claim rejection ratio – My Money Streets

Claim settlement ratio? repudiation ratio / rejection ratio or the largest Insurance company?

Who is the best insurance company for you? How to choose the best company and best policy?

The main purpose of buying term insurance is to ensure that after the death of policyholder, nominee or legal heir gets the sum assured. It could be very sad in case the insurance company rejects the policy claim to the nominee. Hence, it is important to choose a right insurance while keeping in mind about the common exclusions.

While the popularity of Term insurance is catching pace, so is the complications coming to the fore. Many people including ones who sells endowment policy claims that in term insurance nobody gets money back.

Well that is not true, term insurance is comparatively new and still finding its base, awareness is low and it will gain pace with time as people get hands on experiences. However, as it is likely and we all hope that most of the policyholders will outlive the policy term, (mostly ranges till 60-70 years of age), people feel it is unreasonable and unnecessary, many end up buying the cheapest policy online without any homework. There are also cases of hiding (or non-disclosures) of medical conditions to get cheaper premium, and not writing hobbies (adventures, bunjee jumipng, horse riding etc) to avoid rejection while buying the policy. There is a list of common exclusion which is followed by the life insurance companies. Apart from the common exclusion, we should also educate ourselves on criteria on how do choose the best insurance company, which will stand in our favour incase of life loss of the policy holder.

You can give a weightage based marking system on the below mentioned parameters. Keeping 5 marks for each criteria, and marking 1 for lowest performance on the parameter and 5 for the highest.

Though do check out the premium amount of each insurance, but it should not be a criteria of choosing insurance

Here is a list of criteria I personally followed while choosing term insurance –

Which company is offering your desired insurance cover and package – List down what is the kind of cover you are looking at, are you looking for a rider like Personal accident cover/ Critical Illness benefits or Premium waiver or multiple option of payout of death benefit. First step is to short-list your requirement.

Tip – Its a good idea to bundle your Critical Insurance cover with Life insurance and not health insurance, as in life insurance you lock your premium of entire term, while Health insurance premium keeps increasing based on age and claims

Company history/reputation – In financial services, trust is the first factor. So, knowing how the Brand in general is perceived by you, your circle of friends who happens to work in financial services can come handy. Doing a google check on the news on the company/ promoter, checking its review would be helpful. Check how long the company is in operation specially in India and how the news have been on their claim settlement experience (simple google check – insurance company + issues on claim settlement) will give you some snapshot on how the negative experience have been on the particular company. It is good idea to short list companies a per their age – ideally more than 5 years of operations.

Do keep a criteria on How long they’ve been in business; In which states they sell their products and how is their quality of service

Claim settlement Ratio – A crucial matrix for shortlisting the insurer. It is considered that higher the claim settlement ratio, higher the chances of settling your insurance claims. While considering an insurance company, check repudiation ratio and rejection ratio of the claims too.

Based on 2018-2019 IRDA data on claim settlement ratio of Life Insurance companies

Link to IRDAI Annual Reports

According to latest Annual report of IRDAI, Claim settlement ratio of LIC was at 97.79% as at 31.03.2019 when compared to 98.04% as at 31.03.2018. For private insurers, settlement ratio had increased to 96.64% during the financial year 2018-19 when compared to 95.24 % during the previous year

Claim Amount settlement ratio – Claim settlement ratio can be looked at in two ways, first is no. of claims settled based on claim received, a volume measure and second is the ratio of settlement ratio based on claimed amount

Claim repudiated / claim rejection ratio – This is an important parameter, in any scenario, if this ratio is closer to one or above 1%, just tick-off the insurance company off your list, even if it is meeting all other criteria

Image taken from IRDA Annual report 2018-2019

Pending claims ratio – This figures shows what are the pending claims application lying with insurance companies. Ideally a company should close the claim within 30 days, but there are times, when the companies take a lot of time to conclude their investigation resulting into agonizing waiting game.

Solvency ratio – Financial strength of your insurance is important. Minimum solvency ratio of insurance should be 150% as per IRDA. Higher solvency ratio is a good way to look at it, however, the decision should be made keeping in mind the claim settlement ratio as well.

We need to keep in mind Term policy is taken for a period of 25 – 35 years term, and all these ratios can alter in this time frame. Given all the above parameters play important role in deciding life insurance company and Term policy, the first priority remains filling the insurance application truthfully to ensure claims don’t get rejected.

Keep reading my blogs on investments, insurance, mutual funds, second income options, and many financial education topics.

Must read for Financial Education –
Let’s Talk Money – Monika Halan
I will teach you to be rich – Ramit Sethi
Rich Dad Poor Dad – Robert Kiyosaki
Easy Money Triology – Vivek Kaul
Aapka Paisa Aap Samhalein (आपका पैसा, आप संभालें)- Rajnish Kant

11 reasons Term-life insurance claim can be rejected

What to do if the claim rejection appears unreasonable

Buying a term-insurance doesn’t ensure the it will cover death of policy holder under any or all circumstances. There are death claims which gets rejected because of exclusions in term-life insurance plans and also non-disclosure. Insurance is contract between two parties, the policy holder and the insurer, when you buy a policy online or through agent, you must read the form carefully, do not hide any fact about yourself what you ought to tell the insurance company, i.e. the questions mentioned in the insurance application. Also, keep a copy of of your filled up form, take a print out and keep it in a folder/ safe ocker for future reference.

