Can timely payment of claims be guaranteed?

It may not always be assured. Coverage of scheme limited; time of applicability not clearly spelt out

The next time a claim arises against Reliance Life Insurance’s term policy, it will be paid in 12 days. If this timeline is breached the policyholder will be paid interest of 6.50 per cent a year. Similarly, IDBI Federal Life Insurance says it will settle claims in eight days or pay eight per cent per annum, calculated on a daily basis. This apart, Reliance Life guarantees it will process the fund value of the policy within 48 hours of the intimation in case of death claims against unit-linked insurance policies (Ulips). Bharti AXA Life Insurance also offers this benefit to its Ulip holders. While this is good news, there are some finer points policyholders need to be aware of. For instance, Reliance Life Insurance guarantees claim settlement in 12 days only for policies are at least three years old. Similarly, IDBI Federal will adhere to the guarantee only for policies that have completed two years.

The above timelines are applicable only after the insurer receives all the necessary documents. Documents required for a death claim typically are a death claim form, original policy documents, original/attested copy of death certificate issued by the Municipal Corporation, attested copy of the nominee’s photo ID and residential proof, medical records at the time of death and documents related to past illnesses of the insured. In case of accidental death, there could be a delay in submitting all the documents; for example, viscera reports can take up to 20 days.

There are two steps to approval of claim applications. One, all the supporting documents need to be in place. And, after the documents are submitted, the insurer takes some time to assess and decide if the claim can go through and to calculate the amount payable. “There is no clarity on when the 12-day or eight-day timeline will kick in. It is not clear if it is right from the day all the documents are received or from the day the insurer takes a call on the claim,” explains an insurance broker.

The Insurance Regulatory and Development Authority’s (Irda’s) norms mandate death claims to be settled within 30 days of receipt of documents. If there are pending documents the insurer needs to be informed in 15 days. But sector players say the 30-day timeline gets breached often. Hence, the eight-day or 12-day promise seems a difficult task.  “Apart from issues of documents, many claims need to be checked for things like premium payment, lapsation/reinstatement, correct reason for death and so on,” he says. Insurers say policies reinstated in the previous 12-24 months may also not be included in this scheme. Reliance Life Insurance’s website says, “(This scheme is) Not applicable for claims where investigation is triggered.” Even IDBI Federal Life Insurance’s website says this. Irda says if a claim needs more investigation, the insurer has to complete its procedures in six months from receiving the intimation. A case in point could be a claim upon the death of a young policyholder, which mostly results in an investigation.
 

Industry officials add that in case of a calamity like the one in Uttarakhand, there have been few instances where a person's name is not there on the official list of people who are dead released by the government, inspite of the family claiming that they were present at the site. "In such cases, the person would have to wait for 7 years for the claim (a person missing for 7 years or more is assumed to be dead as per Indian rules). No interest will be paid since the claim is under dispute," the official said.