“What a long and tedious meeting!” Borhan was heard grumbling.He had just finished attending July monthly meeting with the top management of Takaful Dinamik Berhad (TDB), a takaful company located in the heart of Kuala Lumpur.Just as he was about to breathe a sigh of relief, Borhan saw a letter which was discreetly placed on his table by his secretary.He was about to throw his files onto the letter when his eyes caught the phrase "Bank Negara Malaysia” (BNM) on the letter.BNM is the Central Bank of Malaysia and responsible for regulating and monitoring the insurance and takaful industry in the country. Borhan felt a bit anxious. With a furrowed brow he opened the letter and scrutinized the content line by line

Janor, Hawati

Redzuan, Hendon

Yakob, Rubayah

UUM Repository

Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 15    TAKAFUL CLAIM DILEMMA  1RUBAYAH YAKOB, 2HENDON REDZUAN, 3HAWATI JANOR  1,2,3Universiti Kebangsaan Malaysia, 3hawati@ukm.edu.my    Prologue  “What a long and tedious meeting!” Borhan was heard grumbling. He had just finished attending July monthly meeting with the top management of Takaful Dinamik Berhad (TDB), a takaful company located in the heart of Kuala Lumpur. Just as he was about to breathe a sigh of relief, Borhan saw a letter which was discreetly placed on his table by his secretary.  He was about to throw his files onto the letter when his eyes caught the phrase "Bank Negara Malaysia” (BNM) on the letter. BNM is the Central Bank of Malaysia and responsible for regulating and monitoring the insurance and takaful industry in the country. Borhan felt a bit anxious. With a furrowed brow he opened the letter and scrutinized the content line by line.   Borhan’s intuition was right. The content of the letter was indeed not very flattering to TDB (Exhibit 1). The letter was related to Yusof Bin Ahmad, a policyholder of TDB whose claim for total permanent disability and critical illness benefit was recently rejected. Yusof was not satisfied with the reasons for rejection given by TDB. He insisted that his claim must be reviewed by TDB. The letter instructed TDB to provide explanation for the claim rejection and must response within two weeks from the date of the letter. BNM would review the explanations to be given by TDB and would take further measures deemed appropriate for the situation.   Borhan leaned back in his chair as he glanced at the calendar in front of him. "Today is July 26 and the letter is dated July 24. So I have exactly twelve days to respond to BNM". He whispered to himself.  Yusof’s case was still fresh in his mind. As the manager of the claim department, he was responsible for making decisions regarding claims. And he still remembered endorsing the rejection of Yusof’s claim. "The claim was treated fairly. It was given due considerations and I am confident the decision I made was appropriate". Borhan tried to comfort himself. Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 16    However, he knew that Yusof’s claim had to be reinvestigated immediately. It was his responsibility to find the most appropriate solution to the problem.   Among the important issues that needed to be resolved by Borhan in Yusof’s claim reinvestigation include:  1. Was it reasonable and legitimate to reconsider Yusof’s claim?    2. Has Yusof breached any terms or provisions specified in the policy contract?   3. Was TDB responsible to pay Yusof’s claim?  4. If TDB was responsible to pay Yusof’s claim, would Yusof receive all types of benefits under the policy?   5. If TDB was responsible to pay Yusof’s claim, would Yusof receive the total amount of each benefit under the policy.  6. What measures should be taken by TDB to prevent claim disputes in the future?  Since Borhan became a claim manager of TDB five years ago, he had never been asked by BNM to justify his decision regarding a claim.  Being one of the leading takaful companies in Malaysia, TDB has always strived to provide the best service to their customers. Borhan and other employees of TDB have always been proud of their company’s achievements and progress.   Background of TDB  TDB was formed from the partnership between Alpha Insurance, one of the well-known international insurance companies and Delta Bank. Both of them were financially strong companies in their respective fields of expertise. TDB received the approval from BNM in early 2006 to operate a takaful business. Alpha Insurance was founded in 1848 and began as a leading life and pension provider in the United Kingdom. Currently, it is one of the world’s largest financial services groups. Alpha Insurance brand had been in Malaysia for over 80 years through Alpha Malaysia. Delta Bank was launched in 1974 in Malaysia and at present it enjoys a 9-million customer base that is served by 5,100 employees in nearly 400 branches Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 17    nationwide. It is a statutory body under the Ministry of Finance. Today, with the strong brand presence and innovative financial services, TDB has attracted more than 440,000 customers.  