12.6 Life Claim Recipients, Medical Claims and Registers

Study Focus

Schedule 10 determines payment to trustees, nominees, assignees or estate recipients. Hospital and accident claims distinguish reimbursement from fixed benefits.

4. Title to Policy Moneys Under Schedule 10 of the FSA 2013

Even when proof of death is clear, the insurer can pay only the person with valid legal title. For a life or personal accident policy on the policy owner's own life, title is governed by Schedule 10 of the Financial Services Act 2013:

+-------------------------------------------------------------+
|          SCHEDULE 10 FSA 2013: CLAIM PAYOUT PATHWAYS        |
+-------------------------------------------------------------+
| 1. Paragraph 5 Trust Nomination (non-Muslim owner)          |
|    -> Paid to the trustee for spouse / child / parent       |
|    -> Outside the estate; not subject to the owner's debts  |
| 2. Paragraph 6 Nomination (all other nominees)              |
|    -> Paid to the nominee as EXECUTOR                       |
|    -> Part of the estate; debts paid first                  |
| 3. Paragraph 8 No Nomination                                |
|    -> Executor or administrator, or if none:                |
|       spouse / child / parent (Distribution Act 1958);      |
|       if none, up to RM 100,000 without a grant             |
+-------------------------------------------------------------+

Pathway 1: Trust Nomination Under Paragraph 5

• Who: A non-Muslim policy owner's spouse or child, or a parent if no spouse or child was living when the nomination was made.
• Settlement: The policy moneys do not form part of the deceased's estate and are not subject to the deceased's debts (Paragraph 5(2)). The insurer pays the trustee (often the adult nominee, or the other parent of a minor nominee) on a claim with proof of death, without a Grant of Probate or Letters of Administration.

Pathway 2: Nomination Under Paragraph 6

• Who: Any other individual nominee, such as a sibling, a friend, or a parent where a spouse or child is living, and every nominee of a Muslim policy owner.
• Settlement: The insurer pays the nominee, who receives the money as an executor, not as the beneficial owner. The money forms part of the estate, so the nominee pays the deceased's debts and distributes the balance under the Will, the Distribution Act 1958, or Faraid for a Muslim estate. If the policy owner had assigned the benefits to the nominee, the nominee keeps them as a beneficiary.

Pathway 3: No Nomination Under Paragraph 8

Where the policy owner dies without a nomination (or the nomination has lapsed):

1. Executor or administrator: The insurer pays the lawful executor or administrator of the estate, on production of the Grant of Probate, Letters of Administration or distribution order.
2. No executor or administrator: If the insurer is satisfied that there is no lawful executor or administrator at the time of payment, it may pay the policy moneys to the deceased's spouse, child or parent in accordance with section 6 of the Distribution Act 1958.
3. No spouse, child or parent: The insurer may pay up to RM 100,000 (or a higher amount set by BNM), without a grant, to a person who satisfies it that they are entitled to the estate, are named as executor in the Will, or have the consent of all lawful beneficiaries to act as administrator. Any balance above RM 100,000 is paid to the lawful executor or administrator.

The RM 100,000 figure applies to the total policy moneys under all of the owner's un-nominated policies with that insurer (Paragraph 8(3)). A person paid under Paragraph 8(2) receives the money as an executor and must distribute it in due course of administration (Paragraph 10). If the person entitled is under 18 or mentally incapable, Paragraph 9 directs payment to a trustee, a parent, or, for larger sums, the Public Trustee or a trust company.

Delays and Interest

• Unclaimed by the nominee (Paragraph 4): If a nominee has not claimed within 60 days of the insurer learning of the death, the insurer must write to the nominee. If there is still no claim within 12 months, the insurer pays as though there were no nomination.
• Late payment interest (Paragraph 12): If a claim on a life policy, or on a personal accident policy upon the owner's death, is not paid within 60 days of notification, the insurer must pay compound interest at the average 12-month fixed deposit rate of licensed banks published by BNM plus 1% (or another rate BNM specifies) from the end of the 60 days until payment.

---

5. Claims Investigation, Fraud Detection, and Dispute Resolution

Special Investigation Unit (SIU) Protocols

Life insurers maintain specialized forensic units to combat insurance fraud, which inflates premium costs for honest policyholders. Common fraud typologies include:

• Phantom / Faked Deaths: Procuring fraudulent foreign death certificates or bribing corrupt officials while the insured remains alive.
• Staged Accidents and Concealed Suicides: Disguising intentional suicide as a single-vehicle road accident during the first policy year.
• Impersonation: Sending a healthy surrogate to undergo required medical examinations in place of an ailing applicant.

Proper Protocol for Claim Repudiation

If an insurer repudiates (rejects) a claim on grounds of material non-disclosure, fraud, or policy exclusion, Bank Negara Malaysia guidelines require the insurer to:

1. Issue a formal, detailed written repudiation letter explaining the precise contractual and factual grounds for rejection;
2. Present certified documentary evidence substantiating the decision;
3. Notify the claimant of their right of appeal and provide contact details for consumer dispute mechanisms.

Dispute Resolution: The Financial Markets Ombudsman Service (FMOS)

Claimants dissatisfied with an insurer's claim decision have independent, free redress:

• Financial Markets Ombudsman Service (FMOS): Since 1 January 2025, FMOS (which absorbed the former Ombudsman for Financial Services) resolves disputes between consumers and financial service providers. It is approved by BNM and the Securities Commission.
• Jurisdiction: FMOS hears life and general insurance claims involving direct financial losses of up to RM 250,000. It does not handle disputes about payments made in accordance with Schedule 10, or about the actuarial basis of surrender values and bonus rates.
• Consumer Protection: The service is free. The Ombudsman's Decision is binding on the insurer, while a complainant who rejects it may pursue the claim in court.

Hospital, Personal Accident and Claims Registers

For hospitalisation and surgical benefits, check membership, dates of cover, waiting periods, accepted conditions and the expense limits. A panel hospital may seek a guarantee letter, but this is an administrative facility rather than an unconditional promise to pay all expenses. At a non-panel hospital, the customer may pay first and submit itemised bills and medical evidence for reimbursement. Pre- and post-hospitalisation expenses require their own covered time window and relationship to the insured admission. Prevent duplicate recovery of the same expense under overlapping reimbursement contracts.

For personal accident claims, establish the accidental event and its causal connection to death, injury or disability. A police report, medical diagnosis and disability assessment answer different questions. Apply the benefit schedule for a fixed-benefit claim and original expense evidence for reimbursement. Do not confuse an illness-triggered disability with accidental disability or assume every injury produces the full sum insured.

The insurer's claims register records the claim reference, policy and claimant details, notification and event dates, benefit sought, evidence received, outstanding requirements, decision and payment. This supports monitoring, reserving, complaint review and audit. The agent records accurate progress and protects confidential documents; only the authorised claims function decides liability. Escalating missing documents promptly is more useful than promising an unverified settlement date.