Can you rely on your policy?

ACCORDING to the Irda, of the 7.62 lakh life insurance claims filed in 2009-10, nearly 15,000 were rejected by insurers. This means 15,000 families were denied the money that policyholders had thought would reach them if they died. Though the 2010-11 figures are still being compiled by Irda, unaudited data individually sourced from insurance companies shows that roughly 16,000 insurance claims ended up in the rejection bin last year. The rejection ratio of some companies, especially those that started operations a few years ago, is alarmingly high. Aegon Religare rejected 45% of the claims. Future Generali, IDBI Federal and DLF Pramerica turned down one of every fifth claim that was raised. In comparison, the LIC has a rejection ratio of just 1.1%. 

    Does this mean buyers should stick to older, established insurance companies and steer clear of the newer players? Not really. Claim settlement statistics should not be seen in isolation. Most of the claims received by the new companies are early death claims, where the policyholder died within two years of buying the cover. "An early claim is a warning as this could be a deliberate attempt to defraud," says Yateesh Srivastava, chief marketing officer, Aegon Religare. In suchcases, insurers investigate the cause of death in great detail, which could take up to six months. 
    Early claims are not a problem because if everything is found to be in order after the scrutiny, the company will pay the insured sum even though it might reach the nominee late. The bigger problem is rejection of claims because the insurance company believes that pertinent facts were deliberately suppressed by the policyholder at the time of buying the cover. The villain is often the insurance agent, who filled up the form on behalf of the buyer. Don't think the agent is doing you a favour if he deliberately overlooks any health problem. He's doing so only to sell the policy and will not be around to help when the claim gets rejected. 
WHAT YOU SHOULD DO Don't rely on the agent: Fill up the application form yourself. If you can't, go through the form after the agent has filled it. Retain a photocopy. Don't hide your health condition: Do not withold any information relating to your health and family medical history. Incorrect information is the most common reason for rejection. Don't avoid medical tests: A rigorous medical test actually helps the buyer. It rules out the chances of the claim being denied on account of pre-existing diseases. Give correct information:Be completely honest about your age, occupation, income and other insurance cover. Crosscheck the policy: After the plan is issued, check the policy document and notify the insurance company if there is any inaccuracy. 
Why claims are REJECTED 
Early death 
If death occurs within two years of buying the policy, the insurer will probe the case closely. This can take up to six months. 
Non-disclosure of health condition 
If insurer believes the policyholder deliberately hid his condition, claim can be rejected. 
Non-divulgence of family medical history 
If close relatives suffer from a disease but it's not mentioned in form, the claim may be turned down. 
Details of hazardous occupation 
Certain jobs carry a high risk. If the policyholder has not correctly stated his occupation, the claim can be refused. 
Over-insurance 
One must declare income and other insurance plans. Taking a high cover and not mentioning other plans arouses suspicion. — ETW, May 9, 2011

T H E B E ST OF INSURANCE BIGGER LIFE COVER, LOWER PRICE

It's more important than buying the right stock or investing in the best mutual fund. And it's more useful than any other investment in your portfolio. Yet, many Indians continue to buy insurance for the wrong reasons. Insurance is the lynchpin that keeps your financial plan steady even if unforeseen events threaten to derail it. This is why ET Wealth covered life and general insurance in detail, telling readers about the benefits of taking cover against risk, guiding them on the best ways to insure themselves and cautioning them against mis-selling by unscrupulous agents. Advice on life insurance would have been incomplete without talking about eschewing unsuitable policies or ensuring that a claim is not rejected. We also tracked the changes in the health insurance landscape as also the possible impact of portability.

    It's that time of the year when showrooms try to get rid of merchandise that may not find buyers till next year. So, something far more precious than off-season apparel and household appliances is being sold at unbelievably low prices. Term plans, which are seldom pushed by agents, but are arguably the best form of insurance, are being sold at premiums 40-50% lower than those offered 1-2 years ago. 
    Much of this has to do with the growing competition in insurance. Some of the newer players, desperate to get a toehold in the market, are offering lower premium rates to attract customers. They are encouraged, in part, by the improving life expectancy figures in the country. The average Indian now lives for almost 65 years, compared to about 55 years in the 1980s and 58 years in the 1990s. 
    There is more good news. Online term plans, where a customer buys the policy directly from the company, are up to 35% cheaper. By removing the intermediary between the customer and the company, the Internet has helped bring down the price of the cover. Says Madhivanan B, executive director, ICICI Prudential Life Insurance: "The online channel lowers the costs of processing and servicing, which we pass on to customers." 
    Online term plans have become a huge hit with buyers. Every 18 minutes, an online term plan is bought in the country. In the past six months, the seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly 9,100 crore. This is almost equal to the total cover offered by all new policies sold by the newest five life insurance companies (Star Union Dai-ichi, Shriram Life, IndiaFirst, DLF Pramerica and Sahara Life) in 2010-11. 
    The large cover offered by online plans is good news for an underinsured country like India. The average life insurance policy - issued in 2010-11 offered a cover of 1.93 lakh. 
    — ETW, December 20, 2010