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The next sections analyse how the key claims sub-processes serve the policyholders, and how microinsurers have made these processes work in an efficient and effective manner.
2 Claims notification Claims notification occurs on two levels. First, the approach may be either by the policyholder, the beneficiary or the insurer’s representative. Then, the application is completed and submitted to formally launch the claims settlement process.
For MUSCCO in Malawi, beneficiaries generally advise the SACCO that a member has died, although there are instances when beneficiaries are not aware of their designation or the insurance coverage. Under such circumstances, the SACCOs inform the beneficiaries and encourage them to initiate the paperwork. The SACCO has a particular motivation to do so if the member dies with an outstanding loan balance.
Similarly at CARD MBA, the field officer and the group members are motivated to find the beneficiaries to be able to clear the deceased’s loan balances. If there is no beneficiary named or that person predeceased the insured, it is the policy of CARD MBA that “in the event of the death of a member without designation of her beneficiary, all benefits due will be paid to her legal heirs according to law” (McCord and Buczkowski, 2004).
Even if there is not a loan to be repaid, with life insurance it is important for microinsurers or their intermediaries to make sure that claims are initiated even if they have to seek out the beneficiary. Trust is still being built with many of these programmes, and claims payments show policyholders that they can trust the insurer to pay.
With healthcare, either the policyholder approaches the insurers for reimbursement, or the insurer keeps the policyholder out of the process by paying the healthcare provider directly. The latter approach is simpler for policyholders and more efficient for the insurers. Grameen Kalyan (Bangladesh) uses a third approach that eliminates the claims process altogether. At GK, members are provided with cards to present at the time of treatment. The treatment cost is then simply discounted and no claim need be made. However, the policyholder still requires cash to access care at the discounted rate, and the cost of medical care that is beyond the capacity of the health centre is covered on a reimbursement basis.
As a means of assistance with the claim process, TUW SKOK (Poland) and Aldagi (Georgia) have implemented 24-hour toll-free help lines to assist in claims queries (among other things). For TUW SKOK, it is interesting to note that only 10 per cent of claims are started through the call centre, while the rest are initiated through their credit union partners – a clear indication of the preference for physical human contact in this process.
2.2 Claims application Claims applications for insurance products are complicated and can be problematic for low-income policyholders, especially those with limited education. For example, Delta Life’s claim form requires significant information including details from local authorities and the deceased’s employer, as well as specific information on the cause of death. Completing this form with all 222 Microinsurance operations the required signatures and information creates frustration and delays for the beneficiary. Additionally, the claims rejection rate at Delta is about 15 per cent, and this is partly due to incomplete claims applications.
At some microinsurers like Delta, claims documentation has not evolved sufficiently to accommodate the low-income market. For example, while documentation from an employer may not be difficult for a middle-class widow in a city to obtain, it may be a serious challenge for a rural, lowincome beneficiary. Claims rejections are often a direct result of the complexity of the forms and the insensitivity to this market’s ability to acquire the formal documentation, which can undermine the intention of microinsurance as illustrated in Box 38.
Claim rejection: A case of insufficient documentation in ZambiaBox 38
Philip Zulu’s wife died and he began the claims process after her burial. Upon submission of the claim form with burial and death certificates, Philip was advised that he also needed to produce the official Cause of Death Certificate. He went back to the hospital only to be told that it was not possible to produce the certificate because too much time had elapsed since his wife’s death. After spending three weeks going back and forth between his MFI’s office and the hospital, he eventually gave up on the insurance claim.
Source: Adapted from Manje, 2005.
Some microinsurers, however, have adjusted their claims requirements for
their target market, for example:
to verify that cause of the claim is covered since (almost) everything is. A simpler claims process not only reduces costs for the beneficiary, the agent, and the insurer; but also leads to a higher level of policyholder satisfaction.
For example, Microcare and Opportunity International use a form for their credit life and funeral policy package that is straightforward (see Figure 17), although even this form requires a death certificate, which may be difficult to obtain in rural Uganda. Consequently, Microcare recently started accepting a letter from the clergy or imam who performed the burial if a death certificate or police report is not available. Without such adjustments, beneficiaries can become frustrated, as was the friend of the policyholder in Box 39.
Beneficiary frustration Box 39 One policyholder in Uganda noted: “I know of someone who lost her husband and she didn’t have any money to process the documents, yet her husband had died of an accident and was thus due a significant claim. As a result, she gave up.” Source: Adapted from McCord et al., 2005a.
The objective is to find a balance between confidence that the insured event has occurred and accepting less than complete documentation. TUW SKOK, for example, requires the death certificate of the policyholder and acceptable means of identification to confirm the identity of the beneficiary.
