Life Insurance Claim / Settlement Ratio

 

Question: I have been talking to a couple of my colleagues about Term insurance. However most of them are having a notion that the claim / settlement ratio of most of the companies is bad. I don't have the statistics though.

Also, if something happens to us and later claim doesn't reach the family, what next?

Therefore, let me have your advice on issue to understand whether we should go for a Term Life Insurance based on the claim ratio.

Mr. Gerard Colaco:  In insurance, the claim ratio is irrelevant and unimportant if the insured knows how to handle a claim. In life insurance, the only question arises is whether the insured is alive or dead. If dead, the only exclusion is suicide. The only proof  required is a proper death certificate.

Where general insurance like vehicle insurance or health insurance or household insurance is concerned, many general insurance companies are in the habit of automatically rejecting claims or a general insurance claim, I advise claimants as follow.

1. Submit a complete claim form backed by notarized photocopies of all relevant documents .

2. Lodge the claim with a proper covering letter either by post acknowledgment due or by hand delivery, obtaining a proper acknowledgement bearing the seal and signature of the staff of the insurance company accepting the claim. The acknowledgement must bear a seal showing the name and address of the branch of the branch of the insurance company to which it is hand delivered. The date of lodging the claim must also appear .

3.While the assistance of the insurance agent through whom the policy was purchased may be taken when filling out a claim form, it is the responsibility of the insured to verify and confirm that the claim form has been correctly and completely filled.

4. Retain a clear photocopy of all pages of the fully filled up claim form .

5. Once these precautions are taken, if the claim is rejected, never waste time in begging of, and pleading and 'discussing' with the insurance company. Straightaway approach a good insurance lawyer, show him the policy document and photocopy of the claim form and get his opinion about whether the rejection by the company is proper.

6. A good lawyer will advise you not to proceed with legal action  if there is some factor that renders the claim invalid. For example, I know a case where a lady took out a healthy insurance policy. She paid two premium over a period of  15 months. Then she had a hysterectomy. When she lodged a claim, the insurance company pointed out that a claim for hysterectomy could be made only after two years of the date of the original policy. We immediately advised the insured not to press the claim.

7. In many other cases, the lawyer may advise the insured to go ahead with the claim. There is no need to consult only a lawyer. A competent insurance advisor or CA may also be able to give an opinion. In case the opinion is that the rejection of the claim is improper, a legal notice must immediately be sent to the company stating that the rejection of the claim is improper and if the claim is not settled in full in say 15 days the insured will be proceeding with a consumer  forum compliant against the insurance company without further reference to the insurance company.

8. The moment a legal notice is sent, the insurance company staff will generally contact the insured for a compromise. The insured must refuse to speak to them and refer them to his/ her lawyer or ask for a response to the legal notice in writing within the time given in he notice.

9. If there is no response or there is an unsatisfactory response from the insurance company, a consumer forum complaint must be filed and actively pursued. For your information, more than 90 percent of such complaints are decided in favour of the insured. Even before the consumer forum complaint is decided, the company may once again come for a compromise.

10. There is one additional measure that can be used along with the legal notice and threat of a consumer forum complaint and that is a compliant before the insurance ombudsman. I think some more years may have to pass before the insurance ombudsman start functioning efficiently. The same thing was observed where the banking ombudsmen deal with dispose of customers grievances quite efficiently and fairly.

 The original insurance policies must be kept in a safe or a bank locker together with all other important documents of the insured such as property documents and jewellery. This will ensure that the legal heirs and /or executors of the will of a deceased insured will happen upon the insurance policies when sorting out other important papers of the deceased.

If the nominee too is no more, then the policy proceeds have to g to the legal heir by operation of the inheritance law under which the legal heir are governed. This may require the probate of a will in case of testate succession .

The only in way in which a life insurance policy can remain unclaimed despite of the death of the insured is if the legal heir are totally unaware of the existence of the policy itself and original policy documents is not found with the other possessions of the insured after the death of the insured.

It is therefore a good practice to keep all important papers together in a bank locker. Photocopies of all important papers must be kept in a separate file in a totally different place, perhaps in a safe in the home of the individual. Additional copies can also be deposited with the lawyer or CA of the insured.

An elderly spinster who is our client has considerable financial physical assets. All her original documents on our advise were placed in a bank locker after taking two  sets of notarised photocopies thereof. One set is at  her residence in a file. The other set is in another file in her name deposited with our firm.

To conclude, the claimants under an insurance policy can improve the claim ratio by adopting an efficient, correctly documented, no-nonsense process with the insurance company against whom they are making the claim.

Secondly, all of us can improve and ensure the smooth transmission of our assets in favour of our legal heirs, by making a will and arranging for the proper safekeeping and placing of all our important papers as well as attested copies thereof.