Check The Insurer’s Claim Settlement Ratio Before Purchasing A Policy

Life insurance serves as an integral component of every civilized society as a social vehicle designed to mitigate the loss of income to families due to an unforeseen contingency. As the primary objective is to provide financial protection to family and loved ones in the absence of the breadwinner, therefore claims constitute the most vital function in the entire business and customer life cycle of a life insurance company. Today, as free-market mechanisms have brought in more transparency and competition to every sector, life insurers are now competing with each other on every parameter with claim settlement occupying a key position. Claims are generally of two types – maturity claims and death claims. Let us understand both of them in brief.

Maturity Claims: Maturity claims largely refer to life insurance savings policies where the maturity amount is paid at the end provided all premiums have been paid regularly and the policyholder outlives the policy term. It is imperative that policyholders pay all their premiums regularly as maturity claims of life insurance saving policies are for achieving long-term financial goals. Maturity claim settlement involves minimal paperwork and in most cases, insurers finish processing the same well before the due date. . Documents needed to settle maturity claims include – policy document, copy of identity proof, address proof, bank mandate form with bank details, and a cancelled cheque.

Death Claims: Death claims refer to the life cover or sum assured amount that is included in all life insurance policies. For all in-force policies, the life cover amount is paid to the nominee(s) in case of the demise of the policyholder. The demise of a loved one, more so if the member is the family’s breadwinner, is a trying time for the family and therefore it is incumbent on life insurance companies to offer a hassle-free claim settlement process. While life insurance is not a replacement for the loss of life, it can provide crucial financial support to the family. It is in these moments that insurers need to be proactive and have a short turnaround time in settling claims to provide a satisfying experience to claimants.

Life insurance provides the family with the necessary financial resources to continue with their lives. It is therefore very critical that customers compare and evaluate the average claim settlement turnaround time and ratio before making a purchase.

What do claim settlement turnaround time and ratio signify?

The claim settlement turnaround time or TAT is the average time taken by a life insurer to settle genuine death claims after receiving all required documents. The lower the TAT the better it is - as it means the life insurer is proactive in delivering on the promise made to policyholders to ensure the family does not face any financial hardship in their absence.

The claim settlement period is divided into three slots – Within 30 days, 31-90 days, and beyond 90 days. Customers looking at purchasing a life insurance policy should pay attention to the turnaround time as claims that take more than 30 days should be considered unfair from the customers’ point of view. In addition, a comprehensive medical examination report should be shared with the life insurer as transparency and trust between both parties is paramount for a smooth claim settlement process to be executed. The claim settlement ratio is a metric that reveals the percentage of claims an insurer has settled or paid out as compared to the total number of claims received during that particular financial year. It is calculated by dividing the total number of claims settled in a financial year by the total number of claims received.

Stipulated regulations: The regulator is very customer-focused and ensures the interests of policyholders are protected at all times. The regulations clearly mandate that insurers settle or reject claims within 30 days of receiving all documents from claimants. Any requirement for additional documents/information should be communicated to claimants within 15 days of receiving the mandatory documents.

Other service parameters: A customer-centric life insurer will ensure that the process to lodge a claim is simple and hassle-free. Digital touch-points such as WhatsApp, Mobile App, Chatbot, or Company Website to lodge and track claims enable claimants to adhere to social distancing norms while facilitating lodging of claims from the comfort and safety of their homes. For instance, ICICI Prudential Life Insurance has recently launched their claim intimation through WhatsApp and email, besides having a dedicated 24X7 Claim care helpline.

It is equally important that claimants have access to the claim proceeds at the earliest to ease the financial distress caused. It is recommended that claimants share their bank details so life insurers can directly credit their bank accounts with the claim proceeds.

The ‘Claim for Sure’ initiative launched by ICICI Prudential Life Insurance in the year 2019 aims at settling all eligible death claims in one day after receipt of all documents. Since the launch of the initiative, 4,658 claims with a total value of Rs 2,575 million were settled in FY2020 and from April 2020 onwards, the Company has settled 7,609 cases with a value of Rs 4,782 million. Covid-19 has disrupted both lives and livelihoods and the Company has settled 3,533 Covid-19 related health and death claims totalling Rs 2,682 million.

A fast and better claim settlement experience will help build trust and at the same time ensure that the real purpose of life insurance is met.

The author is Chief (Customer Experience & Operations), ICICI Prudential Life Insurance Company

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.