Parallel with the overwhelming development of the takaful industry in Malaysia, TDB business had remained robust with the New Business Annual Contribution Equivalent (ACE) of RM269.2 million in 2013. The data provided by the Insurance Services Malaysia indicated that TDB retained its position as the largest family takaful operator in Malaysia with a 27% market share. The company’s outstanding product innovation and strong financial performance entailed them to receive numerous awards from both local and international organizations. Among TDB’s goals were to provide innovative and dynamic products to the Malaysian market, and to become a world-class Shariah-compliant financial solutions provider.    Background of Claim  Borhan informed his claim executive, Johari, about BNM letter and asked him to retrieve Yusof’s claim files. Borhan then asked Johari to brief him regarding Yusof's claims and his takaful coverage.    “Yusof submitted his claim on 25th January 2013. His claim was for a total permanent disability and critical illness benefit. He has been diagnosed with primary progressive multiple sclerosis (PPMS). As a result of his illness, Yusof also suffered from permanent disability. Thus, he also sought to be waived from future contributions for his plan while the plan continues to be in force. And since he was the payer for his sons’ takaful plan, he also sought for contribution waiver for their plans too. Neither Yusof nor his family members had ever made any claims before”, Johari explained to Borhan.   Johari also explained about Yusof’s employment history and financial difficulties faced by his family. During the period from 1989 to 2009, Yusof worked as an account executive at several companies, including JSE Development Corporation, SC Sdn Bhd and JC Sdn Bhd. In early 2010, he resigned from his job to venture into gold business. His wife, Pn. Wanda, was also an account executive at JSE Development Corporation before joining him in the Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 18    gold business. Their average household income was in the range of RM10,000 to RM13,000 a month.   Due to the health problem that he endured, Yusof and his wife lost their source of income as they could not work since the beginning of 2012. The medical cost involved in treating chronic diseases such as PPMS was very high, reaching RM4,000 per month. Yusof  was also required to go through extensive physiotherapy which was very costly. He also had to support his children who were still in school. In addition, he needed to provide for basic needs such as food and utilities. Adding to his expenses was the disposable diapers which he had to wear regularly.  Despite his health problem, Yusof continued paying the monthly instalments for the houses he owned, i.e. RM750 for his terrace house and RM650 for his apartment. He feared his houses would be auctioned should he stop paying the instalments. In addition, Yusof must also pay the monthly car instalment of RM800. He needed the car for his daily use and for his medical treatment. He had to commute from his house in Johor Bahru to the government hospital located in Kuala Lumpur once in every 2 months. On top of that, he continued paying the contribution for his and his family’s takafulink plan totalling RM900 per month. Yusof had used up all his savings to pay for these expenses.   Takafulink Plan   Yusof took out an investment-linked family takaful plan known as Takafulink Plan when he was 43 years old. He also took the same plan for his wife and their two sons. All plans were in force starting from 1st June 2009. Total contributions paid by Yusof and his family were RM900 per month. Out of this amount, RM300 was the contribution for Yusof’s plan, RM300 was for his wife’s plan and RM300 was for his two children (RM150 for each child). He had dutifully paid his contributions without fail since the inception of the takaful contract until the submission of the claim.   Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 19    “Even until now Yusof still continues to pay his contributiona” Johari remarked. Both of them were impressed with Yusof’s commitment in meeting his obligations as a policyholder. Johari also enlightened Borhan about the coverage and benefits accorded to Yusof and his family under the Takafulink Plan that they purchased (Exhibit 2 – Exhibit 5).   