Tuesday, April 29, 2014
Myth busters about disclosures and claim settlement
Yateesh Srivastava, COO- AEGON Religare Life Insurance
Claim settlement is one of the major factors that people consider before buying an insurance policy. Comparison between ‘claims to settlement ratios’ declared by IRDAI periodically are a common norm among new buyers these days. However, a large chunk of people seem to be gripped by claim settlement related myths which mostly arise due to in-correct disclosures by the buyer.
The decisions made at the receipt of claim depend on details, information or disclosures provided by the insured in the proposal form while entering into a contract with the insurer. Any discrepancy in it could result in non-payment of claims.
Disclosures, an important part of insurance business, are of two types, involuntary and voluntary. Involuntary where buyers are unaware of the details filled by anyone other than them, may be by an agent or someone on their behalf. In such cases, the third party filling the form may not know complete details and end up procuring flawed information that could endanger the claim process.
Involuntary disclosures are even more risky as they are deliberately done to hide vital details from the proposal form. Most common form of voluntary non-disclosure is to not reveal life threatening diseases that pre-exist. The motive is to hide the high mortality threat factor for a good cover.
Since the cover amount entirely depends on the disclosures, it is advised that buyers themselves fill policy forms and mention every detail with utmost care to ensure that nothing gets ill-informed. Any factual error could be critical at the time of claim. Insurers encourage buyers to read the policy document in detail before signing it. Once signed, the entire contract means that the information shared is truthful and correct.
There have been instances when genuine buyers unknowingly become victims of their own negligence that results in faulty disclosure. To ensure that the wholesome purpose of buying a life insurance policy is achieved, let’s bust a few myths about claim settlement.
Disclosing lifestyle habits may end up in rejection of the policy: Details related to the habit of tobacco, alcohol and narcotics consumption come under lifestyle disclosure. The most common myth is that any such disclosure will result in higher premiums or rejection of a policy. It is true only to an extent when the buyer is chronic to these habits. It is necessary to reveal the extent of indulgence in these habits to enable a proper evaluation of cover to be offered. A little increased premium will offer you peace of mind, smooth claim settlement process and a timely protection to your family.
Complete medical disclosures always results in higher premiums: Most often bypassed, but extremely critical disclosures are of medical nature. Once again, these are overlooked fearing lesser cover and increased premium. It is advised to always fully disclose any critical illness, prior hospitalization and entire medical history for a fair assessment of health related risks. While this may increase the premiums amount, company does this only for your family’s benefit. The inconvenience of claim rejection could be a huge disappointment at the later stage if any of this information is tampered with as it will deeply affect your family members. A life insurance company will completely honour any claim provided all disclosed details are factually correct.
Financial disclosure and family history is not as important: Many buyers would be uncomfortable disclosing their finances in the proposal form. It is important to mention all details correctly as it only helps the company to review buyer’s risk profile, liabilities and responsibilities before deciding on the cover amount.
With these myths busted, I urge you to keep fears aside and reveal all details with honesty before entering into a contract with the insurer. In fact, have your nominee by your side while filling up the forms for transparency. Closely monitored by IRDAI, insurers are fully committed to pay all genuine claims, as it not only impacts the credibility and reputation of the company but entire industry.
The author is a COO at AEGON Religare Life Insurance.