Claim Settlement Ratio 2023

Life insurance claim settlement is a process where the claimant/beneficiary can make a request to the policyholder's insurance company to avail the death benefits under the life insurance of the insured in case of the policyholder’s death. With this, the claimant/beneficiary can file a claim request for critical/terminal illness, accidental death benefit, accidental total/permanent disability if required.

Following is the list of claim settlement ratio of the best life insurance companies in India:

(Source: IRDAI Annual Report - Claim Settlement Ratio for the year 2020-21)

Types of Life Insurance Claims

Following are the two types of life insurance claims:

1. Maturity Claims: Maturity claims are payable at the time of maturity of the life insurance policy. This means when the policy tenure ends and the policyholder survives the whole policy tenure a certain amount is paid to the policyholder itself. Maturity claims are only paid when the policy term ends and the premiums are paid on time. The policyholder is required to fill a duly signed discharge form to avail maturity claim. The amount received from the maturity claim is considered to be tax-free as per the current Income Tax Act.

2. Death Claims: In death claims, the claimant can make a request for death benefits upon the demise of the policyholder. This means a sum assured amount is settled towards the beneficiary upon the death of the policyholder in any case. The sum assured is paid to the beneficiary only after the death of the policyholder is intimated to the insurance company. The death intimation includes policy number, date of death, cause of death, and the policy term upon which the company investigates the death claim. Amounts received as the death claim are considered to be tax-free as per the current Income Tax Act under Section 10(10D).

Documents Required for Life Insurance Claims

Following is the list of some of the mandatory documents required for life insurance claims:

• Claim Forms (Duly signed and attested)
• Original Policy Documents
• Death Certificate attested by the local authorities
• Copy of FIR/Post Mortem Reports/Punchnama
• Medical Records (including hospital discharge summary)
• Claimant’s Photo ID Proof
• Claimant’s Address Proof
• Copy of Cancelled Cheque/Bank Statement/Bank Passbook

Claim Settlement Process of Life Insurance Policy Claims

Listed below is the process of life insurance claim settlement followed by most of the insurance companies. However, every insurance operates differently hence the claim settlement process for a life insurance claim can differ from insurer to insurer:

Step 1: Claim Intimation: The beneficiary is required to intimate the claim either in a written format or online (on the insurance company’s official website) to the insurance company as soon as possible. The claim intimation should have the information of the policyholder and the claimant such as policy number, name of the policyholder, cause of death, place of death, and claimant details. The beneficiary can visit the insurance company for claim intimation or download the forms online from the insurance company’s website.

Step 2: Submission of Documents: The insurance company requires some documents to settle the claim, which the beneficiary is required to submit within the stipulated time. With help of the relevant documents, the insurance company will be able to carry out an investigation if required or ask for any additional documents required. Submission of relevant documents at this stage is necessary to avoid any possibility of fraud.

Step 3: Claim Evaluation and Settlement: After all the documents have been submitted to the insurance company and the claim is thoroughly evaluated a settlement decision is taken by the insurance company. Usually, it takes 30 days for an insurance company to settle a claim upon receiving the documents submitted. If an investigation is required in any case the insurance company takes 120 days to settle a claim.

Note: Claimant must thoroughly go through the terms and conditions and submit all the required documents for the claim, failing to do so will affect the claim settlement process.

Common Reasons For Rejection of Life Insurance Claims

Here is some common reason for rejection of life insurance claims:

1. Mentioning false inaccurate or false information in the application for a life insurance plan.

2. Not paying premiums on the due date or during the grace period.

3. Causes of death that are not covered by the insurance policy such as suicide before the completion of the first policy term, accidental death caused by overconsumption of alcohol/drugs.

4. A fraudulent claim made by the beneficiary.

Common Exclusions Under A Life Insurance Policy

There are certain instances or events which are not covered under a life insurance policy. Below mentioned are the events/instances which are not covered under a life insurance policy:

1. Participating in Hazardous Activities: It is usually mentioned in the policy documents that participating in dangerous or hazardous activities shall not be covered. The reason being this is the high life risk associated with participating in these activities as a result of which these activities are not covered under a life insurance policy. Death of life assured caused by hazardous activities such as skydiving, paragliding, rock climbing, scuba diving, vehicle racing, hang gliding and other such adrenaline pumping activities are not covered under a life insurance policy. Activities that may result in fatal accidents which shall not be covered under a life insurance policy.

2. Pre-existing Medical Condition: Another standard exclusion under a life insurance policy is death due to pre-existing medical condition of the life assured. In case the life assured fails to inform or conceal the pre-existing medical condition from the insurance provider, claim for the same shall not be settled by the insurance provider. In case the life assured passes away due to a pre-existing medical condition during the policy tenure, the insurance company will not provide a claim to the nominee under such circumstances. It is advised to inform the insurance provider about your pre-existing medical condition or mention the medical condition in the application form.

3. Aviation Related Loss: Often, death caused in air crash wherein the life assured was travelling in a private plan shall not covered a life insurance policy. However, if the life assured passes away while travelling in a commercial airplane which follows a set schedule and route, the insurance company will provide a death benefit under such circumstances.

4. Participation in Unlawful Activities: Death caused by participating in unlawful activities is not covered under a life insurance policy. This is also one of the standard exclusions under a life insurance policy. Participation in illegal/unlawful/criminal activities as defined by the law shall not be covered under a life insurance policy. In case of an unforeseen demise of the life assured due to their participation in unlawful activities such as theft, civil riots, burglary, drugs, road rage etc., the death benefit shall not be provided to the nominee/beneficiary.

5. Suicide: A siginicant number of life insurance comapnies do not provide coverage for death due to committing suicide during the policy term. In case of an unfortunate demise of the life assured due to commintiing suicide within the first 12 months of the policy term, only 80% of the total premiums paid till the date od death of the life assured, shall be provided to the nominee/beneficiary by the insurance comapany. The premiums will be provided after excluding proportionate risk coverage amount till the date of death of the life assured and medical examination expenses incurred by the insurance company.

6. Incorrect/Misrepresented Information: Incorrect/misrepresented information can lead to claim denial or even worse policy cancellation. It is advised that all applicants must ensure that they do not misrepresent or state incorrect facts/information about themselves. It is also advised that the applicant should not lie about their actual age. If you do not provide your correct age to the insurer the insurer can deny your claim. In case the insurance provider finds any discrepancies in the information provided by the applicant, the policy can be cancelled.

7. Death Due to Natural Disasters: Selective life insurance companies do not settle claims for death caused in natural disasters. In case the life assured passes away due to natural calamities such as earthquakes, tsunami, hurricanes, cyclones etc., the death benefit shall not be provided to the nominee/beneficiary.

8. Sexually Transmitted Diseases: Sexually transmitted diseases such as HIV/AIDS are usually not covered under a life insurance policy. In case of an unfortunate demise of the life assured due the sexually transmitted diseases, the insurance company shall not provide a death benefit to the nominee/beneficiay under such circumstances.

9. Death Due Drug/Alcohol Abuse: Life insurance does not settle claims for death of life assured caused by drug overdose or excessive alcohol consumption. In fact, life insurance companies rarely issue a life insurance policy for people who consume alcohol on a daily basis or consume narcotics substances. In case life assured has not disclosed these habits at the time of policy issuance, the insurance company is entitled to withhold the death benefit. If the life assured passes away due to excessive alcohol/narcotics substance consumption, the insurance company will not provide a death benefit to the nominee/beneficiary under such circumstances.