Claims Settlement: The Real Moment Of Truth In Life Insurance
The Insurance Regulatory and Development Authority (IRDA) in its annual report of
2008-09 put it fairly well when it stated that 'the moment of truth in an insurance contract lies at the time of claims settlement'. Unarguably, the settlement of claims (the genuine ones) is the singular most important value proposition that an insurance company offers to its customers. However, it is not just about the settlement of claims but also the process involved, its expediency and timeliness that are of equal importance. While 60% of individual life insurance claims settled in the year 2008-09 were processed within 30 days of intimation, 20% were settled between 30-90 days and close to another 20% were settled between 3 months and a year.
The effectiveness and efficiency of claims processes is an area that the insurance industry in India will soon have to give as much importance to as its new business sales, if not more. It is, however, not just the sole responsibility of the insurers; customers who purchase insurance will also have to take up part of this burden to help insurers help them when it's needed most.
Here's what both the insurers and insured should focus on
1.Product design
Insurer: In an attempt to differentiate their products in a fairly competitive market, insurers should try and ensure that they do not err on the side of developing products that are complex and difficult to understand. The costs and benefits associated with a product and the need that it fulfils should be easy to comprehend for customers so that instances of misselling are reduced. Customers will know what is being bought and what risks are being covered, ensuring there are no surprises and disputes at the time of claims.
Insured: It is equally important for the insured to make sure that they review the products on offer and get as much information about the products as is required for them to fully understand all relevant details. Ask for information and one is bound to get it; seek the necessary information and you will find that it is available. But before any of that, it is also important to be clear as to what is it that we intend to purchase - which needs of our personal financial planning and risk management are we trying to meet. If you know what you want and then obtain enough information about available options, it will not be too difficult to make an informed decision.
2.Point of sale process and documentation
Insurer: Having designed the right products, it is equally important to make sure that the sales communication related to each product is transparent, simple and easily accessible. Readily available and easily comprehensible sales tools and product literature can really help customers understand products and eliminate any issues and surprises at the time of claims processing. Customer complaints and related time and costs involved in resolving claims related disputes can be minimised to a large extent if the right product is sold for the right customer need by making the sales process and documentation easy for the customer to understand. IRDA has recently taken a step in this direction by proposing guidelines mandating insurance companies to follow a simple format for illustrating the 'key features' of each product.
Also important is the standardisation and simplification of proposal forms and related documentation that a customer needs to submit at the time of purchasing an insurance policy. This documentation process, once again, needs to be easily understood and the relevance and importance of providing complete and accurate information explained to customers.
Insured: It is important for customers to obtain and review written information available on a product and not only rely on verbal advice of an intermediary. Make sure you not only understand the key features and benefits of a given product but also review the terms and conditions applicable to your insurance contract carefully.
Insurance contracts are entered into in good faith and what you submit as information as part of your proposal form and related documentation forms the very basis of your insurance policy. Any inaccuracies (wilful or otherwise), fraudulent practices, concealment of relevant information or any misrepresentations can lead to a rejection of claims at a later stage. It is the sole responsibility of the insured to provide complete and accurate information at the time of entering into an insurance contract.
3.Claims process and documentation
Insurer: As the insurance industry in India matures, how an insurance company manages its claims processes will go a long way in building its reputation in the market. At the time of filing a claims, the insured or his/her dependents are in a state of emotional distress and in most cases in immediate need of financial support. The insurers, thus, need to ensure that their processes are not only prompt and efficient but also convenient and executed with a certain degree of empathy.
It is important to provide multiple channels of contact for customers to reach out to insurance companies in the event they need to lodge a claim. On the claim having been intimated, the customer should immediately be informed of the complete documentation requirements and guided through its collation and submission. The forms that need to be filled should be as simple as possible.
The industry may also at some stage need to move towards a level of standardisation for claims forms, documentation and processes. This could help customers with multiple insurance policies in lodging their claims.
Insured: While an insured or his dependents are bound to be in a state of distress when it comes to filing a claim, there are some fairly simple steps that one can take to assist in quicker and prompt claims settlement.
1. Since the prime objective of buying a life insurance policy is to provide financial protection for your dependents, do ensure that for all your life insurance policy contracts you have designated the person you wish to receive the claim proceeds as your nominee.
2. One of the main requirements for filing any insurance claim is the submission of the original policy contract with the insurance company. Ensure that all your policy contracts are safely maintained and that your nominee is aware of which policies are active and where the policy contracts are being stored or maintained by you.
3. Be aware of what documentation is required for your claims to be settled the quicker you complete these submissions, the easier it is for the insurance company to process your claims.
Insurance is all about covering risks, the benefit paid at the time of occurrence of such risks in the form of claims being the core value proposition of insurance products. As the industry matures in India, insurers will surely have to enhance their focus on delivering this proposition but the insured should also do what is required to help.
by: isave
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