New Delhi: In a consumer-friendly action, the Insurance Regulatory and Development Authority (Irda) has started monitoring claim settlements of both life and non-life insurance companies to detect unwarranted delays in payouts.
If found in violation, insurance companies will face heavy penalties.
“We have set in motion a process wherein claim settlement patterns of companies are being watched and inspected,” a senior Irda official said. “In cases where we feel there are irregularities, we are calling the CEO (chief executive officer) and asking for an explanation. We will penalize companies who are refusing claims on unfair grounds.”
As part of its efforts to ensure that insurers quickly redress grievances, Irda had launched the integrated grievance management system last year, wherein customers could register their complaints online and track its status.
Industry insiders say that by examining the claims data of companies for patterns, Irda wants to go beyond just facilitating complaints resolution. It is classifying complaints into different categories to identify instances of violation/non-compliance by insurance companies so that regulatory action could be taken wherever required.
Sanjeev Pujari, appointed actuary, SBI Life Insurance Co. Ltd, said that rather than the internal claim experiences of companies, the regulator is more concerned about the claims settled by a company and the time taken by it to do so. “Delay in settlement of claims or refusing claims on unjust grounds are unfair practices that Irda is worried about,” he said.
Consumers would, however, prefer to wait and watch.
Manoj Agrawal, a Mumbai resident who has a family floater health insurance policy from one of the four public sector general insurers, was sceptical about the impact of Irda’s move.
“Twice I had to approach the consumer forum to get my claim settled. On both the occasions, the TPA (third party administrator) had refused my claim on unfair grounds,” he said. “It is a good move by Irda, but I don’t know what the impact will be on the ground. Companies may just look for some other ways to refuse claims.”
The claim repudiation ratio of private life insurers in 2009-10 for individual death claims was at 7.6% and that of Life Insurance Corp. of India (LIC) at 1.21%. The number of claims repudiated stood at 14,693 (12,781 in 2008-09), amounting to Rs 245 crore (Rs 180 crore in 2008-09), according to Irda’s annual report.
The claims repudiation ratio is the proportion of claims refused by an insurer to the ones it receives.
For non-life insurance companies, the majority of the outstanding grievances (almost 60%) were on account of non-settlement or delay in settlement of claims and repudiation, according to Irda’s report.
“Companies, in an effort to reduce their claims ratio, sometimes reduce claim payments arbitrarily or look to refuse on some grounds. There have been instances when companies deliberately delay paying claims when the renewal date is nearer, to force the client to renew the policy with itself. This specially happens with a lot of corporate clients,” said the CEO of a non-life insurance company, who did not want to be named.
The regulator is not looking to ensure that companies pay each and every claim they receive, said K.G. Krishnamoorthy Rao, managing director and CEO of Future Generali India Insurance Co. Ltd.
“Irda wants that the claims are settled to the satisfaction of both parties,” he said. “Even in cases where companies refuse claims on valid grounds, the regulator wants the companies to promptly inform the customers about the reasons behind the refusal of the claim.”
The unsatisfactory settlement of claims by the insurance industry was flagged by financial services secretary Shashikant Sharma at a recent seminar.
“Undue delay in claim settlement, under-payment and hassles in prompt settlement are the main concerns of the insured,” he had said.
Sharma asked companies to lay down time frames for claims settlement and to adhere to them.
“Some of the companies have started with their own internal monitoring processes even before the insurance regulator started doing it,” said Amarnath Ananthanarayanan, CEO of Bharti AXA General Insurance Co. Ltd. “We are one of them. We pay claims within seven days of receipt, if all other things are in order.”
In 2009-10, Irda’s grievance cell received 2,499 complaints against life insurance companies, as against 1,794 in 2008-09. Of these, almost 10% were related to non-payment and repudiation of claims, partial payment or non-settlement of maturity payments. During the same period, complaints against non-life insurers were to the tune of 2,076, as against 2,202 in the corresponding year-ago period.