Most of the articles I wrote for this column in 2019 encouraged readers to insure themselves adequately against varied risks. This thrust was driven by the broader context that we live in. Our insurance penetration is one-fifth that of developed nations. While the problem persists, people who have bought insurance are often not able to use it well. There are numerous claim rejections, deductions and delays. Last week, I took a session for practicing chartered accountants about how to mitigate investor-related risks through insurance policies. During the Q&A session, participants spoke about their poor experience with claims. There was a strong undercurrent of mistrust. When I peeled a few layers, it was evident that the issues were avoidable, had a few precautions been taken beforehand.
As a new year dawns, here a few resolutions that you could consider for 2020. These suggestions would seem basic. However, the pay-off is disproportionate, if adhered to on a regular basis.
First up, you must ask about the claim process while purchasing the insurance policy. An intermediary or a sales executive, who cannot demonstrate a strong claims know-how, should be avoided. Ask specifically about the points of contact for claim registration and submission. Take a detailed checklist of documents that will be required while making claims. Claim surveyors will ask for a valuation certificate for your jewellery. If you cannot arrange for this document, you might as well not buy the insurance policy. Once you have these details, do keep this information accessible. In the case of personal insurance policies – health, accident and life – do ensure that your nominee is well-versed with the claim process. Recently, a senior executive in a media firm passed away. Apart from a vague inkling that the deceased used to pay hefty insurance premiums, the person’s family and friends were clueless about his insurance portfolio. Colleagues had to scan his official inbox to fetch a premium receipt for an endowment plan. They somehow managed to make a claim. If there are more policies, we may discover only later. Atul Gawande, in his bestseller, ‘Being Mortal’, describes how discussing the consequences of his father’s terminal illness with his parents was an awkward topic. This despite the father-son duo being doctors, and having had similar conversations with their patients umpteen times. But when they overcame this hesitation, both were relieved. Having a frank conversation with your family members about their financial security in your absence may be unusual, but still necessary.
Make complete disclosures
The second resolution should be about making full disclosures. Insurers are increasingly becoming stringent in their underwriting practices. A friend was denied a critical illness insurance claim because he had undergone a minor urological procedure. Another friend had his insurer exclude all orthopaedic procedures because he had suffered a gym accident and had chronic lower back pain. You can debate whether these measures suggest an overreach on the insurers’ part. But, the fact remains that insurers have a final say on this matter. At times, insurance company representatives encourage prospects to suppress adverse medical information to help them get the policy issued. This is wrong. While the policy will get issued, the insurer is likely to deny the claim, if it finds out the truth later. For a health insurance claim, ‘indoor case papers’ is a tool for insurers to discover suppressed information. Nurses and doctors record small remarks about patient history to guide the course of medication. I regularly see cases, where not just the immediate claim is denied. Insurers go to the extent of cancelling the health policy itself. This is a double whammy for the policyholder. Other insurers would be sceptical about issuing a policy at this stage even with higher premiums. You must resolve to always disclose the full information about your medical conditions, read the filled proposal form before signing, and keep a copy of it for your future reference. Anyone, who suggests otherwise should be avoided.
The third resolution requires some proactive effort. You should find the major exclusions in the policy, and enquire about top reasons for claim rejections. Sometimes, the insurance product may offer an add-on to cover such an exclusion. For example, zero depreciation is a standard add-on offered under motor insurance. Absence of this add-on would mean substantial depreciation deduction at the time of claim. You must also understand your obligations when a claim situation arises. For example, if you are stuck in a flooded street, and your car stops, you are not supposed to start the engine. This could lead to an engine seizure, and your claim would be denied on grounds of negligence. Similarly, in case of a fire at home, you are expected to inform the insurer immediately. This allows the firm to survey the affected premises before you initiate repairs or remove the debris. A delayed survey can lead to a lower estimation of the loss incurred by you.
The chartered accountants in the seminar were frank enough to confess later that the primary focus of an insurance purchase discussion revolved around price. Rarely do they envision or discuss the claim process. It is well within your right to look for a bargain. However, you must not be penny wise and pound foolish. Paying a slightly higher premium is better than having a claim rejected!(The writer is Principal Officer & Managing Director, Securenow Insurance Broker Pvt Ltd)