According to a recent survey, Claim Settlement Ratio (CSR) continues to remain one of the most important factors while considering a Life Insurance policy. Customers come across terms like Claim Rejection and Claim Repudiation while checking the CSR. Many people are often confused between these two terms or use them interchangeably. Even though they are synonymous, the meaning of these two terms is entirely different. Let us see the difference between the two in detail.
Claim Repudiation applies to a claim that has been processed and is found unpayable. When a customer makes a claim on the grounds or conditions which are not covered under the policy conditions, the insurer repudiates the claim. The conditions or the loss are not covered under the policy. This is called claim repudiation. In such a case, companies aren’t liable to pay.
Let us try to understand this better with the help of an example
Rahul, who is suffering from hypertension, wanted to purchase an Endowment Plan. His policy gets issued with certain exclusions. The exclusions were that any claims related to hypertension wouldn’t be considered under this policy. 6 years later, Rahul dies because of a stroke which is related to hypertension. Under such circumstances, the insurer won’t be liable to pay any money and the claim would be repudiated.
According to IRDA, in the year 2020-21, only 0.87% of claims were repudiated by Life Insurance companies.
Claim Rejection occurs before the claim has been processed. This is mainly because of non-disclosure or wrong disclosure of information by customers such as the nature of the occupation, pre-existing diseases or age, etc. Other reasons for rejections include – lapsed policy and standard policy exclusions or delay in document submission.
Let us try to understand this better with the help the previous example
Rahul, who is suffering from hypertension, wanted to purchase an Endowment Plan. But while filling out the form, Rahul didn’t mention his pre-existing medical condition. 6 years later when Rahul died due to a stroke, his insurer came to know about this non-disclosure. At the time of purchase, Rahul suffered from hypertension which wasn’t mentioned in his policy document which caused a discrepancy. Hence the company would reject his claim.
According to IRDA, in the year 2020-21, only 0.28% of claims were rejected by Life Insurance companies while 0.19% of the claims were unclaimed.
You can compare and buy Life Insurance plans at MyInsuranceClub. Get assistance from our trained and certified advisors.