Reasons for Rejection of Claim  Borhan then asked Johari the reasons for the claim rejection. Johari handed a letter to Borhan, “This is our rejection letter to Yusof, dated 27 February 2013. The reasons for rejecting the claim are clearly stated in this letter" (Exhibit 6).  TDB’s decision to reject the claim was based on several factors. Firstly, in order to qualify for a claim, there must be a diagnosis by a consultant neurologist confirming that the policy-holder has suffered from the symptoms of PPMS disease for at least a continuous period of six months.  Secondly, through imaging procedures on the patient, there must be presence of white patches/spots involving the optic nerves, brain stem and spinal cord, resulting in neurological deficiency to the patient. In addition, a variety of well-defined abnormality in the structure of tissue or organs must be detected in the patient. A history of aggravation or reduction of the neurological deficiencies suffered by the patient must also be well-documented.   In Yusof’s case, he was diagnosed with the illness in 17 December 2012, and a claim was submitted to TDB on 25 January 2013, hence the required time period of six months was not attained. Furthermore, the symptoms suffered by the policyholder must reflect the definition of PPMS disease as stated in the policy (Exhibit 7). However, the policy-holder did not demonstrate the symptoms of the disease as indicated in the policy.  To gauge the appropriateness of rejecting the claim, Borhan asked Johari to explain about Yusof’s medical condition as described by his physicians in the medical reports (Exhibit 8-10).  Johari also summarized the important facts in Yusof’s medical report as shown in Table 1 below:                                                           aContribution is a term used in takaful that has the same meaning with premium in conventional insurance  Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 20     Table 1: The time-line of important facts of Yusof’s medical report Date Action Medical Result 8th August 2011 Brain MRI at Queen Specialist by Dr. Hasnahb Diagnosis of possible MS 13th December 2012 Medical check-up by Dr. Wanc at a government Hospital Muscle wasting, weakness, hypertonia and hyper-relaxia of his lower limbs 17th December 2012 MRI on brain and spinal cord by Dr Wan Presence of all the symptoms of MS 17th December 2012 Follow-up with Dr. Wan Diagnosis of PPMS    Epilogue  Borhan pondered over the letter from BNM which he received. This would be his first experience having to justify to BNM about a claim rejection. Borhan was aware of the fact that BNM would ensure that policyholders were given fair treatment by their insurance or takaful companies. Whenever BNM received complaints from policyholders regarding a claim, the bank would promptly take the necessary actions to respond to the complaints. At the same time, Borhan also thought about Yusof who was suffering from his illness and disability. Streams of sympathy washed over him. But Borhan realized that he would be answerable to the top management of TDB for any decisions he made regarding the claim. He had to ensure that this case would not damage TDB's reputation as one of the highly respected takaful company. He was responsible to find the most appropriate solution that would satisfy BNM, Yusof and TDB itself. “Huh, claim dilemma…” Borhan whispered to himself as he started to review Yusof’s files.                                                               b Dr. Hasnah was a  neurology consultant registered with the Malaysian Medical Council (MMC) and worked at the Queen Specialist Hospital in Johor Bahru. c Dr. Wan was a neurology consultant  registered with the Malaysian Medical Council (MMC) and worked at one of the government hospitals Kuala Lumpur. Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 21     Exhibit 1   Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 22     Exhibit 2        Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 23             Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 24     Exhibit 3  Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 25               Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 26     Exhibit 4  Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 27              Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 28     Exhibit 5   Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 29                Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 30     Exhibit 6 TAKAFUL DINAMIK BERHAD YUSOF BIN AHMAD JOHOR BAHRU JOHOR  Date   : 27/02/2013  Dear Sir/Madam  Certificate Number : xxxxxxxx Crisis Cover Benefit Claim …………………………………………………. We regret to learn of the Person Covered disability/illness. Please accept our well wishes for a speedy recovery. Kindly informed that this claim has been closed due to the following reason/s:-  No Certificate No Cover Code Reason 1 xxxxxxxx Critical Illness Benefit Decline – Condition does not conform to the definition as stated in the Annexture  2 xxxxxxxx Contributor Benefit Decline – Condition does not conform to the definition as stated in the Annexture  Based on the Confidential Medical Certificate completed by Dr. Wan of Government Hospital, we noted that you were having progressive lower limb weakness with numbness and fecal incontinence. Subsequently diagnosed with multiple sclerosis on 17/12/2012.  