Madison requires the death certificate, a post mortem report, the burial permit, police report, and identification. Often obtaining the required forms is expensive and time-consuming. However, in rural areas, Madison will accept instead three written confirmations of death from the District Secretary, the local chief, the deceased’s employer, or the local police.
Yeshasvini has adopted a very different approach by requiring that claims be pre-approved by its third-party administrator before the insured receives treatment. This approach provides an up-front control to ensure that only authorized services are provided, which has consequently minimized the likelihood of rejecting claims.
In general, claims applications must be simple for beneficiaries to complete, requiring only documentation sufficient to confirm the occurrence of the insured event. Frustrating policyholders or their beneficiaries only hinders the expansion of microinsurance.
224 Microinsurance operations Microcare and Opportunity International claim form Figure 17
We hereby confirm that the details contained in this claim form and attached proof of
death are true and accurate to the best of our knowledge:
2.3 Delays with claims applications Slow submission of claims to the insurer can be due to a variety of causes. At Madison, late claims are frequently related to documentation problems. It was reported that these stem largely from the loan officers, who are expected to assist with the documentation, yet are too busy chasing delinquent borrowers to spend time ensuring that the claims paperwork is in order. In addition, the MFI’s field staff indicated that Madison’s claims settlement paperwork was demanding and they wished it were simpler.
In contrast, VimoSEWA’s insurance-dedicated Vimo Aagewans ensure that members know how to claim and they facilitate the claims process where necessary. VimoSEWA has found that official documents are occasionally not forthcoming, as the local officials request “speed money” to prepare or sign required documents. In these cases, the Vimo Aagewans intervene to ensure that the document is procured without additional cost.
The delays in submission to MUSCCO stem from two areas. The first is the difficulty in Malawi in obtaining a death certificate, which MUSCCO requires. The second is more interesting. MUSCCO works through local credit unions which service the insurance policies. To combat the problem of the credit unions severely delaying premium transfer to MUSCCO, claims payments are withheld until the payments are up to date. As a result, the credit unions delayed submission of the claims applications.
AIG Uganda has similar problems with its distribution channels.
Although the insurer settles most claims within 30 days of the time it received the claim, the total time between the insured event and the claims payments reaching the beneficiary has been dramatically longer. Claims presented by the beneficiaries to some of the MFIs were being batched – held for weeks – before they were transferred to AIG Uganda’s claims department.
For accidental death, where such cover provides an additional benefit, a police report is generally required. Columna in Guatemala further requires a certificate from the forensic doctor, as well as the ambulance report (if an ambulance was involved). The elimination of specific differences between “natural” and “accidental” death would help to eliminate such requirements.
To reimburse healthcare expenses, ServiPerú requires only the policyholder’s identification, the medical report, and the invoices, all of which can be collected upon discharge from the provider’s care. Having this documentation on discharge makes submission of the documents easier for the policyholder, and because there is the incentive of reimbursement, the policyholders submit their claims quickly.
226 Microinsurance operations With TUW SKOK’s savings completion insurance, it takes an average of 60 days to receive the claims documentation, in part because the beneficiary is often unaware of the coverage. Additionally, the claims are first presented to TUW SKOK’s credit union partners and their incentive to disburse these funds to people who have forgotten about the existence of the benefit has been limited. With its AD&D policy, an average 56-day delay in claim submission is often the result of technical rather than memory problems. TUW SKOK and AIG Uganda have found it takes more time to confirm an accidental death or disability claim because confirmation relies on others, like the police or doctors, who have no incentive to rush with their paperwork.
3.1 Settlement mechanisms Several MFIs and credit unions arrange to pay all or part of the claims almost immediately upon being notified of the claim. The Kashf Foundation in Pakistan, for example, originally promised claims payment within one day of the occurrence of the insured event. This worked well for beneficiaries since they could get the funds they needed without having to present the documentation required until later. However, the beneficiaries no longer had an incentive to collect the documents and Kashf was left with receivables and no documentation to use to collect them from the insurer. Subsequently, the MFI changed its policy to payment within five days, but after submission of the documents.
To provide funds to claimants quickly, while still maintaining the incentive to provide the documents, some of Columna’s cooperative partners make partial payments when beneficiaries provide the initial documentation.
These beneficiaries must meet certain criteria (see Box 40) to gain access to the partial payment. Additionally, to protect themselves, the co-ops contact Columna to verify the insured status of the policyholder.
Requirements for an advance payment at Columna Box 40
The claim will not be rejected if the following conditions are satisfied:
– The cause(s) of death stated in the doctor’s post mortem certificate must not include HIV/AIDS.
– In the event of suicide, the policy must have been in force for at least two years.
Source: Adapted from Herrera and Miranda, 2004.