DEATH CLAIM PROCESSING

Death claim processing in CyberLife involves the following:

1) Calculation of Death Benefits
2) Inclusion of payment of Accidental Death benefit if any.
3) Interest on Death Claims
4) Calculation of Withholding for Federal Income Tax
5) Generation of Accounting.

A brief description of each of the above functions is as under:

Calculation of Death benefits:
 Cause of death by default, is taken as “Natural”, and Number of Units and
Value Per Unit as available in coverage segment 02 are used to calculate the
death benefit amount.
 If cause of death is entered as “Accident” through online, Supplemental
benefit segments are verified for double and Triple Indemnity, AD&D and the
amounts are added to the death benefit amount.
 Death benefits may be calculated as of date of death or as of the beginning of
the month.
 The Total amount payable is calculated by considering the following:
 Additions:
♦ Death benefit/specified amount:
 For advanced products, current fund value of all the funds
applicable is calculated by using fund control file and it is the
gross cash value. If it is in addition to Specified Amount, it will
also be added.
 For annuities, Annuity amount is also computed.
♦ For Traditional Products:
 Cash value of Dividends and other forms on deposits
 Face amount of One Year term and Paid Up Additions
 Annuity value of FPA
♦ Premiums Refundable: premiums refundable are added to total
amount. For Flexible premium Advanced Products, there is no
automatic refund of premiums and hence they must be reversed prior
to processing of death claim.
♦ Accidental Death Benefit is added, if death is due to accident.
♦ Interest on Death benefits, if any.

 Deductions:
♦ Loan amount
♦ Premiums due: Premiums due are deducted from total amount.
 For flexible premium products, negative values in the grace
period fund resulting in premium dues are also reduced from
total death benefit amount.
♦ Federal and State withholding from interest payable on death benefits.

 Overriding the Death Benefit amount is possible. But the other amounts such
as OYT, PUA cannot be overridden.

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Calculation of Interest on Death Claims:

 Typically Interest on Death Claim payment may be allowed. Grace period is

defined as the period after which interest on Death Claims is paid, can also be
defined. However, Payment of interest may be forced even if the payment is
within the normal grace period.

 Interest Crediting rules are mostly controlled by user table and constants.
 Table CKAPTB26 is used for state specific entries such as
 Whether interest is allowed or not
 If allowed rate of interest and period
 Grace period.
 For determination of table entry State Code constant ULC033 is used
 The state code may be any of the following:
 Residence state of the Insured
 Issue state of the Insured
 Residence state of the Owner
 State specified by the key word input.
 If the residence state of the owner is to be used, then last line of 90 segment of
the policy records are searched in the order: for other, for payor and for
insured. The first 2 position character state code, if found would be used to
access the table. If no code is found or if the code has no match in the table,
default entry is used.
 Rate of Interest:
 The rate of interest may be State mandatory rate or that given
by key word input. Minimum rate may also be specified.
 Minimum amount of interest may also be specified by state and
if the calculated amount comes less than the minimum, the
interest may be ignored for calculation of total death benefit
amount.
 Overriding of interest calculated is possible
 Interest Compounding Rule:
♦ The constant ULC034 specifies whether the interest is simple or
compound and if compound, frequency of daily is supported.
 Period for which interest is payable:
♦ The interest begin date may be date of death or date of receipt of proof
of loss. Provision for adjusting the date for a specified number of days
is also provided.
♦ The date up to which interest is to be calculated is specified by
ULC035, which may be system date, next normal working date or any
other date input by user. Payment date may be extended by adding a
specified number of days as specified by ULC036, to current system
date

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Federal and State Withholding:
 Federal and State Withholding can be made from the Interest payable on
Death claim benefit amounts.
 Withholding will be made automatically unless “ No Withholding” is
specified through online transaction.
 But automatic withholding for state taxes will not be made when there are
multiple beneficiaries.
 If withholding indicator is not entered through online, withholding will be
made based on percentage applicable to beneficiary in corresponding 89
segment and if there are no beneficiaries, Percentage applicable to policy
owner will be used. Certain exemptions may also be allowed such as for
spouse and blind. When tax is withheld, 39 segment is created and added to
the policy.

Generation of Accounting:
 Accounting will be made by the system automatically by accessing account
numbers from CKULTACM. If overriding is present either for interest or
death claim amount, accounting would be done for system calculated amounts
only and for overriding values, general accounting entries should be made.
 Overriding accounting is possible through U1AC screen or workstation claim
window.

Transactions and Key Words:

 The U107 transaction is used to process death claims.
 Quote, process and reverse capabilities were provided through this transaction.
 U1DB screen is available to enter interest crediting and withholding information.

A brief description of key words associated with U107 transaction are given hereunder:

KEY WORD DESCRIPTION OF E PURPOSE

ACTION Action, whether quote, process, reversal or stop.
AMOUNT Amount of Death Benefit if different from system calculated value.
ASOF Date of Death.
CAUSE Cause of death translated and validated using Table CKULT022
COVRD In case of first – to –die riders, this keyword indicates the individual other
than basic insured.
ERRCORR Applicable with REVERSE and is used to identify the transaction as
correction entry.
FEDWHOVR Applicable only with WH key word, which contains values, F Or P. used
for overriding the federal withholding amounts.
FORCEINT Used when the interest amount is to be calculated even when the payment
is being made within the interest grace period. It is also used to specify
interest-crediting rate when the table entry contains all 9s.
NOXMPT To enter the number of exemptions available
PMTDATE Used for overriding the payment date specified by ULC035 or ULC036.
It is also used to set payment date when ULC035 does not specify the
payment date basis.
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 PROOF DTE To enter the proof of loss receipt date.
STATE For overriding the state code established by ULC033 and their values are
edited against table CKUDT 103
WH Used to specify whether federal income tax on the interest is applicable

Segments Referenced:

Segment Description/Purpose
Coverage Segment For obtaining the Number of Units and Value per Unit of Death
(02) Benefit. Used for calculation of Death benefit amount.
Supplementary This segment is referenced when the cause of death is given as
Benefit (03) Accident. Each supplementary benefit segment for Double and
Triple Indemnity, AD&D is searched for calculation of Death
benefit amount.
Disbursement This segment is added to the policy record when any Federal or
withholding State withholding is made from interest paid on Death Benefit
Information (39) amount.
Address Segment Used to obtain State Code for determination of State specific
(90) Interest crediting rules.

D.Purnananda Kumar,
Business Analyst- Life
12/05/2003