Moment of truth: How to settle life insurance claims

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Every life insurance company adopts its own philosophy regarding handling of claims. Every life insurance company adopts its own philosophy regarding handling of claims.
SummaryNo activity in life insurance is of higher importance than that leading to settlement of claims.

No activity in life insurance is of higher importance than that leading to settlement of claims. It is the ultimate moment of truth in the contract of insurance between a policyholder who undertakes to pay premium regularly and the insurer who commits to pay a certain amount of money to the claimant on his survival up to the stipulated term, or to the nominees or the legal heirs if, unfortunately, the policyholder dies before the expiry of the term.

Every life insurance company adopts its own philosophy regarding handling of claims and tries to faithfully discharge its responsibility towards the customers or their dependents.

In practice, however, the companies widely differ in their approach to this important task. Over a period of time, complacency sets in down the line. Varying degree of passion to deal with the matter with empathy often determines the quality of claim settlement operations. It is necessary that the claims policy of any company is designed to render prompt, courteous and satisfactory service to customers without exception, whatever be the circumstances.

The most critical issue in handling any job in a structured organisation is procedure. It is expected to facilitate the end result within a time-frame while safeguarding the interest of the customers as well as of the company. All procedures are to be initiated or adopted by the people who are assigned the task of fulfilling corporate objectives.

The people who hold the key to a successful transaction have to be conscientious enough to understand that claim settlement is the very purpose of the existence of a life insurance company in the society. The procedure of claim settlement is not just data processing, but an activity that culminates in wiping tears from the eyes of those who have just lost their most loved one. Death claim cases are, therefore, dealt with something more than just an efficient procedure.

The beneficiary is concerned not with the efficiency with which procedures are followed by concerned employees, but with the effectiveness of a procedure that gives him or her prompt material result. In claims settlement activity ,procrastination by citing procedural issue is very common, but I think that allowing such stereotyped work style could prove counter-productive in the business of extending financial support and protection when it is needed the most.

Acquiring customers through aggressive sales strategies and brand-building exercise is exciting; but if a company really wants to influence customers and create a future market for itself, it has to concentrate on deliverables like claim settlement to create a relationship of trust with the market.

Only such positive experience can infuse confidence in the customers and earn huge loyalty. About two decades back, when I was marketing head of LIC at its divisional office 1 at New Delhi, the senior divisional manager once took me to the window of his office in a multistory building at Connaught Place and, looking down at the busy street, he asked: “What must be done to make all these people believe that employees in this magnificent building of LIC will take care of their family if, on a fateful day, any one of them failed to return home.”

I could guess what was in his mind and resolved to devote all my energy and managerial skill in enhancing efficiency of claim settlement operations to the level of being best in the country.

Claim settlement often requires bold decisions. The real test of claim settlement procedure is speed. In most of the cases, it is observed that the sum assured is finally paid but only after causing acrimony. In such cases, companies lose money as well as credibility. I strongly believe that death claim settlement procedure implies enabling the claimants to complete the documentation.

Only a hassle-free process can make the market believe in life insurance as an essential financial instrument. Even if it is decided to repudiate a claim, the action must be completed promptly and courteously.

Once during my visit to an LIC branch, I asked the HoD of the claims department: “What do you do to expedite settlement?” He comfortably replied, “I immediately write letters calling for requirement and forward copies to the divisional office.”

This bureaucratic mindset was the root cause of very poor claims settlement record of that office. To eliminate such a mindset, an interface of various stakeholders was organised. This resulted in settlement of 90% of 65 pending cases in one day.

The system became responsive, sensitive and result-oriented. Every action taken thereafter by any manager had to satisfy one question: Will it help in prompt settlement of claim? While handling claims portfolio, indecision and procrastination tactics must be avoided. People handling claims must note that they are in business because there is a chance of a claim arising. In insurance, claim settlement is not only a moral obligation, it is also a business obligation.

* The writer is advisor (Life Re-ins), GIC of India, Former MD & CEO, Star Union Dai-ichi Life

Matter of honour

* The most critical issue in handling any job in a structured organisation is procedure

* It is expected to facilitate the end result within a time-frame while safeguarding the interest of the customers as well as of the company

* The people who hold the key to a successful transaction have to be conscientious enough to understand that claim settlement is the very purpose of the existence of a life insurance company in the society

* Acquiring customers through aggressive sales strategies and brand-building exercise is exciting; but if a company really wants to influence customers and create a future market for itself, it has to concentrate on deliverables like claim settlement to create a relationship of trust with the market

* The real test of claim settlement procedure is speed. In most of the cases, it is observed that the sum assured is finally paid but only after causing acrimony. In such cases, companies lose money as well as credibility

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