Understanding insurance partial claim settlement

In the realm of insurance, a claim settlement is the ultimate moment of truth. After diligently paying premiums, policyholders expect full financial support when a covered event occurs. However, it's not uncommon for insurers to offer a partial claim settlement, leaving policyholders in India, including those from Kochi and Ernakulam in Kerala, frustrated and financially strained. Understanding why partial claim settlements occur and what recourse is available is crucial for every insurance policyholder.

A partial claim settlement means the insurance company pays out a portion of the total claim amount requested by the policyholder, rather than the full sum. While this can sometimes be justified based on policy terms and conditions, it can also be a point of contention if the policyholder believes they are entitled to more. The Insurance Regulatory and Development Authority of India (IRDAI) consistently works towards protecting policyholders' interests, but awareness on your part is key.

1. Common Reasons for Partial Claim Settlement

Several factors can lead to an insurer making a partial claim settlement instead of a full one:

1.1. Policy Limits and Sub-limits: 1.1. Health Insurance: Many health insurance policies come with sub-limits or caps on specific expenses. For instance, there might be a limit on room rent (e.g., 1% of the sum insured) or limits on specific treatments, doctor's fees, or diagnostic tests. If you opt for a room category or treatment exceeding these limits, the insurer will only pay up to the defined sub-limit, leading to a partial settlement. Similarly, for group health insurance policies, there might be disease-wise capping or specific limits for maternity benefits. 1.2. Motor Insurance:For motor insurance claims, especially in own damage claims under a standard comprehensive policy, depreciation is a key factor. The value of parts like plastic, rubber, tyres, and batteries depreciates over time. The insurer will deduct this depreciation from the replacement cost of these parts, resulting in a partial settlement. This is where an "add-on" like a zero depreciation cover becomes valuable, as it negates these deductions.

1.2. Non-Medical Expenses (Health Insurance): 1.1. Health insurance policies typically do not cover "non-medical expenses" or "consumables" incurred during hospitalization. These include items like gloves, masks, syringes, cotton, gowns, food charges for attendants, telephone charges, and sometimes even basic toiletries. Hospitals may include these in the final bill, but the insurer will deduct them, leading to a partial settlement.

1.3. Deductibles and Co-payments: 1.1. Deductible: This is a fixed amount or percentage that the policyholder must pay out of pocket before the insurer starts paying for the claim. For example, if your health policy has a deductible of ₹5,000, and your bill is ₹50,000, the insurer will pay ₹45,000. 1.2. Co-payment: This is a percentage of the claim amount that the policyholder must bear. For example, a 10% co-payment clause means if your bill is ₹1,00,000, and your insurer approves ₹90,000 after other deductions, you will still pay 10% of that ₹90,000 (₹9,000), and the insurerwill pay ₹81,000. Co-payment clauses are more common in policies for senior citizens or specific variants of health insurance.

1.4. Under-insurance (Property Insurance): 1.1. In property insurance (e.g., home insurance), if the sum insured is less than the actual value of the property, the policyholder is considered "under-insured." In such cases, the insurerapplies the "average clause," paying a proportionate amount of the loss rather than the full loss.

1.5. Lack of Proper Documentation or Bills: 1.1. If the policyholder fails to submit all original bills, prescriptions, reports, or necessary documents required for the claim, or if the submitted documents are incomplete or unclear, the insurer may only approve the portion of the claim that is adequately supported by evidence.

1.6. Disputed Charges / Reasonable and Customary Clause: 1.1. Insurers sometimes dispute charges from hospitals or garages if they deem them to be "unreasonable" or not "customary" for the type of treatment or repair in that geographical area. They may cap the payable amount at what they consider reasonable, leading to a partial settlement.

1.7. Policy Exclusions or Non-Disclosure: 1.1. If a part of the claim arises from an exclusion specifically mentioned in the policy document (e.g., cosmetic surgery in health insurance, driving without a valid license in motor insurance), or if the insurer finds a material non-disclosure (e.g., undisclosed pre-existing disease), they may reject or partially settle the claim pertaining to that specific aspect. However, for health insurance, claims cannot be rejected for pre-existing diseases after the moratorium period (usually 5 years, as per IRDAI).

2. What to Do If Your Claim is Partially Settled

Receiving a partial claim settlement can be disappointing. However, you have rights and avenues for redressal:

2.1. Understand the Reasons for Deduction: 1.1. The insurer is legally obligated to provide a detailed, written explanation for any partial settlement, referencing the specific terms and conditions or exclusions in your policy document. Carefully review this explanation. If you are in Kochi or Ernakulam, contact your local insurer branch or TPA.

2.2. Review Your Policy Document Thoroughly: 1.1. Compare the insurer's explanation with your actual policy document. Look for clauses related to sub-limits, deductibles, co-payments, depreciation, and exclusions. Often, the reason for partial settlement lies within the fine print you might have overlooked at the time of purchase.

2.3. Lodge a Formal Grievance with the Insurer: 1.1. If you believe the partial settlement is unjustified or incorrect, formally write to the Grievance Redressal Officer (GRO) of the insurance company. Clearly state why you disagree, provide supporting documents (e.g., detailed bills, medical records, surveyor's report), and demand a recalculation and full settlement. Keep copies of all communication.

2.4. Escalate to IRDAI (Bima Bharosa Portal) or Insurance Ombudsman: 1.1. If the insurer's response is unsatisfactory or you don't receive a response within 15-30 days, you can escalate your complaint. 1.2. IRDAI's Bima Bharosa portal (bimabharosa.irdai.gov.in) is an online platform for tracking and resolving insurance complaints. 1.3. Alternatively, approach the Insurance Ombudsman in your region. For Kerala residents, the Kochi Ombudsman officeis relevant. The Ombudsman provides a cost-free, impartial dispute resolution mechanism for claims up to ₹50 Lakh. They can mediate or pass an "award" binding on the insurer.

2.5. Approach the Consumer Disputes Redressal Commissions (Consumer Courts): 1.1. For larger claim amounts or if previous steps fail, file a complaint with the District, State, or National Consumer Commission under the Consumer Protection Act, 2019. Partial claim settlement without valid reasons can be treated as "deficiency in service," allowing you to seek the full claim amount along with compensation for any distress or expenses.

Conclusion

A partial claim settlement can be a significant setback, but it's not always the final word. While some deductions are legitimate based on your policy's terms, it's crucial to understand why your claim wasn't fully paid. By carefully reviewing your policy document, understanding the specific reasons cited by the insurer, and utilizing the robust grievance redressal mechanisms provided by IRDAI and the Consumer Protection Act, policyholders in India, including those in Kochi and Ernakulam, can effectively challenge unjustified partial settlements and strive for the full financial protection they are entitled to. Always read your policy document thoroughly before purchasing and during the claim process to avoid surprises.

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