly the SA shall proportionately get reduced based on the 3 years premium paid

58
PAID UP STATUS OF POLICY

• IMPACT : HIGH. This is a crucial stage in life insurance policy wherein the customer stops paying premiums after
having paid in the initial years. This has a direct impact on the future continuation of the policy.
• Key Points / Aspects to be tested
• Check the number of years premiums paid by the policyowner
• Check the policy status based on whether it is a limited pay or regular pay option.
• Verify that the sum assured in the policy has been proportionately reduced based on number of years premium paid
• Verify that the risk cover under the policy has ceased after attaining reduced paid up status.
• For ULIP plans check that the monthly charges are getting deducted on every month versary.
• For fully paid up cases check that no further billing is getting generated
• For reduced paid up cases billing to continue.
• Check for a reinstatement of a paid up policy after collecting all overdues, interest payments.
• Check for restoration of SA after reinstatement along with change in policy status to IF.
59
 SURRENDER OF POLICY

• Surrender value is the amount payable to the policyholder should he decide to discontinue the policy and encash it.
Depending on the type of payment (regular pay / limited pay), it is payable only after two/three full years' premiums
have been paid to the insurance company.
• Traditional Plans
• Surrender is usually a percentage of premiums paid or a percentage of paid up value.
• Surrender quotation needs to be generated while processing surrender
• Surrender value to be calculated basis the SV factor provided.
• In traditional plans there are two types of surrender.
• Guaranteed surrender value : It is the amount guaranteed to the policyholder in case of voluntary termination of
policy. Eg In case a surrender is done after 2 years the SV can be 30% of the premiums paid, excluding premium for
the first year. ...
• Special surrender value : SSV is usually declared by the actuarial department of individual companies, based on
product & company performance. It is generally higher than GSV.

60
SURRENDER OF POLICY

• Unit Linked Plans

• In Unit Linked plans the policyholder can opt for surrender anytime after paying the first year’s premium.
• In case the policyholder opts for surrendering the policy after paying only first year’s premium the policy will move
into discontinuance status.
• The policy will continue to be in discontinuance status till the time the lock in period is over.
• Appropriate charges need to be deducted on every month versary.
• At the end of lock in period the balance available in the fund value along with nominal interest is repaid to the
policyowner.
• Surrender charges as per the table values (co. specific) need to be deducted at the time of processing surrender.
• Surrender charges are higher in the initial years of the policy term in comparison to later years.
• IMPACT : HIGH. Surrender involves a payout hence need to be tested and processed with care. Any incorrect
calculation and amount refunded will have serious consequences.

61
SURRENDER OF POLICY

• Key Points / Aspects to be tested

• Check the number of years premium paid based on option of regular pay / limited pay.
• Check the policy status (whether it has acquired paid up status).
• Generation of surrender quotation based on the date on which request received.
• Verify guaranteed SV calculation and SSV (provided by insurer) for traditional products.
• In case of UL cases verify whether the policy is getting into discontinuance status, and discontinuance fund has been
created from the existing fund value.
• Check all necessary charges are getting deducted on every month versary.
• On processing UL surrender after lock in period, check whether nominal interest is getting added to the balance
fund value and appropriate surrender charges are also getting deducted.
• The NAV should be of the date on which the surrender transaction has been processed in the system.
• The policy status to be verified after processing surrender transaction and payout from suspense to be checked.

62
LOANS & FORECLOSURE

• Policy loans are amounts available to the policyowners against their existing life insurance policies.
• Policy loans are available only in traditional products.
• Policy needs to be in either IF status or PU status in order to be eligible for a loan.
• Loans are calculated as a percentage of the surrender value. (eg 80% of SV)
• The rate of interest charged for the policy loan is specific to insurance companies.
• Loan EMI shall comprise of both principal and interest.
• Both Loan EMI and instalment premium needs to be paid by the policyowner.
• The policy loan term would change from insurer to insurer.
• More than one policy loan can be taken by the policyholder.
• Amortization to be prepared based on the loan term which should have EMI payable along with due dates.
• Example : Status RPU, Reduced SA 3 Lacs, SV 2.40 lacs, Loan 1.92 lacs (80% of SV)

63
LOANS & FORECLOSURE

• IMPACT : Moderate. Need to understand the flow from surrender value as loans are derived as a percentage of the
surrender value.
• Key points / aspects to be tested.
• Check the product and whether loan is eligible under the product.
• Check the number of years premium paid based on option of regular pay / limited pay.
• Check the policy status (whether it has acquired paid up status).
• Loan quotation to be generated after checking the above parameters.
• Verify the loan amount as a percentage of surrender value of the policy.
• Loan EMI to be verified based on the loan principal and rate of interest provided by the insurance companies
• Check for the loan policy term and interest calculations.
• In case of default in loan repayments, we need to check whether the loan principal plus overdue interest is not equal
to the surrender value

64
LOANS & FORECLOSURE

• Check for communications to be sent to the customer requesting for immediate payments to be made before
initiating foreclosure.
• On processing foreclosure verify that all the outstanding's are adjusted internally in case outstanding amount is
equal to or marginally higher than surrender value.
• In case any amount is left after adjusting all the outstanding’s then that amount needs to be refunded to the
policyholder.
• Check the status of the policy once foreclosure is processed
• Once the policy is foreclosed it cannot be reversed

65
PARTIAL WITHDRAWAL

• Partial withdrawal is a facility only available in Unit Linked plans.

