Busting the myth of tedious insurance claims settlement
It is a common perception that settling insurance claims is tough and a tedious process. After all, claim rejection is quite common among insurers. Many point fingers at the third party administrators hired by insurance companies for claim rejections or delays. Many people hold them responsible for making the process cumbersome.
But the scenario has changed drastically in the last few years. This is because the insurance regulator—Insurance Regulatory Development Authority of India (IRDAI)—has stepped in. The IRDAI introduced a new set of regulations. Their aim was to ensure policyholders do not suffer.
A bit of number crunching threw up these interesting facts:
Top private sector insurers like Tata AIG, Bajaj Allianz Life, HDFC Life, and Bajaj Allianz General had good claims settlement ratios in 2015–16. These ratios were 89.63%, 98.03%, 95.02%, and 99.21%, respectively.
The claims rejection ratio is now firmly under 5%. This is true for the largest insurer LIC as well. That means policyholders can look forward to better days ahead. These figures could become even more impressive in 2016–17.
Here are some bottlenecks that complicate the settlement process:
- Not reading the policy documents carefully is a problem. There are several exclusions listed in the document bond. If you overlook these, settling claims may be difficult for you.
- Non-disclosure or partial disclosure of facts may affect even valid claims. The facts could relate to a policyholder’s age, nature of occupation, and so on.
- Sometimes, the insurance advisor fills the proposal forms for the applicant. This is a big mistake. The advisor may not know vital facts about the applicant. Hence, disparities may arise during underwriting of the policies.
How claims are processed:
An insurance company has an obligation towards its customers. It needs to settle claims promptly.
On your part, you need to fill a form. Next, contact the financial advisor from whom you bought the policy. Submit all relevant documents to the insurer. You may need a death certificate, hospital bills, and the policy bond, among others.
Usually, claims settlement happens within 7–15 days from the receipt of the documents. The insurer issues a cheque on the policyholder’s name.
There are new rules governing India’s insurance sector. third party administrators can no longer settle or reject claims on behalf of insurance companies. The IRDAI has restricted their role. They can now only facilitate hospital admissions and make recommendations to insurers. This has come as a breather to policyholders. In the past, many complained about having a tough time dealing with the third party administrators.
Meanwhile, insurance companies have set up in-house claim settlement cells. These cells ensure prompt service to customers. Insurers like ICICI Lombard, Bajaj Allianz, and HDFC ERGO all have such cells nowadays.
Insurance companies have reduced their dependence on third party administrators. In some cases, this is now below 10%. They are now recording better claims settlement numbers than ever before. The turnaround time for settling claims has also improved. That is because insurers are settling claims through their own in-house cells.