premium notice lapse procedure

Policy Servicing Manual No. 1 (Premium Notices And Lapse Procedure) 31.01.2002
PREMIUM NOTICES & LAPSE PROCEDURE
Premium Notices have to be sent to the policyholders ensuring that they are dispatched at
least three days before the end of the month proceeding the month in which the premium falls due.
Where more than one premium is outstanding and if the first unpaid installment with interest
thereon is received within the days of grace of the next one, it should be accepted and premium
receipt issued therefore in the ordinary course since the grace period of the next premium has not
expired and the policyholder could still pay it within that period. Even in case where the first unpaid
premium is paid after the days of grace of the next installment, the Branch Manager or the Officer will
have the discretion to accept that installment and issue the premium receipt if he is satisfied that the
concession is not misused. The premium receipt issued in this manner, that is for an installment of
premium received after the days of grace of the next installment, should invariably bear a rubber
stamp impression reading as follows:
THIS RECEIPT IS ISSUED WITHOUT PREJUDICE REGARDING THE
CORPORATION’S RIGHTS IN RESPECT OF THE SUBSEQUENT PREMIUM/S. IT SHOULD
BE NOTED THAT THE POLICY CONTINUES IN LAPSED CONDITION DUE TO NONPAYMENT
OF ALL PREMIUMS, WHICH HAVE BECOME DUE.
The above procedure reduces the incidence of deposits and also benefits the policyholders as
the amount thus adjusted help advance the policy towards acquiring paid-up value or claims
concession.
PREMIUM DEFAULT NOTICE: A policy lapses when the premium due there under is not paid
within the days of grace.
Default notice has to be issued on the expiry of three months from the due date of the first
unpaid premium.
Simultaneously with the issue of the Default Notice, a Premium Default Intimation
Agent wise i.e. for all the policies under a particular Agency organization is issued to the Agent.
FINAL LAPSE INTIMATION: Where the premium remains unpaid for six months from its due
date, Final Lapse Intimation is issued to the policyholder.
CONTROL ON FIRST YEAR LAPSES: A list of policies, which lapses in the first year, is
generated every month DO wise & Agent wise which should be used suitably for exercising control
over first year lapses.
GAPS: After the implementation of Front-End Systems, further gaps in premium will not occur from
the date of implementation of the Front-End. Previous gaps, if any, should be followed up with the
policyholder and should be located and accounted on hearing from them or earlier, if traced. If the
policyholder is not in a position to throw any light on the gap or even with the information given by
the policyholder, the Office is not in a position to locate the payment of the relevant premium in our
records, he should be advised suitably that the concerned premium remains unpaid and will be treated
as debt against the Policy. In this connection, it may be noted that under these cases the collection of
earlier gap premium/s is not to be made a condition to adjustment of further premium and such
intermittent gaps in premium are treated only as debt against the policy if not paid by the
policyholder. The same should be taken note of and if there are further dealings in the policy such as
Policy Servicing Manual No. 1 (Premium Notices And Lapse Procedure) 31.01.2002
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granting of Loan or payment of Surrender value, the debt should be realized as any other X-charge or
debt under the Policy. It may, therefore, be noted that while giving Loan or Surrender quotation, the
premium position should not be shifted back, but treating the gap premium as paid, actual premium
paid should be taken for calculating surrender value and when loan or surrender is settled, the gap
premium should be deducted. No interest need be charged on gap premium collected from the
Policyholder.
Gaps in Premium Posting under Policies other than SSS:
1. Where gaps are noticed during the period of three years immediately preceding the date of death,
intensive enquiries should be made to locate the premium/s in question. For this purpose, our
records should be verified and enquiries should also be made from the claimants with a view to
getting the particulars of the premium/s paid. If despite all these efforts the premium/s is/are not
located and if the last two premiums under the policy are paid and adjusted, the death claim may
be settled after deducting the unpaid installment/s from the claim amount. Admission and payment
of such claim will be ex-gratia basis unless the policy has got the benefit of claim concession
clause.
2. Where gaps have occurred more than three years before the date of death, efforts for locating the
gap premium should be made. If the enquiries do not result in locating the gap premium/s and if
these gaps do not exceed one yearly, 2 half-yearly, 4 quarterly and 12 monthly premiums, and as
per the latest premium position the policy is in force, the death claim may be settled for full
amount WITHOUT deducting gap premium/s.
3. Deserving claim cases which do not fall strictly within the relaxation stated in Para (2) above,
may be referred to Zonal Office for individual consideration with specific recommendations and
reasons as to why the claimant is unable to furnish particulars of payment towards the gap
premiums.
Settlement of Maturity Claims under SSS policies where intermittent and/or terminal gaps are
noticed: Wherever the policyholder submits a certificate from the employer on the deduction of
premium which are shown as gaps in our records, the Maturity Claim can be settled without deduction,
subject to the condition that the total amount of gap premium does not exceed Rs. 3,000/-.
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