How does life insurance claim settlement work in India?

By Nilesh Parmar

Though life insurance is primarily intended to meet the unexpected loss of income owing to the death of the life assured; with the changing times, it has also been looked upon as an instrument to cover many other events such as scheduled expenses, risk of living long, critical illnesses and disabilities, etc.

Claims pay-out is perceived to be the ‘end of spectrum’ and most important milestone in the life cycle of a policy. This is where, as they say, the rubber hits the road. While the policyholder completes his part of the commitment by paying due premiums; fulfilment of the promise from the insurer’s side is completed by payment of the rightful claims.

Credibility or trustworthiness of an insurance company enhances with higher claim settlement ratio. All insurance companies work towards this. To achieve this, internally every insurance company has its own process for claim settlement which works within the framework designed by IRDAI. While safeguarding policy holders’ interests through sections like section 45, regulators also protect the insurers from fraudulent claims by allowing the insurer to investigate and repudiate when there is intentional misrepresentation of facts. Insurers, however, do offer claim concessions, ex gratia claim payments as relaxations in rules to favour claimants and protect their interests.

Claimants intimate the insurer of the event where claim becomes due, with relevant basic documents that are usually handy with the claimants. Insurers assess the legality of the claim and genuineness of the documents submitted. If all is found in order, the insurers are expected to process the claim payment immediately (30 days is the outer limit for this). However, if the insurers find something suspicious; IRDA allows the insurers to investigate the claim and then take a decision.

In any case, the insurer must complete the investigation and decide on the admissibility of the claim within 120 days. Insurers can take help from third-party investigators for this purpose. These investigators also help the claimants in getting documents otherwise difficult to procure and relieve their stress in difficult times. Most importantly, if the policy is in force for 3 year or above, the insurers cannot repudiate the claims on grounds of non-disclosure or misstatement of material facts concerning health, occupation, income, etc.

In this process, insurers regularly update claimants through website, phone helplines, company apps, branches, and field support. These gateways are also used for exchange of documents and other necessary interactions to ensure speedy claim settlement.

Repudiation of a claim is a sensitive matter and is a lose-lose situation for both the customer and the insurance company. Repudiations result in monetary losses to the claimants in times of need. Higher repudiation ratio creates a negative impact on the insurer’s credibility.

No company would like to repudiate a genuine claim. To ensure that there are no issues in the unfortunate event of a claim, it is imperative that at the time of taking the policy the customer exhibits the highest standard of good faith and discloses all material facts. Both the customer and the distributor should follow this good practice so that insurance serves its purpose in case of any unfortunate event. As long as the customer has shared all the information honestly, you can rest assured that the claim will be paid/settled.

IRDAI has mandated every insurer to set up a grievance redressal mechanism and the process is governed by the grievance redressal Cell of the consumer affairs department of IRDAI under Protection of Policyholders’ Interests (PPHI) regulations with detailed guidelines and turnaround times. Aggrieved claimants do have an option to approach the Insurance Ombudsman, if they are not convinced with the insurer’s decision on the grievance raised.

( Author is Chief Operating Officer at Future Generali India Life Insurance Company Ltd)