Life insurance policy claims settlement ratio explained – Forbes Advisor INDIA
One of the biggest concerns surrounding the purchase of an insurance policy is the settlement of claims by insurers. The âpaid claims ratioâ is a reliable measure mandated by the insurance regulator in public disclosures in India. This ratio helps determine whether the life insurer and insurance policy are the right choices for you or not.
Here’s what a paid life insurance claims ratio is, how it’s calculated, and how it affects your life insurance policy.
What is the ratio of paid claims?
Simply put, a âclaims settlement ratioâ or âpaid claims ratioâ is a computational measure that helps understand the number of claims paid versus the number of claims received by the insurer. This ratio makes it possible to assess the insurer’s commitment to ensure the settlement of claims. A higher ratio helps to understand the effectiveness of claims paid by the insurer and gives the family a better chance of settling claims by the business after the unfortunate death of the insured.
How is the âpaid claims ratioâ calculated?
The âpaid claims ratioâ is calculated by dividing the total number of paid insurance claims by the total number of insurance claims received by the insurance company. For example, if a life insurance company receives 1,000 claims per year, of which it pays 992 and either rejects or does not make a decision (e.g .: ongoing investigations) on the remaining claims, then the ratio of claims paid to the insurance company would be (992/1000)% or 99.2% in a fiscal year.
It’s important to remember that the ratio is measured for the company’s entire product portfolio, including term plans, ULIPs, and endowments, among others.
What does the “VSclaims the remuneration report ” Tow to talk about the life insurer?
The âpaid claims ratioâ reflects the model for resolving claims by a life insurer. A high ratio indicates that the underwriting and claims process is robust, compared to one that has a low âclaims paid ratioâ.
The main purpose of a life insurance plan is to provide financial support to families dealing with the premature death of a breadwinner. When purchasing an insurance policy from an insurer with a high paid claims ratio, it is certain that when the need arises, the claims process is likely to be smooth, convenient and transparent.
In the event of the insured event (critical illness or death) occurring while the policy is in force, your loved ones should receive a hassle-free payment of the life insurance benefit.
A business with a higher ratio is considered more reliable than a business with a lower âclaims paid ratioâ. If we look at the comparative data, a paid ratio of over 98% can be considered good. One third of Indian life insurers have a paid ratio of over 98% while the top three life insurers have a paid ratio of over 99%.
Step-by-step process for resolving complaints
The claims settlement process in a life insurance company consists of three stages:
- Registration of the request and submission of documents
An insurer’s claims settlement procedure must be simple and accessible. Typically, you should be able to report the loss online or through a hotline, email, or any branch or central office of the insurer.
The faster the average review time, the better. All complaints raised are examined and resolved on the basis of the information contained in the documents submitted in this regard. Thus, it is advisable to provide complete information for a faster and smoother complaint handling.
- Claim decision and settlement
A life insurance company appeals to the final settlement after evaluating and approving the relevant documents that are submitted. By law, all valid claims must generally be settled within 30 days by the insurer after receipt of all required documentation and clarification.
If the circumstances require further investigation, it may take up to 120 days to resolve the claim. Insurance claimants should remember when an insurance company assigns a dedicated ‘claims relations officer’ to guide the claimant through different stages of the claims process, their services should be used to make the whole process easier and faster.
When are life insurance claims dismissed?
An insurance policy filled out with explicit details has a low risk of being rejected. However, an insurance company may refuse to settle a claim in the following circumstances.
- Inaccurate or incomplete details
Do not mislead the agent or company with incorrect or incomplete information about important details such as previous policies (issued / applied / rejected) and claims, if any, information on age, income and lifestyle (smoking / alcohol) among others.
There is nothing wrong with disclosing the details of your existing life insurance policies at your insurance company. In addition to being detrimental to the settlement of claims, the inaccurate declaration of any personal information may be considered fraudulent and may result in the termination of policy benefits.
- Hide medical history
The most common reason for rejecting claims is the non-disclosure of facts about an individual’s health. Factors such as withholding information about existing critical medical conditions, surgeries and operations, among others. These factors, if revealed at the time of settlement, can result in denials of life insurance claims. Therefore, it is best to disclose them at the time of purchasing the policy, as this also influences the premium you pay.
- Incomplete applicant information
If you don’t update candidate details, the settlement process may take longer. In this case, the insurer may request additional documents to establish legal proof of title including an estate or legal heir certificate. If the candidate is a minor, details of his or her guardian should also be included in the police file.
- Irregular premium payments
A claim is settled for full benefits only for active insurance policies. Regular payment of premiums on the policy helps prevent lapses. A grace period of 15 days is offered for monthly premium mode policies and 30 days for all other premium payment frequencies.
Some policy contracts also offer the option of converting a lapse policy into a reduced paid-up policy, where the sum insured is proportionally reduced by the amount of premiums paid versus the premiums payable for the entire term of the policy. To avoid delays due to time constraints, set up a direct debit system linked to your bank account to pay the premium for renewals.
However, if you are still late in paying premiums, check with the insurance company on how to reinstate your policy. This may require paying late fees or prescribed interest as well as submitting new health claims to restore policy benefits.
What can claimants do to ensure prompt settlement of claims?
For a speedy claims resolution process, a claimant should ensure the following:
- It is advisable to report the claim as soon as possible after the occurrence of the insured event.
- Be sure to provide all claims documents, if needed. You can contact your agent or designated manager of your company or the company website for complete documentation requirements.
- Complete claim forms in all respects with care and honesty.
- Make sure to provide your latest communication details such as address, phone numbers, and email address. In accordance with the standards of the insurance company, the company may undertake additional verification of documents and information to complete the verification process.
Hygiene points to keep in mind before purchasing your life insurance policy
As a general rule of thumb, one should always consider the ease of the claims process and a life insurance company’s âclaims paid ratioâ before purchasing a policy – the higher the ratio, the greater the chances. that your future claim be settled by the company. .
The Insurance Regulatory & Development Authority of India (IRDAI) annually publishes a ratio of all insurance companies in India, the information of which is available on the website. Check this data before choosing the insurer, but don’t make it the only parameter when purchasing a life insurance policy.
As a smart buyer, you should ask the insurance company to provide full information about their claims process and âpaid claims ratioâ. During the term of the policy, if the insurance company does not pay the claim, the purpose of purchasing the insurance policy is canceled.
Likewise, being transparent about your medical history, habits such as smoking, income, and education details will go a long way in ensuring that claims are resolved quickly. This will ensure that your family has no problem filing a claim with the insurer in your absence.