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IBNR and unclaimed death benefits


Turkey’s state sector has made rapid strides in computerising many aspects of life. Visitors to Turkey can now apply for an e-visa on line. Citizens can track and pay their tax and social security bills on line. We can also check details on our traffic insurance policies.

Towards the end of last year, the Office of Population Statistics opened up its databases to insurance companies and a directive from the Treasury required companies to search through the database of deaths for their lives insured to see whether they had any incurred but not yet reported claims.

Fair enough, but what made companies lobby for the directive to be recalled or its implementation to be delayed is the fact that it required an IBNR claims reserve to be set up for the amount so discovered.

As it is currently impossible for insurance companies to obtain the cause of death from a query on the database, this would cause over-reserving as claims that would be normally be rejected due to exclusions such as suicide are automatically included in the Treasury’s directive. The situation is even more acute in the case of Accidental Death Benefit, of course, since a large number of the deaths in the database are as a result of sickness or natural causes.

In addition, it is quite common in Turkey for family members never to make a claim. Where the beneficiary is not named, but just defined as the life-insured’s statutory beneficiaries it may be that family members never go through the process of probate to ratify themselves as beneficiaries of the estate if the deceased died with more debts than assets!

Of course, if it is just that they did not know about the policy it is important for the industry to do what it can to let them know and provide them with information relating to how to make a claim. To this end, I recommended that the IT link went the other way. Insurance companies provide up-to-date details of insurance policies to the Insurance Information Centre (SBM). This includes the ID numbers of lives insureds. If the Office of Population Statistics were connected on line to the Insurance Information Centre’s system, then they would be able to provide the person notifying them of a death with information concerning life insurance policies that were in force at time of death, along with contact details for the insurance companies.

Following industry representation, the implementation of this well-intentioned but hastily-drafted directive was deferred to a later date.

It would appear that the Treasury is currently working on a solution that satisfies both the industry and their desire to reduce the number of unclaimed valid death benefits. The Insurance Information Centre has produced a report for each company covering deaths in 2013 of citizens that showed in the company’s data submitted to the Centre as lives insured. The report contains information such as product, sum insured at death and contact details for the insured’s next of kin. Companies have been asked to check the accuracy of the policy information.

So, watch this space. As yet there has been no mention of rolling back to look at deaths before 2013 (the original directive went back 5 years ). There is however a strong hint that they may be moving towards requiring insurance companies to proactively contacting the next-of-kin, and setting up an IBNR on this basis.

Tags: reserves | IBNR | claims | death |
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