Claim settlement ratio by irda for term insurance – 2017-18 – moneychai

We often see the news regarding the Claim Settlement Ratio of Insurance Companies. Insurance Regulatory and Development Authority (IRDA), the Insurance Regulator will publish the details regarding this in its annual report. While it looks like a technical insurance term, it is in our own interest to know what it means for us. What is Claim Settlement Ratio – Meaning?

In Life Insurance business, all the companies will have a low Claim Settlement Ratio in their initial years of operations because of the applicability of Section 45 of the Insurance Act. Any claims reported in the first 3 years of the policy are called Early Claims and insurance companies will be carrying out a detailed investigation to ensure the genuine nature of such claims.

If it is found that the policy holder has deliberately suppressed material facts at the time of taking the policy, such claims will be repudiated. But after the first 3 years, the claims are called as Non-early Claims and they cannot be rejected.

Mr. X has purchased a Term Policy of Rs. 50 Lakh from a private company. This private company was not having a high Claim Settlement Ratio, as per the IRDA data. Since he is a diabetic, he disclosed his health condition. He has undergone the pre- medical examination arranged by the insurance company and his premium was loaded by around 20% from the normal premium quoted earlier. Unfortunately, he died within 2 years of taking the policy. His nominee got the claim because he had mentioned his health conditions correctly at the time of buying the policy. Had he not mentioned that, his nominee would have been denied the claim after a detailed claim investigation by the company.

Mr. X has taken a policy from the company with the highest Claim Settlement Ratio. Here, he has not disclosed his diabetic condition. What will happen, if there is a claim in the first 3 years like above? Will his nominee receive the claim? No, because each claim will be investigated separately and will be decided on the merit of each case. In case of claim after 3 years?

If you fill up all the correct information while buying the policy, you need not worry about the Claim Settlement Ratio of the company. You have to read each question in the Proposal Form and answer it correctly to the best of your knowledge. There will be questions about your current health conditions, medication, family history of hereditary diseases, previous policies held by you, etc. Habits like smoking and drinking also have to be disclosed. There can be a pre-medical examination depending on the type of policy and its value. The insurance company will decide on each proposal based on the information given by you. If there is an adverse finding, the company will either charge a higher premium or reject the proposal.

Reason to worry is when you are hiding the material facts about your health, occupation or your habits like smoking, etc. The chances of claim rejection become high. Though there is a clause of 3 years for the insurance company, it can still reject your claim if they are able to prove that you had hidden some material facts to take advantage out of your insurance policy.