http://ahmedabad-info.blogspot.com/2007/08/insurance-companies-go-slow-in-early.html

Insurance companies go slow in early claim


While
the probability of facing a claim rejection is a lot lower in life insurance
policies than in medical or accident covers, early life claims invite a higher
scrutiny. That is why they carry a higher risk of being turned
down.



All life insurance
companies such as LIC, ICICI Prudential, Bajaj Allianz and Tata AIG treat claims
made within the first two years of a policy as an early
claim.



In such an early claim
case, Ahmedabad's Consumer Disputes Redressal Forum recently held LIC Ahmedabad
liable for deficiency in service. A statement from Ahmedabad's Consumer
Education & Research Centre (CERC) says the forum ordered LIC to pay a
deceased's widow Rs 5 lakh under one policy and Rs 50,000 under another, with 9%
interest from September 3, 2004. It also ordered LIC to pay the widow Rs 5,000
for causing mental agony, besides Rs 2,000 towards cost.




The policyholder drowned in
January 2004. "Though more than six months had elapsed, LIC did not pass the
claim, stating that it was an early claim (before the expiry of one year) and it
was being investigated," says the CERC statement. After nine months, it
repudiated the claim, arguing that the policyholder might have committed
suicide, having given in to the unbearable suffering due to kidney stone, the
statement says.



An Life
Insurance Corporation of India official says the insurer has "gone against the
district forum judgment, vide appeal no 480/ 2007 in the state commission. We
have deposited Rs 1 lakh as earnest money with the
court".



Says a senior insurance
official who does not wished to be named, "If a suicide takes place within 12
months from date of the risk, then the claim gets rejected under the suicide
clause, which is included in all life insurance policies. But, the insurance
company has to prove it was a suicide in the first
place."



Claim rejections would
also happen if an investigation revealed mis-representation, non-disclosure of
facts or a fictitious policyholder (extremely rare). An LIC agent says, "If an
early claim investigation finds the policyholder was on leave on medical grounds
before he applied for the policy and failed to mention it, the claim will be
treated as null and void."



CERC
legal director Kirti Bhatt delves further on the grounds of rejection,
"Sometimes investigations reveal that the policyholder had suppressed
information about bypass surgery, heart attack...." Which is why, Bhatt advises,
"When you apply for a policy, you must give all your details." Agents are known
to ill-advise consumers to hide relevant medical information to avoid a higher
premium, says Bhatt. "But hospital papers may show up the person's medical
history—like he was suffering from heart disease for the past five years.
It is better to pay a higher premium or your relatives may land in
trouble."

Source by timesofindia.indiatimes.com/Business/

compiled by bhavik shah