The life insurance industry has paid more than 97 per cent of the death claims received during the COVID-19 pandemic year, 2020-21. Now the sector received 21,836 claims between April 2020 and March 2021, out of which 21,304 claims were paid, according to the Insurance Regulatory and Development Authority of India’s (IRDAI) annual report for 2020-21.
This includes claims settled under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) which provides a life cover of Rs 2 lakh. When the pandemic hit India, the insurance regulator notified all life And health insurance companies were directed to expedite the claim settlement process in their policies.
Collectively, insurers rejected 175 or 0.8 per cent claims with COVID-19 death claims pending settlement of 357 (1.63 per cent) claims till March 31, 2021. However, this data does not fully reflect the lethal effect of the second wave. When the second wave gripped the country in the end of March 2021 itself and created havoc in April and May 2021.
Though 97.56 per cent claims have been settled, the figure falls short when it comes to the claim amounts settled. Life insurance companies paid only 88 per cent of the amount of claims presented. Life insurers settled only Rs 1,418.71 crore out of the total claim amount of Rs 1,617.45 crore. The rejection rate by amount paid was much higher i.e. 5.02 per cent as compared to claims rejected by policy number.
It may be noted that life insurance policies cannot be questioned after three years due to the mandatory implementation of the Insurance Act (Amendment), 2015. But life insurers scrutinize early claims to avoid the possibility of fraud, resulting in high claim rejection ratio with high claim pendency.
Although the claim settlement ratio is not the only parameter that you should keep in mind while choosing the insurer and the policy, it is an important parameter. If you are buying a pure risk term insurance cover of more than Rs.1 crore, it is a must to analyze the claim settlement ratio based on the benefit amount paid before selecting the insurer.
