Claims and Benefits Accounting in Life Insurance
Death claims on intimation, maturities when due: the timing rules behind every payout.
A claim is booked in the accounts at a defined trigger, which is not always the day the money leaves the bank. For a death claim the trigger is usually the insurer learning of the death. For a maturity it is the date the payout falls due. For a unit-linked surrender it is the cancellation of units. Getting the trigger right decides which year's Revenue Account (the policyholders' account) carries the cost.
There is no single regulator rule on these triggers in the source material, so IC-26 is best learned through insurers' own published accounting policies. HDFC Life's policy defines benefits paid as policy benefit amounts plus claim settlement costs, where applicable. SBI Life's policy defines claims cost the same way.
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When Each Payout Is Booked
From HDFC Life's and SBI Life's accounting policies. The two companies differ on some rows, which is exactly what questions test.
Death and rider claims
HDFC Life, non-linked
On receipt of intimation
HDFC Life, linked
On receipt of intimation
SBI Life
When intimated (intimations up to the end of the period are counted)
Maturity claims
HDFC Life, non-linked
When due
HDFC Life, linked
On a due basis when the associated units are cancelled
SBI Life
On the policy maturity date
Annuity benefits
HDFC Life, non-linked
When due
HDFC Life, linked
Not stated
SBI Life
When due
Periodical (money back) and survival benefits
HDFC Life, non-linked
When due
HDFC Life, linked
Not stated
SBI Life
Survival benefits when due
Surrenders and withdrawals
HDFC Life, non-linked
On receipt of the insured's consent to the quote provided by the company
HDFC Life, linked
When the associated units are cancelled
SBI Life
As and when intimated
Lapsed or discontinued policies
HDFC Life, non-linked
Not stated
HDFC Life, linked
On expiry of the lock-in period
SBI Life
As and when due, as part of benefits paid
| Payout | HDFC Life, non-linked | HDFC Life, linked | SBI Life |
|---|---|---|---|
| Death and rider claims | On receipt of intimation | On receipt of intimation | When intimated (intimations up to the end of the period are counted) |
| Maturity claims | When due | On a due basis when the associated units are cancelled | On the policy maturity date |
| Annuity benefits | When due | Not stated | When due |
| Periodical (money back) and survival benefits | When due | Not stated | Survival benefits when due |
| Surrenders and withdrawals | On receipt of the insured's consent to the quote provided by the company | When the associated units are cancelled | As and when intimated |
| Lapsed or discontinued policies | Not stated | On expiry of the lock-in period | As and when due, as part of benefits paid |
Key Terms
- Intimation
- Notice to the insurer that a claim event (such as death) has happened. Death and rider claims are booked on intimation at both HDFC Life and SBI Life.
- When due
- The date the contract says a payment becomes payable, such as an annuity instalment or a maturity date.
- Consent to the quote
- HDFC Life's trigger for a non-linked surrender: the company quotes a surrender value and books the surrender when the insured agrees to it.
- Units cancelled
- HDFC Life's trigger for linked maturities and surrenders. Older editions of its policy say units "de-allocated" for the same step.
- Lock-in period
- The period during which money in a linked policy cannot be paid out. HDFC Life books amounts payable on lapsed or discontinued linked policies when the lock-in expires.
- Charges recoverable
- Charges the insurer deducts on exit. Both companies disclose surrenders, withdrawals and lapsation net of charges recoverable.
Reinsurance Recoveries
When a claim is partly reinsured, the reinsurer's share is booked alongside the claim.
- check_circleHDFC Life accounts for claims receivable from reinsurers in the period the claims are intimated, and nets them off against benefits paid.
- check_circleSBI Life accounts for amounts recoverable from reinsurers in the same period as the related claim is intimated, and reduces them from claims.
- check_circleEither way, the Revenue Account shows benefits paid net of the reinsurer's share, not a separate income line.
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Repudiated and Disputed Claims
A repudiated claim is one the insurer has refused. If the claimant takes it to a court or other judicial authority, the outcome is uncertain. HDFC Life provides for repudiated claims and other claims disputed before judicial authorities on a prudence basis, as management considers appropriate. SBI Life provides for repudiated claims disputed before judicial authorities on management prudence, considering the available facts and evidence.
Worked Example: A ULIP Surrender at HDFC Life
Illustrative figures. The point is the order of events, not the amounts.
- 1
Request received
On 25 March a policyholder asks to surrender a ULIP worth ₹4,00,000 in units.
- 2
Units cancelled
The units are cancelled on 28 March. Under HDFC Life's policy, this is when the linked surrender is booked, so it falls in the year ending 31 March.
- 3
Charges deducted
If ₹10,000 of surrender charges apply, the surrender is disclosed net of charges recoverable.
- 4
Cash paid later
The payment reaching the bank in April does not move the expense into the next year.
Exam Traps
Swapping triggers between claim types is the classic distractor: death claims go on intimation, not on payment or on settlement; maturities go when due (or, at SBI Life, on the maturity date), not on intimation. For a non-linked surrender, HDFC Life waits for the insured's consent to the quote, while SBI Life books it when intimated. A lapsed linked policy at HDFC Life waits for the lock-in to expire. Reinsurance recoveries are netted against claims, not shown as income.
FAQs
When is a death claim accounted for by a life insurer?expand_more
On receipt of intimation. HDFC Life and SBI Life both book death and rider claims when they are intimated, and SBI Life counts intimations received up to the end of the period.
When is a maturity claim accounted for?expand_more
When due. HDFC Life books non-linked maturities when due and linked maturities on a due basis when units are cancelled. SBI Life books maturities on the policy maturity date.
What do benefits paid include?expand_more
Policy benefit amounts plus claim settlement costs, where applicable. That is how both HDFC Life and SBI Life define it.
How are reinsurance recoveries on claims shown?expand_more
They are booked in the period the claim is intimated and netted against benefits paid (HDFC Life) or reduced from claims (SBI Life).
Are surrenders shown gross or net?expand_more
Net. Both companies disclose surrenders, withdrawals and lapsation net of charges recoverable.
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