Here is a post from a reader….his name and location does not matter does it? Yes he is a Tamil speaking insurance policy holder….and this is his ordeal…

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Shouldn’t insurance be more user-friendly?

“Veettai katti paar, kalyanathai panni paar” – A popular Tamil adage that means “Try building a house and try arranging a marriage”.

The implication is, these two are very tough tasks and one would need to experience them to understand.
An acquaintance recently added “Insurance panathai vaangi paar” to the above adage which means “try getting money from insurance company”. There have always been anecdotes of difficulties in getting insurance claim amounts. But then, I could quite empathize with the insurance companies as they need to ensure that they are not being cheated through bogus claims.

But a recent experience of surrendering a life insurance policy changed my perception quite a bit. This was an Aviva ULIP with a balanced fund purchased through a bank in Oct 2003. The surrender documents containing the original policy, claim form, voter card copy, original bank statement, photograph, cancelled cheque etc were couriered to their office at Chennai on 1st November. And then the various interactions are briefly as below:

Sir we’ve received your surrender docs but we shall not be able to process the same. You’ve used version 1.5 of the surrender form, but it should actually be 1.6… (it was provided by the bank)

But any way your bank statement has not been attested by you sir. So we cannot… (Though it was the original bank statement signed and stamped by the bank)

Sir you’ve paid premium for 9 years, why do you want to surrender now? If you pay premium for the full term you will get loyalty addition!  Loyalty addition? Yes sir. Every policy has that feature (!!???) And it’s a 2003 product you know… why you want to lose 10-15% L.A. We shall anyway be sending the docs back… you may check. (have you heard of mis-selling while surrender?)

Even after 10 days, the policy docs do not come back. “Sir, J has kept it in his locker and he is away at Coimbatore. Once he is back it shall be processed (?).”

A complaint is lodged with their call centre. They revert citing the bank statement reason and claim to have formally intimated through ORDINARY POST (it never came), in this age of e-mail!!
But the very next day, the bank branch gets a call that the docs have reached their head office!!!  What’s happening? And why to the bank H.O?
Sorry sir, we need to figure it out. But please send back the documents immediately when you receive it. It will be processed immediately. But sir, please fill up the RTGS mandate also and enclose it with the docs. I forgot to tell you earlier (!!!)

And few days later…

Sir, we have a problem with your voter id. Your age varies… (I’ve already proved my age at the time of purchasing the policy. Now is not the time for you to worry about my age. Since when did voter card become age proof… it is supposed to be only an identity proof!)

Sir… but company rules. Just send me copy of your bank passbook with your photograph sir. I shall process it within 2 days.

A few days later, a call from their Gurgaon office…

“Sir, we’ve received your surrender document. Can I verify your address sir?

Me: blah… blah
“Thank you sir. We shall send you the cheque in a week”

Me: But I was told that the amount would reach me by RTGS…
“Yes sir. But your bank statement is not the “latest” (???)

And on 17th December, I was singing chitti aayee aayee hai, chitti aayee hai…. The surrender cheque reached me and it got cleared by the 19th of December. A 50 day ordeal to surrender an insurance policy…. Couldn’t this have been done simply based on the original policy and the surrender form?

When all it takes is signature verification for MF redemption, why should an insurance surrender be such an arduous task? Yes of course, insurance is a contract and has bigger implications. But does such an elaborate process justify itself, especially when it is just the policyholders’ money that is being returned?

Where is the need to prove identity, age, photo etc while surrendering? Aren’t insurance policies predominantly sold as investment products nowadays?
Insurance products by nature are complicated (term policies are hardly sold) and the whole process makes it so much more complicated that intermediaries seem to become simply indispensible, especially when insurance companies hardly have a presence in semi-urban / rural India. What about those who buy policies online? Or what if someone has lost his original policy doc? And what happens in a death claim if the person is not alive to do all the running around? Its time insurance is made more user-friendly, in the interest of both the company and policy holder.

This experience is of Sreekant Vaithiyanathon, a small business owner based in semi-urban TN and a regular reader of this blog. He has been an investor since the late 90s. His consistent brush with “quality” and “privileged” financial advice made him to seek financial enlightenment and finally landed him a CFP certification.

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  1. Look at Life Insurance Policies. Most of it is brought by men, and for many, their wives are financially illiterate. Do you think they will ever get money when their husband dies??

    In my case, regarding one medical insurance claim, they kept on playing ping-pong untill I informed my employer (policy was paid for by employer) and then I got paid immediately. One needs to show his muscle power to get claims.

  2. “Veettai katti paar, kalyanathai panni paar” —– yes, have experienced half of this saying, and in the middle of other half 😛

  3. I had a BAD BAD experience with Royal Sundaram Alliance Insurance in January 2010 (Chennai-based), while raising a claim for a major surgery for my wife from Mumbai.
    They tried to “negotiate” down the claim in multiple ways. Surgeon’s fees too high, this not covered, that not covered, etc…

    My simple question was, if I’m insured for 5 lacs, why do you say that a claim totalling 1.9 lacs is too high.
    I kept on persistently following up via email, with ALL previous emails included in their replies (yes, they would even remove previous email correspondence from the latest response !)

    They finally paid up 1.85 lacs in June 2010 !

    The simple FACT IS, they will ALWAYS try to delay or reduce claims settlements.
    They want to test the customer’s persistence and diligence in chasing them.

    I would recommend seeing the movie “The Rainmaker” to see the full extent of this sort of behaviour on the part of insurance companies 🙂

  4. On the positive side, I got a final payout from LIC, via NEFT, yesterday.

    This was for a 25-year money-back policy which matured 2 days ago !

    BANG ON TIME !
    And a very pleasant surprise 🙂

  5. KV

    maturity claims are paid on time. They have no issues… and all the managers will want to take credit for the same. Then they will want u to buy something with that money!

    However death claim AND surrender claim are difficult to handle for LiC

  6. Few years ago am able to surrender ICICI ULIP policy with out any hassles, Just Filled the the form and attached the proof with in few days i got my settlement money.

  7. @Pooja R:

    I suppose you’re right !
    It’s the claims settlements which you will have to *fight* for.

    I can understand *all* health / death insurance claims being seen with suspicion at first. But they could certainly handle even those claims with more grace and understanding !

    Why should they cause delays in surrender claims ?
    They just want to test the customer’s persistence !
    If even 50% of customers give in to their tactics, that would be a lot of money ‘saved’ by the companies !

    After being a Subramoney reader for the past couple of years I’ve learnt the importance of saying “NO”, if I want to become ‘rich’ 🙂

    Of course, my LIC agent and Bank Relationship Manager are not at all happy about that ! ;P

  8. @ All,
    What is ULIP? 🙂

    People in late 20’s and early 30’s can only think of equity as a saving grace, by avoiding financial porn to hope for a peaceful living..We just cant afford to initiate a ULIP investment now…

    Unless some of us are blessed with rich parents/grandparents or an old relative’s bequeathed wealth… 🙂

    Long live Equity..

  9. Sir, after getting GYANN from you i surrendered 2 policies Moneyback& pention plan of LIC…There was no hassle at all!!!

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