As a policyholder, you would have expected that upon submitting a claim, your insurer would review and respond to it before the applicable deadline. Some claimants, however, find themselves in the confusing position of having their claim rejected while others have their claim delayed for an unreasonably long time.
While you may not know what exactly is the difference between the two, it is important that you understand that both instances are different and require different actions and documentation.
In this article, you will learn about the key difference between a rejected vs delayed insurance claim, the reasons behind each scenario, what your rights are in these situations and what actions you can take in each case.
What is an Insurance Claim?
An insurance claim is a request by you, the nominee or the insured to your insurer for a cover or payment, as per the terms and conditions of your insurance policy.
Depending on the insurance type, you may file a claim for:
• Health insurance
• Life insurance
• Motor insurance
• Home insurance
• Travel insurance
• Property insurance
• Personal accident insurance
• Other general insurance
After you make the claim request, the insurer reviews and evaluates the policy details, documents, event or loss, and other details before approving or rejecting your request. The claim can either be approved, partially approved, pending or under review, or rejected/repudiated.
Rejected vs Delayed Insurance Claim: What is the Difference?
The most apparent difference between the two insurance claim types is summarised below.
Delayed Insurance Claim Rejected Insurance Claim Your insurer has not yet taken an official decision on your claim. Your insurer has rejected your claim. Your claim is pending or has exceeded the processing period. Your claim has been officially rejected/repudiated by the insurer. The insurer should explain the reasons for the delay. The insurer must provide the reasons for claim rejection. You can review the reasons for the delay. You can review the reasons for the rejection. You can ask for an update on your claim. You can take appropriate action to file a grievance against the rejection.
The difference between a rejected vs delayed insurance claim is that the former has been officially denied while the latter is either pending or beyond the processing time.
In short, a claim that says “under process” should not be considered as a rejected claim.
Why Do Insurance Claims Get Delayed?
Insurance claims get delayed for various reasons. Listed below are the reasons for the delay in claim settlement along with some examples.
1. Missing or Incomplete Documents – The most common reason for a delayed insurance claim is incomplete or missing documents. It is the claimant’s responsibility to ensure the required documents are submitted with the claim request. Some of the commonly needed documents are:
• Health Insurance – hospitalisation bills, police report (in case of accidents), documents regarding personal accident, doctor’s certificate, etc.
• Motor Insurance – police report (in case of theft or accident), repair estimate, registration and insurance certificate, etc.
• Home Insurance – photos and videos of the damaged property, police report (in case of theft), repair estimate, etc.
If documents are not submitted or are incomplete, the insurer cannot process the claim.
2. Complex Third Party Involvement – In some cases, insurance claims require the involvement of a third party such as a surveyor. This is common in cases involving motor claims, or multiple contractors.
In such cases, the claim amount can only be settled once the surveyor’s report or agreement between the contractors is submitted to the insurer.
3. Delays Caused by Discrepancies or Errors – A typographical error in your name or policy number can lead to a claim being processed slowly. Such errors trigger fraud alerts thereby leading to the claim being reviewed manually before processing.
4. Insurance Company’s Processing Delays – In some cases however, insurance claims get delayed due to the insurer’s processing errors or backlog. For example, after a natural disaster such as a cyclone, flood, or rainfall, the number of claims received by the insurer increases manifold. This causes an inevitable backlog in processing claims, especially for motor and home insurance.
5. Investigation Delays “Bad Faith” or Other Reasons – In some cases, particularly for high-value claims, the insurer conducts an extensive background investigation to ensure that the claim is legitimate. On the other hand, some insurers intentionally delay the claim process for their own benefit. When such “bad faith” by the insurer is proven, they penalise the claimant.
How to Resolve a Delayed Insurance Claim
As mentioned before, a delayed claim means that the insurer has not taken an official position on the settlement of your claim.
Your objective should be to get your insurance claim processed as soon as possible. Here’s what you should do for delayed insurance claim :
1. Ensure you know if your claim is delayed. You can find details of your claim status on the portal provided by your insurer. You can also check your email inbox or spam/junk folder for any messages or requests from the insurer.
2. The insurer must provide you with a Request for Information (RFI) detailing the missing or additional documents or details that they require from you to process the claim. It is your responsibility to reply to the RFI as soon as possible.
