MUMBAI: IRDAI has asked non-life industries to come up with a uniform definition of claim and a uniform definition of claims settlement ratio for various lines of business. This came after different companies used different definitions to determine the claims settlement ratio, a key metric that is an indicator of companies’ financial health and customer satisfaction.Some companies record the claim in the first instance while others do so after liability has been determined under the policy. While for the average person a “settled claim” is one in which the insurance company pays to their satisfaction, some insurance companies treat claims that they close due to unavailability of documents or claims that are rejected for not being within the scope of the policy as settled claims. While this helps increase the numbers, it gives an uneven picture of how many customers are getting what they demand.“The General Insurance Council has submitted its views on standard definition of claim and uniform approach for determining claim settlement ratio for various lines of business to IRDAI as requested by them. This is to ensure that a clear picture emerges regarding the company’s claims settlement standards without differences in the different methods taken by each company in different steps,” An industry source said.
” In simple fact, a claim can only be treated as settled if the customer confirms that it has been settled.
Until this is done, the claim remains pending/disputed ” said KK Srinivasan, former life-changing member of IRDAI. He added that if the claim is rejected by the insurance company, it can be legally challenged within 3 years of rejection, and it will remain disputed until the court decides on it. “Once a repudiation or dispute is accepted by the court for hearing, it shall be treated as unsettled until the court or tribunal disposes of it and the court order is complied with,” He added.While companies require claimants to submit a release slip stating that they accept full and final settlement, there are many claims where the client is not satisfied. Claim definition is necessary to determine the proportion of claims incurred that determines underwriting profits. The broad definition of a claim means that insurers have to allocate money for each claim they make even when they do not have active cover.“The claim settlement ratio should be seen over a period of time. It is possible for a company to have a claims settlement ratio of over 100 if it has settled all claims and outstanding claims from the previous year,” said the former CEO of a life-changing company.