The life insurance industry has paid out more than 97 percent of the death claims received during the year 2020-21 of the COVID-19 pandemic. According to the Insurance Regulatory and Development Authority of India (IRDAI) annual report for 2020-21, the sector now received 21,836 claims between April 2020 and March 2021, out of which 21,304 claims were paid.
This includes claims settled under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) which provides a life cover of Rs 2 lakh. and directed health insurance companies to expedite the claim settlement process in their policies.
Taken collectively, insurers rejected 175 or 0.8 percent of claims, with COVID-19 death claims pending for settlement of 357 (1.63 percent) claims as of March 31, 2021. However, this data does not fully reflect the deleterious effect of the second wave. When the second wave gripped the country in late March 2021 and wreaked havoc in April and May 2021.
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Though 97.56 per cent of the claims have been settled but when it comes to the amount of claims settled, this figure becomes very less. Life insurance companies paid only 88 per cent of the amount of claims filed. The life insurers settled only Rs 1,418.71 crore out of the total claim amount of Rs 1,617.45 crore. The rate of rejection in terms of amount paid was very high i.e. 5.02 per cent as compared to claims rejected as per policy number.
It may be noted that life insurance policies cannot be questioned after three years of mandatory enforcement of the Insurance Act (Amendment), 2015. But life insurers investigate early claims to avoid the possibility of fraud, resulting in higher claim pendency ratio with higher claim rejections.
Although the claim settlement ratio is not the only parameter that you should keep in mind while choosing an insurer and policy, it is an important parameter. If you are buying a net risk term insurance cover of more than Rs 1 crore, then one must analyze the claim settlement ratio based on the benefit amount paid before selecting the insurer.
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