Initially it me seem tempting to avoid habits like smoking/ drinking, hobbies like bungee jumping, horse riding etc, but you should know in advance for such activities Life Insurer may add extra premium. The focus here should be to ensure to respond to each query truthfully. Following are the nine common reasons why claims get rejected. But everything cannot be decided in black and white, and there are times when conflict may arise between the nominee and insurance company and nominee may feel the insurance is rejected on false grounds, will cover that too in the post.

Also Read – Term Life MUST to secure future of loved ones

11 reasons Term-life insurance claim can be rejected –

Suicide or death due to self-inflicted injury – If the policy holder commits within one year of purchaisng the policy, nominee won’t get death benefit. However, the nominee will get the benefit second year onwards.

Death involving homicide: If death of the policy holder is suspected to be murder and the nominee(s) are suspect of the crime, the claim-compensation to that nominee(s) will stand rejected, until her/his innocence is established in a court of law

Death due to sexually transmitted diseases like HIV or AIDS – Death claim arising out of STDs will be rejected as per common exclusions, no insurance company will honour such claims

Death due to the pre-existing health conditions (condition present prior buying the insurance) – If policy holder happens to have pre-existing health condition such as diabetes, hypertension or any disease, such claims which may arise from death due to complication on such condition will be declined. As, many health condition appears little later part of our life, it is prudent to apply for term-life insurance policy as soon as getting a job, atleast by 30 years of age.

Death caused due to the involvement in illegal or criminal activities – If a policy holder dies while engaging in any illegal or unlawful activities such as drug peddling, smuggling, unauthorised arm dealing any activity which is considered illegal as per Indian Law, the insurance will be rejected

Accidental death due to driving under the influence of alcohol or drugs – If the policyholder dies due to accident caused by driving under the influence of Alcohol

Death due to the participation in racing activities – Death caused by sports or adventorous activities like bike racing, car racing, traking, bunjee jumping, horse racing, any adventorus activities which has inherent life risk, claim arising from such activities are out of the scope of policy claim. Claim arising from fatal accident such as these will be outright rejected.

Death due to pregnancy and childbirth – If the death of the policyholder takes place due to pregnancy complications or childbirth, the insurer would not pay the sum assured to the nominee.

Pre-existing disease / Condition – Death due to any condition that existed while availing the term insurance policy will not be settled by the insurer

Death due to natural disaster/ war/ nuclear calamity – It is a common exclsion in life insurance, in situations like war and nuclear calamity, insurance company protects itself from mass claim which may arise in such situations.

Non-disclosure – Non-disclosure such as smoking habits, recent surgery, any medical procedure, family history or any point in the query list of the policy application form will be counted as breach of the insurance contract conditions, and on discovery of such facts, Insurance companies will reject the claim

What to do if you feel the claim rejection was unjustified?

The above are the direct rejection reasons, but if nominee is not satisfied with the reason of rejection, delay in claim settlement the nominee can escalate the matter. Ideally, insurance claims needs to be settled within 30 days of claim application. If the claims are not settled on time and the nominee is not satisfied with the response from the insurance company, nominee can take following action. The nominee needs to file a complaint first with the insurance company through the consumer grievances section online or reach out grievances cell officer with written complaint and required supporting documents at the earliest, they should respond to your complaint within 15 days of complaint submission.

If Insurance company fails to resolve your query or sort the claim settlement issue, you can complaint to IRDAI (Insurance Regulator and Development Authority of India)approved Insurance Omudsman in a written format. Insurance Ombudsman scheme was created by government of India for individual policyholders to have their complaints settled out of the courts system in a cost-effective, efficient and impartial way.

IRDAI Website details out here when and how you can approach the ombudsman- https://www.policyholder.gov.in/ombudsman.aspx

There are at present 17 Insurance Ombudsman in different locations in India. Ombudsman has authority to intervene in the claims below Rs. 30 lakhs. Incase of claims above 30 lakhs, one needs to approach the consumer court for sorting the matter with legal help. In consumer court, Court’s directive will be final for the insurance company. Insurance company cannot escalate the matter to any other court. If the nominee wins the case, the court can direct the insurance company to pay penalty and interest charges on the claim amount in favour of the complaint.

So, Read the policy application carefully, make comparison with few products, also check claim settlement ratio before making a decision. Even after buying a insurance policy, Policy holder gets a free-look period of 15 days, within which policyholder should go through the policy document, incase of dissatisfaction, policy holder can cancel the polcy and get back the premium paid (company may deduct medical expenses – if incurred).

Check my blog for informative posts on financial products, second income options and financial education.

POSTED ON AUGUST 21, 2020 ”DID YOU KNOW PERSONAL ACCIDENT INSURANCE COSTS RS. 12?”

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