Today's Editorial

12 April 2018

Rethink insurance death claim settlement

Source: By Arunava Dey: The Financial Express

The recent landmark judgment of the Supreme Court, allowing passive euthanasia to ease the dying process of terminally ill patients or a person in a persistent vegetative state, has evoked strong criticism across the country. While many welcomed the judgment, many others, particularly religious groups, expressed unhappiness, stating that the right to life is in the hands of God.

Will passive euthanasia have an impact on death claim settlement in case the customer had taken a life insurance policy earlier? One would be surprised to know the statistics pertaining to suicide cases in India. As per the National Crime Records Bureau data on accidental deaths and suicides in India, there were 1, 33,623 suicide cases in 2015Maharashtra recorded the maximum number of suicide cases, accounting for 12.7% of the cases, followed by Tamil Nadu (11.8%) and West Bengal (10.9%).

Illnessbankruptcy or indebtednessmarriage-related issues (non settlement of marriage, dowry-related issues, extra-marital affairs, divorce, etc), failure in examination, impotency/infertility, drug abuse/alcoholic addiction, fall in social reputation, love affairs, poverty, unemployment, property dispute, illegitimate pregnancy, physical abuse, rape, professional/career problems, etc, are some of the major causes of suicides. The report further mentions the means adopted for committing suicide that include consuming sleeping pills, drowning, fire/self-immolation, using fire arms, hanging, consuming poison, jumping into the well, coming under running vehicle/train, touching the electric wires, etc. Sadly, the Insurance Regulatory and Development Authority of India (IRDAI) annual reports are silent about the life insurance claims settled under suicide cases.

It is indeed surprising to note that “illness” accounted for 17.2% (3,379 out of 19,665 victims) of the suicide cases. Illness includes AIDS/STD, cancer, paralysis, insanity/mental illness and other prolonged illness. Thus, even without legislation, if the percentage of suicide cases pertaining to illness was 17.2%, then one can imagine that with the legalisation of “passive euthanasia”, the death figure due to illness may rise exponentially in the near future. Now, the question is, would death due to passive euthanasia be treated as natural death or should it be treated as unnatural death? If it is treated as unnatural death, then what would be the cause of death? Would it be treated as suicide or assisted suicide? As per the definition of “suicide” as mentioned in the National Crime Records Bureau, it includes, “deliberate termination of life.

The essential ingredients of a suicide are: (i) It should be an unnatural death, (ii) The desire to die should originate within him/her, (iii) There should be a reason for ending the life” Thus, going by this definition, can the death due to passive euthanasia be construed as equivalent to suicide? If not, then how would it be treated? This is important since if the customer had taken a life insurance policy earlier, then, while claiming the death benefit, the nominee is required to mention the cause of death. Even if passive euthanasia is treated as suicide or assisted suicide, it would hardly have any impact on the death claim from an insurer in case the customer had taken a life insurance policy earlier.

This is because even for suicide cases, claims under a life insurance policy are settled by the insurers, subject to certain conditions as mentioned in the clause. The suicide clause states that, “if the life assured commits suicide within one year from the date of commencement of risk or date of revival if revived, whether sane or insane at that time, the policy will be void and no claim will be payable”. This is applicable for policies issued before January 1, 2014.

This implies that if the policy holder commits suicide after one year from the date of commencement of the policy, then the policy qualifies for death benefit. However, in case the policy holder commits suicide before the completion of 12 months, then no claim would be paid by the insurer and the policy would become void. This clause has undergone some changes, and as per the new regulation that became effective for life insurance policies issued after January 1, 2014, “in case of linked plans, if the policyholder commits suicide even within 12 months from the commencement of the policy during the policy term, then the nominee is entitled to receive 100% of the policy fund value. Whereas in case of non-linked plans, the nominee is entitled to receive 80% of the premium paid in case of death claim due to suicide even within 12 months from the commencement of the policy during the policy term”.

It is important to note that life insurance is governed by a principle called “utmost good faith”, also known as “Uberrimae Fidei”, which means that there should not be any suppression of material facts while purchasing a life insurance policy. It is high time that the IRDAI captured the data pertaining to claim settlement under suicide cases in its annual reports. This would provide a trend of claim settlement over the year, enabling the policymakers to make necessary amendments to the suicide clause. This is important because there may be a possibility of intentional suicide by the policyholder in order to enable its beneficiaries or its creditors to receive the proceeds from the life insurance policy. Utmost care needs to be taken by the regulator to ensure that suicide clause should not encourage commercially planned suicide since no one should profit from one’s own crime.



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