Life insurance claims to the extent of basic sum assured if policyholder dies due to infection by the corona virus is admissible.
Life and non-life insurers offer accident benefit cover to the policyholders. In case of life insurance, the accident insurance cover is a rider on a core endowment, whole life or term policy but non-life insurance companies offer stand-alone personal accident policy to individuals and group insurance beneficiaries.
In case of death of the policyholder by accident, the life insurer pays to the nominee a sum equal to the basic sum assured as the accident benefit amount subject to maximum limit as per policy conditions. Under the personal accident policy issued by non-life insurers, the sum assured is payable only on death due to the accident or on permanent disability. Nothing is payable during the term or maturity or lapsation of the policy.
The accident benefit is payable under the accident benefit rider or cover when it is established by the claimant on the basis of medical and police report that the life assured had sustained bodily injury and that injury was the direct cause of death of the policyholder.
In a judgement on a case between the National Insurance Company and the legal heirs of an Indian manager of a tea factory in Mozambique who died of “multi organ failure” due to encephalitis caused by mosquito bite, the district consumer forum and state consumer forum, which heard the plea by the claimants, upheld the plea and ordered NIC to pay accident benefit claim to the heirs. Again when the matter was taken to the National Forum by the NIC, the chairperson observed that “it would be rather silly to say that it was a natural death” and “it would be difficult to accept NIC’s contention that malaria due to mosquito bite is a disease and not an accident”. Not being satisfied with the verdict of the National Forum, the NIC filed an appeal with the Supreme Court. The Supreme Court of India allowed the appeal filed by the NIC and observed that:
A) In a policy of insurance which covers death due to accident, the peril insured against is an accident: an untoward happening or occurrence which is unforeseen and unexpected in the normal course of human event.
B) Being bitten by a mosquito is not an unforeseen eventuality in Mozambique… therefore the death of the manager should not be regarded as an accident. Mosquito bite cannot be considered as an accident as it was neither unexpected nor unforeseen.
C) Supreme Court clarified that where a disease is caused or transmitted in the natural course of events it would not be covered by the definition of an accident.
It is therefore clear that a disease contracted in the natural course of living cannot be termed as accident and therefore the insurers are not liable to admit claim for accident benefit under a life insurance policy or under a personal accident policy.
Today, the whole world is reeling under the threat of the dreaded coronavirus. There is a sense of emergency at the level of the governments as well as the individuals. Globally, many people have died due to the pandemic.
In this situation some people may have a feeling that the accident insurance cover taken by them either from life or non-life insurance companies will provide financial support to their families in case of coronavirus-related death. But I think policyholders or the claimants should not harbour such thoughts and expect their insurers to rescue the affected individuals or their family members. However, I would like to clarify that I have attempted to explain the issue from the insurers’ point of view, the final decision is the prerogative of the consumer fora and the judiciary.
So far as the life insurance policyholders are concerned, there is no doubt about the admissibility of claim to the extent of basic sum assured in case the policyholder dies due to infection by the corona virus. Insurers should come forward to provide immediate relief to the dependents of such deceased policyholders by settling the claim immediately without invoking the requirement for investigation even in early claim cases. This is a global crisis, hence all concerned must act promptly and empathetically.
The writer is former MD & CEO, SUD Life