How Does Life Insurance Claim Settlement Work – Forbes Advisor INDIA


Industry insiders often refer to claim settlement as a life insurance company’s moment of truth. It is one of the most critical services an insurance provider is obligated to fulfill for its customer. Simply explained, claim settlement refers to the process whereby a life insurance company pays out the sum assured and other benefits as laid out in the policy document.

Every company uses a metric called claim settlement ratio to record the percentage of these claims it has settled or paid during a financial year from the total claims received. For instance, if a company has a claim settlement ratio of 97%, it means that it settled 97 of 100 claims received during the year. The remaining three were repudiated after the company conducted due diligence.

All insurance companies are required to measure and report their claim settlement ratio to the regulator. In turn, the regulatory insurance body, IRDAI, publishes this data in its annual report on its website.

What Claim Settlement Ratio Tells About the Company

Customers often consider claim settlement ratio as an indicator of an insurer’s reliability to pay out their claim. Apart from a company’s reliability, this ratio also underlines the quality of a life insurer’s business along with certain other data points like persistency ratio, net promoter score, etc. However, a single number doesn’t tell the whole story.

It is important to look at every company’s claims track record – a consistency is as critical as a higher claim settlement ratio. It reflects a pattern of resolution of robust claims and underwriting practices at the company.

Why Life Insurers Reject Claims

Claim settlement has been a fairly misunderstood subject. With the industry’s mistrust issues in the past, a significant number of customers have been disillusioned with insurance companies’ customer service practices. People believe a company to be fraudulent and ill-intentioned if a claim is rejected. However, life insurance companies seek to settle every genuine claim.

Certain business nuances like fraudulent claims require companies to follow stringent processes. In fact, new technologies like Data Analytics and Machine learning are allowing life insurers to tighten their underwriting and risk management practices including fraud detection and mitigation at early stages.

As a customer, you also can help your life insurer in ensuring a seamless claims process. With this context, I think it is important to be aware of why certain claims are rejected.

  1. Incomplete customer disclosures

The main purpose of a life insurance policy is to get the eventual benefit. So, it is important to provide honest and complete information to your life insurer. The information you provide at the underwriting stage helps your company correctly estimate your risk profile and therefore determine the premium you are required to pay for the desired life cover.

In a bid to avoid an increase in premium payable, customers often hold back certain relevant information (financial and medical), which may lead to claim rejection in the future.

  1. medical information

Your medical records and habits offer useful information to a life insurer. Your medical status can often lead to reinvestigation of your claim and eventually a rejection if there is any significant divergence. So, it is absolutely critical to be truthful and honest when disclosing medical information to your insurer.


Consumers, at large, see medical tests as a tedious task necessary to buy life insurance. Policies that don’t need medical testing are viewed in a good light. However, medical tests are objective way of establishing your health status when buying a policy. This information cannot be overlooked or disputed by your life insurer in the future.

  1. Existing life cover

Life insurance considers a concept called Human Life Value (HLV). HLV estimates the financial tooth caused by loss of an individual’s life on their dependents. Quite naturally, HLV differs from person to person. When you apply for a new policy, your existing life cover tells your life insurer whether you are adequately covered and need this new insurance policy that you have applied for.

However, with the interest to protect the customer, the regulation now states that a life insurer cannot reject a claim on any grounds whatsoever, after 3 years of policy commencement date. In case of revival of policy, this rule is effective from the date of revival.

How to Raise a Claim

Here’s the different types of claims and how each are processed:

  1. Death Claim

In case of a death claim, the nominee must follow this process –

  • Intimating your insurer: The first, most important step is intimating your claim to the life insurer. The claimant needs to fill a detailed intimation form which includes disclosure of information like name of the insured, policy number, cause of death, date of death, place of death, name of the claimant (you) etc. You can procure this form by reaching out to your insurance advisor, the insurer’s contact center or the website of the company. Some insurers also offer these forms in various languages ​​to make the process easily understandable and simpler for the claimant.
  • Submit required documents: As a claimant, you will need to provide a written statement, called claimant’s statement, death certificate of the insured, original policy document, and any other document needed by the insurer.

In case of early death claims, ie, for claims that arise in less than three years of issuing the policy, the insurance provider may conduct an additional investigation to ensure its integrity. As apart of the procedure, the company may undertake the following actions:

  • Verify with the hospital where the insured was admitted for treatment
  • In case of accidental death, check with relevant authorities to confirm the veracity of the circumstances
  • If the insured dies of medical causes, the insurer may ask for treatment records, doctor’s certificate, post-mortem report, police FIR etc.

It is crucial to submit all the requisite documents as early as possible for a quick settlement. Unless your insurer receives all these documents and conducts due diligence, the claim will not be settled.

  1. Rider Claims

There are additional riders such as critical illness rider, accidental rider, waiver of premium rider, etc that can be bought with a life insurance product to secure your dependents from certain events. The claim process typically differs in such cases. For instance, waiver of premium rider or accidental disability must be filed as a standalone claim. In such claims, the insurance company asks for documents such as FIR copy, disability certificate from the treating doctor, hospital report, etc.

  1. Maturity and Survival Claims

The payment released by an insurance provider on completion of the policy term or the maturity date is known as maturity payment. The payable amount includes the sum assured and any incentives or bonuses. In such cases, the insurance company needs to inform the policyholder in advance. The company sends a policy discharge form to the policyholder, which needs to be filled and returned to the company along with the original policy document, valid identification proof, copy of the policyholder’s bank passbook copy or a canceled cheque.

What Happens After you File a Claim?

Once you have filed your claim with required documentation, your life insurer ensures the policy is active and verifies the beneficiary’s identity. As per regulation, a claim has to be settled within 30 days of receiving all the necessary documents. In case a claim demands further investigation, the insurer must take 90 days for adjudication and another 30 days for payment from the claim initiation date.

Things to Remember to Ensure your Intended Beneficiaries Can Get the Claim Hassle-free

  • Thoroughly read the policy’s terms and conditions when you receive the policy document – ​​quite cliché, but knowledge is power. It is absolutely vital to be aware of the benefits, inclusions and exclusions of your life insurance policy
  • Understand the claim settlement process beforehand and discuss it with your loved ones
  • Give accurate details to your life insurance company when buying the policy
  • Update your policy or add life cover with every critical life stage or event
  • Inform your nominee about the policy and educate them about the process

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