The world knows the importance of insurance as financial protection for any unforeseen loss or damage of property or life. The price of insurance, called premium, is the most loved child of the family, no matter how unethically he is brought up. The hated child is the unwanted but the most helpful child of the family at a time of distress. His name is CLAIM.
The rhyme ends there.
In developed insurance markets, claims are treated with professional empathy as a natural happening, albeit undesirable, under any insurance policy. In some open customer-friendly markets, the insurance companies go overboard to help the insured at the time of claim.
They consider this an opportunity to prove their worth to the customers and win their trust forever. The relevant members of the whole ecosystem work fast and in perfect synergy. The salesperson immediately acknowledges the claim, and the claim manager registers the same quickly and deputes a surveyor. The surveyor calls the insured within the shortest possible time, followed by a visit.
The required documents are collected, and guidance is given to dispose of the claim quickly. Hardly any procrastination technique is adopted, such as calling for papers infamously known as the LOR (letter of requirement). Such lists ludicrously, even today, call for a police report in case of an earthquake or a meteorological report in case of a burglary.
A template of all imaginable supporting documents is copied and pasted in the surveyor’s mail to the distressed insured. Often, no indication of which ones ( documents)are relevant to the case leads to chaos and unnecessary trouble.
The insurance company’s claims manager often does not bother to call the surveyor and ask him to streamline the requirements. He is sometimes too happy since the claimant will take years to submit those documents (even if remotely relevant). In others, he is too indifferent since the game is between the claimant and the surveyor and does not involve him.
A senior public sector insurance company claims official once lamented the lack of coordination in his organization. The claims department unduly rejected a claim, although the policy wordings technically allowed the coverage.On enquiry about the refusal, the claims department asked the claimant to contact the underwriting department- which maintained that the claim was very much tenable, but the underwriting office told me that the claim was an issue to be handled by the claims hub. The salesperson told me it was between the underwriting and the claims department. He was not involved.
Finally, we asked them who was the actual Insurer. There seemed to be no unified insurer; these were only uncoordinated departments. The regional chief could not respond. The head office, if approached, would say, “The amount is within the regional office limit”. Thus, the insuring company has no responsibility as a singular entity.
The public perception of private sector insurers is fragmented. There are exceptions among the employees who keep the lamp burning with generous funding from the union government. Otherwise, three of the four public sector insurers with a total loss figure of Rs.6 926/- crores in 2021-22 would have shut shops by now. The losses incurred were Rs. 1,675 crore, Rs. 3,115 crore and Rs. 2136 crore for National Insurance, Oriental Insurance and United India Insurance, respectively.
- The metro city entrepreneurs have accepted them as reliable insurers with contemporary practices and futuristic outlooks.
- The well-off business people of tier 2 and tier 3 cities consider them suitable for motor insurance coverage and cashless settlements.
- The industrialists of these cities till consider public sector insurers more reliable regarding financial strength. According to them, on claims their general philosophy is “better late than never”. They believe the public sector will eventually pay out because they are unafraid of loss (read bothered).
- The old agents and mid-level semi-urban brokers advocate the prophetic words, “Sir, the public sector insurers consider a claim as a file to be cleared, whereas the young private sector considers claims as a cost to be avoided”. The public mostly agrees. I reserve my comments.
At this juncture, the regulatory provision on claim disposal and surveyors’ code requires a discussion. The IRDAI protection of policyholders’ interest regulations and surveyors’ code of conduct gives all the timelines. They also highlight all the rational and empathetic actions to be taken to help a claimant, but these are rarely followed.
There is a provision in the IRDAI Protection of Policyholders’ Regulation 2017 that the insurers are liable to pay interest for delay beyond the stipulated period stated in the regulation.
It highlights that after the receipt of the final survey report or the additional survey report and on receipt of all required information/documents that are relevant and necessary for the claim, an insurer shall, within 30 days, offer a settlement of the claim to the insured / claimant (Sec15, subsection 8).
Subsection 10 states that in case of non-settlement of the claim within the above stipulated 30 days, the Insurer is liable to pay interest at a rate of 2% above the bank rate from the receipt of the last relevant and necessary document till the date of actual payment. The question is how many times such provisions have been adhered to.
Some companies came up with the concept of a claim service guarantee. Service assurance clauses/delay covers are incorporated purely as a marketing gimmick. They do not guarantee settlement of the claim. One can go on and on asking for documents. A nominal penal amount for the delay is not a deterrent. The assurance is of a prompt reply, even if it is a rejection.
With the above backdrop, the time has come to propagate the insurance of claim concept. It is proposed that except for fraud, all claims must be paid on the following two conditions being met:
- Policy validity
- Proper coverage
In other words, the Insurer will be duty-bound to ensure that the surveyors collect the documents and they guide the claimant on how to prepare/ organize such documents.
In case of insufficiency of any document, the surveyor has to clarify/approximate the quantification note.
Each claim will have a supervising manager’s name attached to it. Any delay in the settlement of a genuine claim as stated beyond 60 days of submission of these documents will attract a monetary penalty on the approving authority, even with document insufficiency.
Similarly, for rejected claims subsequently allowed by a court of law, the consumer forum will attract a monetary penalty on both the official and the rejecting authority concerned.
Regular on-site audits by the IRDAI have to be conducted with its team and hired claims professionals from the industry. These can be retired insurance officials, chartered engineers, accountants and lawyers.
The general insurers can consider an add-on coverage towards guaranteed claim settlement at a premium. This will ensure the payment of non-fraudulent claims with proper coverage of up to 75% of the claim amount, subject to a maximum of Rs. 50 crores.
It is completely understood that there are existing provisions for non-standard settlements of claims, but there is no guarantee of exercising such a mode of payment.
A paid add-on coverage will at least assure the client of 75% recovery of the claim, up to Rs. 50 crores. This will be a significant relief to most clients with neither the infrastructure nor the expertise to fight with the Insurer to recover such a technically perceived deficient claim.
The Insurance Brokers Association of India (IBAI) releases an annual report on the performance of various general insurers based on precisely defined service parameters.
One such parameter happens to be responsiveness on claims and surveyor handling. Most public sector general insurers have miserably bad scores in this parameter. Thus, some kind of guaranteed settlement provision is likely to improve these disappointing scores.
In conclusion, the actions which have become extremely necessary for Indian claimants are the following:
- Personal accountability of settlement of any claim with monetary penalty provisions.
- Strict adherence to the IRDAI’s guidelines on claim settlement both in letter and in spirit. As one of the finest insurance regulators in the world, IRDAI has always drafted the best possible guidelines for protecting policyholders’ interests. It is incumbent on the other stakeholders to follow such guidelines with utmost honesty.The above regulation has to be outcome-based to minimise the trust deficit.
- Understand that the documents required can be flexible. Surrogate documents/pieces of evidence can be looked into. The sole motive should be to help a genuine claimant.
- Finally, let there be a campaign by the insurers and the regulator and, if possible, by the judicial bodies. Let us, as an industry, find more reasons to help a genuine claimant than coming out with excuses to reject claims.