3. Always mention your claim number, full name, and policy number when you contact your insurer.
4. Maintain a log of your communication with the insurance company. You can use this log to keep track of all your conversations with the insurance company. While doing so, note the following details:
• Date and time of the call
• Name of the person you spoke with
• The phone number or extension of the person you spoke with
• Summary of the conversation
5. If possible, you can also escalate the matter to the supervisor.
6. If your claim was delayed past the due date (mentioned by your insurer or by law in the local jurisdiction), you can call the Claims Manager or Supervisor to request a detailed status update of your claim.
7. In some cases, certain laws (such as your local Prompt Payment law) may require insurers to pay or deny your claim within a certain time period once all required documents have been submitted. If your insurer fails to do so, you may be entitled to additional compensation.
Why Do Insurance Claims Get Rejected?
Insurance claims get rejected for several reasons. Most commonly, claims are rejected because the insurer determines that the insured event or loss is ineligible for coverage under the terms and conditions of the policy.
Some of the common reasons for a rejected insurance claim are:
1. Policy Exclusion – Policies usually mention certain events or items that are not covered by the plan. For example, a standard home insurance plan does not cover flood damage unless you have a separate flood cover.
2. Policy Lapse – If you fail to renew your policy before the due date, the coverage lapses. Any claim arising after the lapse is rejected by the insurer since the coverage was discontinued.
3. Missing Claim Deadlines – Most insurance policies require that you report a claim within a stipulated time frame. For example, some motor policies require that you report a stolen vehicle within 24 hours while others require that you report any vehicle accident within 30 days of occurrence. Missing these deadlines leads to claim rejection.
4. Pre-Existing Conditions – In health insurance, pre-existing diseases are usually excluded from coverage.
5. Misrepresentation or Fraud – If the insurer discovers misrepresentation or fraud, they can reject your claim. For example, if you did not disclose a family member’s name while purchasing a health plan, the claim for their treatment will be rejected.
How to Contest a Rejected Insurance Claim
A rejected claim usually entails a formal decision by the insurer not to settle your claim. However, this does not always mean that you cannot do anything about it. Insurers can and do make mistakes. They also tend to deny claims for various reasons including misinterpretation of policy wording or automated rejections that can be overturned.
To contest or file a grievance against a rejected claim, you can follow the steps below.
1. Review the explanation of benefits (EOB) or the denial letter sent to you by the insurer. The EOB must outline the reasons for the rejection as well as the clauses in your policy that were violated.
2. Compare the EOB with your policy wording. Sometimes, the insurer violates its own policy wording and denies a claim that should have been approved.
3. Gather counter evidence, if any. To contest a rejected claim, you will have to provide sufficient evidence to prove that the insurer’s decision is false. In the case of health insurance, you can obtain a letter from your doctor certifying that the treatment you requested was indeed required.
In the case of auto or home insurance, you can obtain independent estimates and reports from contractors that contradict the estimation or report provided by the insurer’s surveyor.
4. File an internal appeal. The insurance company must have an internal appeals process that you can use to appeal against the rejected claim. You must file your appeal (along with all supporting documents) by the deadline mentioned in your EOB.
5. Take the matter to regulators or legal authorities, if necessary. If your internal appeal was unsuccessful, you can take the matter to your state’s insurance department or the National Insurance Regulatory Organisation (NIRN) for resolution. You can also consider consulting an independent public adjuster or even an attorney, particularly in the case of high-value claims.
Common Rejection Reasons
There could be various reasons for rejection of an insurance claim. Some of the common reasons for rejection are listed below:
1. Policy exclusion: The claim could have been rejected due to a policy exclusion. For instance, in a health insurance policy, certain treatments could be excluded.
2. Waiting period: For certain benefits, waiting period could apply. In health insurance, if the claim is made during the waiting period, the claim could be rejected. Insurance consumers are advised to check the IRDAI’s health-insurance guidance note on waiting periods and other exclusions.
3. Non-disclosure or misrepresentation: The claim could be rejected if there was non-disclosure or misrepresentation while buying the policy. For instance, as per the IRDAI’s guidelines, certain disclosures are mandatory while buying a health insurance policy. If such disclosure is not made, it could lead to rejection of the claim.
4. Policy not in force: This happens when the policy is not active when the claim is made. This could happen if the premium is not paid on time.
5. Documents: The claim could be rejected due to incomplete or incorrect documents.
6. Claim not meeting the terms and conditions: Every policy has specific terms and conditions. The claim could be rejected if the insurer determines that the claim does not meet the terms and conditions.
7. Suspected fraud: The claim could be rejected if fraud is suspected.
However, it is important that an individual analyses the situation rather than assuming that the insurer has acted wrongfully.
