All one wants when taking a term insurance policy is a financially secure future for the family. But, did you know that in 2011-12, some private insurers have rejected almost a third of the claims?
Shriram Life, Future Generali and IDBI Federal are some insurers whose claim rejection was as high as 15-27 per cent.
An insurer who is a new player and has a small claim portfolio with large number of early claims (claims that come in the first two years of the policy), may have a low claim settlement ratio. But, this may not always be the case; it could be reflective of a poor claim processing system at the insurer’s end. So, it pays to check the insurer’s track record on claim settlement before buying a policy.
Of all the insurers in the market, the Life Insurance Corporation (LIC) has got the best record on claim settlement. The company’s claim settlement ratio has been consistently improving since 2008-09 and claims rejected have always been under 1-2 per cent. In 2011-12, LIC settled 97 per cent of the claims amounting to a settlement of Rs 6559.5 crore. At the end of the year only 1.2 per cent of the claims were pending for settlement; of which a majority was pending for a period less than three months.
So, LIC may be a good option if you are looking for a term cover. The premium for a life cover of Rs 50 lakh for a male of 30 years is around Rs 12000 per annum.
Private insurers as a group settled 89 per cent of claims in 2011-12. They had a claim settlement ratio of 82 per cent in 2008-09. The best of the lot were ICICI Prudential, HDFC Standard, SBI Life, Bajaj Allianz and Kotak Mahindra Life which had a claim settlement ratio of over 90 per cent. Aegon Religare, Future Generali, IDBI Federal and Shriram Life had the lowest claim settlement ratio in the industry of below 70 per cent. Aegon Religare Life’s Chief Marketing Officer- Yateesh Srivastava however said that the company’s poor settlement ratio was because a bunch of them were early claims. “The company has been in business only since July 08 and almost 91 per cent of claims in FY-12 were ‘early-stage’ claims, those made within two years of the policy. Also, a majority of the rejected claims were on grounds of deliberate fraud and purposeful withholding of material information”.
Ensuring claim settlement
Ensuring a trouble-free claim processing is also in the hands of the policyholder. The claim on a life policy can be rejected on evidence of non-disclosure of crucial information about health at the time of the proposal, says P Ravi Kutumbrao, Head-Technical, Bajaj Allianz Life Insurance. With Aegon Religare Life in-fact, 79 per cent of rejections in 2011-12 were due to non-disclosure of chronic ailments such as cancer and heart diseases. Remember that when a term cover is taken on-line, some insurers do not mandate a health check-up for individuals below a certain age, but it is your duty to declare the facts about your health.
Kutumbrao also added that a claim can be rejected if the policy is in lapsed condition at the time of the policyholder’s death. A term policy lapses if the due premium is not paid within the grace days (usually 15-30 days) after the due date.
However, if your claim is genuine and you have troubles with the insurer, approach the Claims Review Committee of the insurer. And, if yet not satisfied, you can escalate it to the regional Ombudsman.