We would like to draw your attention to the definition of “Multiple Sclerosis” which means:- Unequivocal diagnosis by a consultant neurologist confirming the following combination, which has persisted for at least a continuous period of six (6) months: i. Symptoms referable to tracts (white matter) involving the optic nerves, brain stem and spinal cord, producing well defined neurological deficits; and  ii. A multiplicity or discrete lesions; and iii. A well-documented history of exacerbation and remissions of the above said symptoms/neurological deficits.  In view of the above, we regret to inform that your condition does not conform to the above definitions where your illness was diagnosed on 17/12/2012, shows that the event has not lasted more than six (6) months. Hence, we are unable to admit liability on this claim.  We shall review this claim again if further medical evidences is submitted to us to prove that your condition qualifies to either one of the aforesaid 36 Critical Illness definitions. Returned herewith the Certificate Documents (3) for your safekeeping.    Kindly continue to pay the contributions in order to keep the certificate inforce.  Thank you,   Yours sincerely, Borhan Claim Manager      Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 31     Exhibit 7                 Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 32     Exhibit 8 Medical Report by a Government Hospital Consultant Neurologist (Dr Wan)  Yusof has had symptoms of progressive lower limb weakness and numbness for 2 (two) years prior to his presentation to our institution on 13th December 2012. A year before that in August 2011, he was initially seen by Dr Hasnah in Queen Specialist Hospital and a diagnosis of possible multiple sclerosis was entertained based on clinical and radiological features.  On my examination on 13th December 2012, the patient had muscle wasting, weakness, hypertonia and hyper-relexia of his lower limbs are all in keeping with a spinal cord pathology. In other words, referable to tracts (white matter) involving the optic nerves, brain stem and spinal cord. The patient is most likely on a wheelchair life long. Yusof had 2 (two) MRI scans performed. The first was a brain MRI on 8th August, 2011, the report of which is attached (Exhibit 9). The report confirms that there were lesions in both periventricular regions which are typical of multiple sclerosis. His second scan was on 17th December 2012 which consisted of imaging of the brain and spinal cord. This MRI confirmed the presence of discrete lesions at both periventricular regions involving the frontal, temporo-parietal and occipital lobes bilaterally, corpus callosum and periaqueductal region with multiple lesions throughout the spinal cord. The report is attached (Exhibit 10).  I also need to get you acquainted with the 2010 McDonald Criteria for the diagnosis of MS.  According to this universally accepted criteria, a diagnosis of PPMS is made when the patient has had at least a year of disease progression and has evidence of at least 1 (one) dissemination in space (DIS) lesions in multiple sclerosis (MS)-characteristic regions (periventricular, juxtacortical, infratentorial) in the brain and at least 2 DIS lesions in the spinal cord. Finally, on 15th January 2013, the VEP and MRI findings, along with his history fulfills the 2010 McDonald Criteria this patient has been diagnosed with Primary Progressive Multiple Sclerosis (PPMS). There is no doubt of his diagnosis and the patient is very unlikely to improve.  MS has different subtypes (relapsing remitting, secondary progressive, primary progressive and progressive relapsing) each with its own disease progression. Although the typical description of relapsing remitting MS (the most common subtype) is marked by exacerbations and remissions, this does not encompass the entire spectrum of the disease.    Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 33         Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 34     Exhibit 9       Institute for Management and Business Research (IMBRe) National Case Study Conference (NCSC) 2015 35     Exhibit 10   

Takaful claim dilemma

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