Claim settlement ratio and other data tell you
which insurer is more reliable.
Would your life insurance policy really take care of the financial
needs of your dependents as insurers promise to do after your death? Don’t
take them for granted. Insurance regulator IRDA’s annual reports for
2012-13 reveal that of the total 23 private life insurers, only five have a
claim-settlement ratio of over 90% (in terms of number of policies),
despite many of them having completed 10 years of operations.
The figure tells you that many insurers are tight-fisted when it comes to
passing on the benefits to nominees. According to financial advisors, it’s
time insurance buyers, especially those considering pure protection-term
covers, take their eyes off the claims of lowest premium and highest
benefits, and pay a more attention to the claim settlement record of the
insurance company. “Claims settlement ratio, along with related data, is
the only objective yardstick for the consumer to determine which insurance
company is preferable and more reliable,” says consumer activist Jehangir
Gai.
IRDA’s data reveals LIC had the best claim settlement ratio of 97.73% among
life insurers in the country. Private life insurers’ average settlement
record was at 88.65%. Of the 23 private life insurers, only five — ICICI
Prudential Life, SBI Life, HDFC Life, Max Life and Kotak Life — have a
claim settlement record of over 90%. Shriram Life, Aegon Religare,
Edelweiss Tokio and DLF Pramerica Life are at the bottom of the list.
Insurers say wrong information provided by policyholders in the proposal
form or non-disclosure of facts are the key reasons for rejection of
claims. Often, they claim, this is because many policyholders leave the
paperwork to agents. So, apart from completing the form yourself when you
have zeroed in on an insurance product, next time ask your insurance
advisor for the claim settlement record of the insurer. Even before asking
him for details, you can visit the website of the insurance regulator and
go through the industry data to ensure the advisor doesn’t take you for a
ride. “Customers should exercise caution while buying a policy. They should
select a company which has a claims settlement ratio of above 95%,” says
Kalpana Sampat, chief of branch operations (underwriting and claims), ICICI
Prudential Life. However, please note the distinction: new companies
typically tend to have a high claim-rejection ratio.
As older companies see more of non-early claims, their overall rejection
ratio seems lower. Insurers are not allowed to reject claims citing
non-disclosure of facts, if the policy has been in force for more than two
years. For a newer company, which is bound to have more early claims, the
overall repudiation ratio seems higher as most claims are likely to be
early claims, requiring investigation. However, do not stop at just
examining the claim-settlement record. Claim pending ratio would help you in
ascertaining the time taken by insurer to settle claims. According to the
IRDA annual report, private insurers’ claim-pending ratio stood at 7.68%
(pending for 3-6 months). LIC’s ratio was higher at 15.47%. A high
claim pending ratio usually points to the company’s inefficiency in
processing claims, particularly, if the proportion of claims pending for
more than six months is higher.
“While considering claims-pending ratio, ageing of claims pending should be
considered. There are three bands — within three months, three to six
months and greater than six months. As per policyholder protection
guidelines, all claims should be decided within six months. There should
not be too many claims pending for more than three months,” says P Ravi
Kutumbarao, head-technical, Bajaj Allianz Life Insurance. Turnaround time
for claim settlement is crucial as well. You will get an indication of the
time taken by a company to settle claims. While choosing an insurer, check
whether a huge proportion of claims has been settled after a delay of more
than 180 days.
Source : Preeti Kulkarni – The Economic Times –
16/01/2014
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