LIC tops in death claims settlement
Percentage of rejected claims to total claims is much higher for private life insurance cos compared with state-owned Life Insurance Corporation. Keep good health
By TNN |
MUMBAI: The percentage of rejected claims to total claims is much higher for private life insurance companies compared with state-owned Life Insurance Corporation (LIC).
According to data released by the Insurance Regulatory and Development Authority (IRDA), private life insurers received 13,139 individual death claims in 2006-07 compared with 6.02 lakh claims recorded by LIC. Of the total number of claims received, private life insurance companies settled 72.7% of the claims, while LIC managed to settle 96.94% of claims.
The number of claims rejected by private insurers as a percentage of claims booked was 13.98% in 2006-07, while the claims rejected by LIC were 1.43%. Claims pending with private insurers as on March 31, 2007 stood at 13.32% of total claims received against 1.63% for LIC. LIC paid Rs 4289.28 crore as death claim benefits against Rs 155.46 crore paid by private life insurers.
Life insurers receive two types of claim, the first are the maturity claims where the policyholder gets the savings that accrue under his policy at the end of the term. Bulk of the claims comes under this category, and usually there is no dispute on maturity claims, as these payments are akin to repayment of a maturing bond.
According to data released by the Insurance Regulatory and Development Authority (IRDA), private life insurers received 13,139 individual death claims in 2006-07 compared with 6.02 lakh claims recorded by LIC. Of the total number of claims received, private life insurance companies settled 72.7% of the claims, while LIC managed to settle 96.94% of claims.
The number of claims rejected by private insurers as a percentage of claims booked was 13.98% in 2006-07, while the claims rejected by LIC were 1.43%. Claims pending with private insurers as on March 31, 2007 stood at 13.32% of total claims received against 1.63% for LIC. LIC paid Rs 4289.28 crore as death claim benefits against Rs 155.46 crore paid by private life insurers.
Life insurers receive two types of claim, the first are the maturity claims where the policyholder gets the savings that accrue under his policy at the end of the term. Bulk of the claims comes under this category, and usually there is no dispute on maturity claims, as these payments are akin to repayment of a maturing bond.
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The second set of claims, which are far fewer, are death claims. Section 45 IA of the Insurance Act 1938 allows insurers to reject claims if there is suppression of material fact by the insured. In life insurance, any information that has bearing on the mortality of the proposer is considered to be a material fact. So, if a proposer suffers from a serious ailment which is not disclosed, the insurer can reject his claims.
However, the Supreme Court has said that the clause cannot be used unilaterally and it is for the insurer to establish that the non-disclosure has a bearing on mortality. In the first few years of operations, private life insurers did not have much of a claims experience. Therefore, a comparison on claims servicing between the private sector and LIC was not possible. Now, with the private life industry being in its seventh year, there has been a substantial number of maturity and death claims.
According to an official with a private life insurance company, repudiations were higher in group policies. Also, given that private companies have been only a few years in existence, their share of early claims are higher. Early claims are those which occur within two years of the policyholder acquiring a policy. In such claims, insurers double check on whether the terms of the policy have been strictly met.
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