All about seamless insurance claim

Opting for life insurance, the foremost thing one notices is the amount of premium to be paid on an annual basis. The next consideration is the return one would earn on it at the time of maturity or the various guaranteed benefits or the bonuses it provides along with the numerous other benefits especially of the survival. Survival benefits are important as it helps in one’s future planning but it’s the death benefit that’s actually more critical as insurance is the only product/investment with this benefit and it could be only be available to the beneficiary post the insured’s survival. Hence, the prime most prominence should be given to death benefit and the ease/difficulty in the process of obtaining for the nominee/survivor/beneficiary

Life insurance policy is like any contract. It has an offer and acceptance but one has to note that the offer is actually made by the individual or the proposer whilst the acceptance and the terms are governed by the insurer. It’s generally misunderstood the other way.

The other key principle in insurance contract is the doctrine of “utmost good faith” or uberrima fides, which emphasises the presence of mutual faith between the two parties. Insurance contracts are not governed by ‘caveat emptor’ i.e., ‘buyer beware’.

This also makes the ‘duty of disclosure’ by the proposer/individual i.e., one is legally obliged to disclose all the required information that would influence the insurer’s decision to enter into the contract or accept the risk.

Factors that influence the decision by the insured are called as “material facts”. Deliberate non-disclosure is providing incorrect information or suppressing the facts whereas an innocent non-disclosure is failing to supply the information one wasn’t aware of.

This makes for the disclosure very important and voluntary as it not only puts the insurer at disadvantage but the entire community of policyholders. Any such act would amount to breach in the contract, however the burden of proof to show non-disclosure or misrepresentation is on the insurance company and so makes inquiry through financial and medical inquiries/examination.

Further, the insurance act lays down that an insurance policy can’t be called in question two years after it has been in-force. Uninformed individuals assume that by mentioning a particular shortcoming/defect, the insurer would penalise by increasing the premium but there is a scientific approach of rating that is adhered to and the overall rating is what matters to categorise the individual as standard or otherwise.

So, by revealing all the information, the proposer could help make an informed decision for the insurer. At the time of claims especially the death, the beneficiary should produce the required documentation along with the death certificate, which mentions the cause of death.

Of course, now the regulation mandates for the claim to be directly debited to the insured’s account avoiding any fraud. But, one has to ensure that the nominee of that account is same as that of the insurance policy to evade any legal hassles at a later point of time for the beneficiary.

So, if the insurer suspects any distortion in the material facts mentioned at the time of proposal, legally the contract is void and hence the insurance company could reject or dishonour the claim.

In case of early death claims the insured automatically investigates the cause of death and only after the insurance company is satisfied, the claim is cleared and the benefits are disbursed to the beneficiary.

If not the insurer could decline the claim and the beneficiary could, however, fight it out in the court of law. So, customers need to recognise that the seamlessness of claim disbursement actually lies with the insured and the transparency they adhere to at the time of proposal.

This doesn’t mean the entire onus transferred to the insured but one could avoid any annoyance for the beneficiary. (The author is a practicing financial planner and could be reached at [email protected])

By K Naresh Kumar