Monday, March 25, 2013

One Good turn Deserves Another

When The Moment of truth arrives, Policyholders are still made to run from Pillar to Post Seeking Settlement of their Insurance Claims, While it has become more of a Customary Practice for The Insurance companies to reject Claims on grounds Incomprehensible to Policyholders.

Honesty is the best policy, and sure enough, there are a number of disgruntled people in India who feel that their insurance policies have offered them anything but that!

Consider the case: W.P No 1521/08 @ Hazera Khatun Vs NIC & Ors in the Guwahati High Court, wherein the petitioner challenged the action of National Insurance Co. Ltd. of repudiating her claim upon the death of her husband, stated to be covered under the Group Personal Insurance Policy taken by Golden Multi Services Club Ltd. from NIC, insuring all members of the club. NIC reasoned that the claim was repudiated on the ground that it was not submitted within the stipulated time period of 90 days. The Guwahati High Court in a landmark decision on March 2, 2010 quashed the repudiation of the insurer and directed NIC to make payments due to the petitioner, Hazera Khatun.

The repudiation of the claim and the legal battle that resulted in this instance is not a one of its kind happening. If the statistics available are to be relied on, then in FY’10 alone, approximately 7% complaints lodged with the grievance cell of the insurance regulator, Insurance Regulatory & Development Authority (IRDA), related to either non-payment of claims, repudiation of claims or incorrect claim amounts. Surprisingly, the industry says that as far as individual death claims are concerned for the year 2009-10, it has settled 95.24% of the cases and in group death claims, the settlement is 98.9%. And herein lies the greater irony of tall claims pertaining to customer centricity and service delivery.

When a policyholder, the insured, enters into a contract with an insurer, it is primarily with an anticipation that eventually when the time for settling of claims comes he/she or his/her family members would not face any problem. This, in simple terms, explains the very concept of Uberrima fidei or utmost good faith – the guiding principle of contracts in the insurance business.

To put things in perspective, the World Insurance Report 2011 states that globally, the claims department spends over $336 billion every year in managing and settling claims. This implies that for every dollar collected in premiums, insurers on an average spend 61 cents on claim settlement. While claim ratios are rising fast, it doesn’t negate the importance of balancing customer satisfaction with improving operational efficiency.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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