How Long Can an Insurance Claim Take?
There is no fixed time period that applies to all types of insurance claims. The time period applicable to your claim depends on the type of insurance, claim type, documents, investigation, and other factors. These factors also vary for different insurance products, such as motor, health, and home insurance. You can refer to the relevant IRDAI guidelines for more information. For instance, as per the latest health-insurance guidelines issued by the IRDAI, the settlement period for claims (other than cashless claims) is 15 days. The time period for cashless pre-authorisation decisions is 1 hour while the time for final authorisation is 3 hours from the time of receiving the discharge authorisation request.
In short, policyholders must remember that every claim must be settled within a reasonable time frame. If your claim has not been settled within the applicable time frame, you can request a written explanation from the insurer. You can also take up the matter with the insurers’ grievance redressal mechanism.
Rejected vs Delayed Claim: What Should You Do?
You must take different actions depending on whether your claim is delayed or rejected. If Your Insurance Claim Is Rejected:
Step 1: Ask for the Reasons for Rejection
Do not rely on what your insurer verbally says. Ask for the written communication regarding your claim’s rejection. Ask for the reason for rejection and whether the rejection notice mentions the policy wordings that were violated.
Step 2: Review Your Policy
Review the following policy details:
• Coverage
• Exclusions
• Conditions
• Waiting period
• Claim-related requirements
• Definitions
• Limits and sub-limits
Step 3: Review Your Documents
Review your submitted documents for inconsistencies or missing documents.
Step 4: Raise a Formal Grievance
If you feel that your claim was wrongly rejected, you must raise a formal grievance. Keep a printout or the electronic copy of your grievance, the acknowledgement, and all other correspondence.
Step 5: Escalate, If Required
If your grievance is not resolved to your satisfaction, you can escalate the matter to the appropriate regulator.
As per the IRDAI’s Bima Bharosa guidelines, you must first raise the grievance through the complainant’s grievance redressal mechanism before approaching the IRDAI. Escalation is recommended if your initial grievance does not yield satisfactory results.
When Should You Escalate an Insurance Claim?
You should escalate a claim if:
• Your claim was rejected and you feel that it is not justified.
• Your claim is pending beyond the applicable time period.
• Your insurer keeps asking for information without providing reasons for the same.
• Your claim is stuck even though you have submitted all the required documents.
• Your grievance has not been resolved to your satisfaction.
• You feel that the claim assessment or communication was done incorrectly.
As per IRDAI’s guidelines, policyholders must first raise the grievance with the insurer directly. Escalation to IRDAI must be done if the grievance is not resolved within the stipulated time frame or if the resolution was unsatisfactory. Where applicable, policyholders may also approach the Insurance Ombudsman for resolution of eligible insurance grievances.
Conclusion
A rejected insurance claim and a delayed insurance claim are different situations, and each requires a different approach. Understanding the reason, reviewing your policy and maintaining proper documentation can help you decide what to do next.
Eternity Claim Solutions helps policyholders with claim rejection, claim delays, short settlement and insurance disputes, providing guidance on the available grievance and resolution process.
Facing a rejected or delayed insurance claim? Get in touch with Eternity Claim Solutions for assistance with your claim.
Frequently Asked Questions
Is a delayed insurance claim the same as a rejected claim?
No, a delayed claim is different from a rejected claim. In a delayed claim, the insurance claim has not been resolved by the applicable deadline. In a rejected claim, the insurer has rejected the claim.
Can I challenge a rejected insurance claim?
Yes, depending on the circumstances, you can challenge or file a grievance regarding a rejected claim. You must first obtain a copy of the written rejection notice. You must then review the notice against your policy wording and supporting documents.
What should I do if my insurance claim is stuck under process?
You must ask the insurer for the status of your claim. Ask them for the reason for the delay and whether any additional documents are required to process your claim. You must keep a soft or hard copy of all correspondence with the insurer. You can then take up the matter with the insurer’s grievance redressal mechanism if required.
How can I complain about an insurance company in India?
You must first approach the grievance redressal mechanism of the concerned insurance company. If you are not satisfied with the outcome, you can raise a complaint with the IRDAI’s Bima Bharosa mechanism. You can also approach the Insurance Ombudsman, if applicable.
Does a delayed claim mean my claim will be rejected?
No, a delayed claim does not necessarily mean your claim will be rejected. You should follow up with the insurer to determine the status of your claim.