• Partial withdrawal is related to the withdrawal of amounts from the existing accumulated fund value of the
policyholder during the policy term.
• Partial withdrawal are not allowed during the lock in period and when the policy is nearing the policy term.
• At no time can the policyholder withdraw the entire amount of the fund value in a policy.
• There is a minimum limit of partial withdrawal allowed under a policy.
• There is a maximum limit of partial withdrawal allowed under a policy.
• Depending on the insurer 1-2 partial withdrawal can be free and the balance will be chargeable.

• Example : Unit Linked Plan in the 6th year Fund value 2200 units, NAV 12.549078 Fund value 27,608.
5% partial withdrawal allowed (5% of 27,608) Rs 1380. Charges Rs 100. Charges will be deducted from the units
(Rs 100/12.549078 = 7.97 units)
66
PARTIAL WITHDRAWAL

• IMPACT :HIGH Since this request is directly related to the fund value it has a very high impact.
• Key points / aspects to be tested.
• Status of the policy to be checked while processing partial withdrawal.
• Minimum and Maximum limit to be checked while processing partial withdrawal.
• Verify that no partial withdrawal is allowed during the lock in period.
• After each partial withdrawal check the balance lying in Fund value and balance number of units.
• Verify that the charges for the partial withdrawal are getting deducted from the units balance.
• After each partial withdrawal is processed check that the balance lying is enough to take care of the future charges.
• In case the balance lying in the fund after partial withdrawal is not equal to the amount required to run the fund in
the future or FV becomes equal to NIL /Negative then the policy needs to be foreclosed.
• In case the policy is foreclosed, check the status of the policy after foreclosure is processed.

67
CLAIMS

(a) Survival benefit claim

• Periodic survival benefit claim are paid on a periodic basis (agreed in advance) during the term of the policy.
• The policy should be in IF status.
• These are called money back plans which promise payment of part SA at specific intervals during the term of the
policy to the surviving policyholder.
• The specified amounts are paid after deducting all outstanding dues from the customer.
• If the policy holder dies after the due date but before settlement of claim, the survival benefit is paid to the legal
heirs of the policyholder.
(b) Maturity claim
• Claims which are payable if the LA is alive at the end of the policy term or on maturity date
• Policy should be in IF,PU status in order to process a maturity claim.
• Amount payable is Basic SA or Paid Up Value or FV + Top Up FV + Rider SA/FV + Bonus payable, any excess premium
collected less Partial withdrawals paid less survival benefit paid less any other recoveries..

68
CLAIMS

© Death Claims
• Death to be registered in the system once intimation is received.
• Policy status to be IF,PU in order to register the death in the system.
• Communication to be generated and sent to the customer depending on the nature of death.
• In case there is no valid nomination or assignment the claimant will have to produce a succession certificate, letter
of probate, a registered will.
• When all the formalities are completed insurance company issues a discharge form for completion which is to be
signed by either the Nominee, Assignee, or the legal representative or successor.
• Amount payable in a death claim will be SA/FV plus accrued bonus plus rider SA (if any) less any partial withdrawals
done less any survival benefits payment done less any outstanding which needs to be recovered.
• IMPACT : HIGH Claim processing is of utmost importance as this is a terminal transaction wherein all the amounts
due / recoveries need to be adjusted

69
CLAIMS

• Key points / aspects to be tested

• Type of claim to be kept in mind while testing for claims.
• Policy status to be kept in mind while processing every type of claim. (Eg IF,PU for maturity and death claim).
• Verify the survival benefit calculation (adjust outstanding's) which is to be paid during the policy term.
• In case of money back plans while processing the death claim check for the survival benefit payouts already paid
under the policy. (Can vary from insurer to insurer).
• Check whether the bonus calculations have been run till the date of processing of claim.
• In case of death due to suicide within one year of policy commencement or policy revival, check the payout
calculations and comparison with surrender value, along with the present status of the policy.
• Check whether all the documents related to the type of the death claim have been collected and there are no
outstanding’s.
• In case of a death claim wherein based on investigation certain facts have emerged leading to non disclosure, in that
scenario claim will not be paid to the nominee.
70
CLAIMS

• Key points / aspects to be tested

• Verify the calculations of claims eg in case of death or maturity depending upon the product it would be
SA / FV plus vested bonus plus rider SA (if any) plus Top up FV, plus any excess payment recd from customer less any
outstanding premiums, less loan outstanding, less partial withdrawal done, less survival benefit payment made & less
any other misc. outstanding should be the final payout to the customer.
• In case of ULIP cases the NAV should be of the date on which the claim is being processed in the system after receipt
of all documents.
• Validate the payment processing from the policy suspense to the customer’s bank account (NEFT/Cheque)
• Verify the status of the policy which should get changed to Death in case death claim has been processed and in
case the claim has not been processed the status should change accordingly (insurer specific)
• Validate that no future batch jobs are being run for the policy wherein death has been registered.
• Check and test If the insurer allows the claim proceeds of one policy can be transferred to another proposal taken by
the nominee or any immediate relative in the family.

71
 THANK YOU

Head Ofice
419A, C Wing,
Rupa Solitaire, Sector-1, Millennium
Business Park, Mahape, Navi Mumbai –
400710.
Tel. | +91-22-41288200 | 41416900
Email | info@[Link] [Link]

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