March 12, 2019

How to Ensure you Minimize your Client’s Claim Rejection?

Dinesh Jain

How to Ensure you Minimize your Client’s Claim Rejection?

Time for some Due-Diligence!

Disclaimer: This article has been written keeping health insurance in mind.

The common myth among a lot of people is that we are buying insurance from the insurance company and insurance companies are selling their policy to us. Well, this understanding is not completely correct. Rather it is the other way round, i.e you are selling your risk and the company is actually buying it.

The procedure we all know is, we apply for the insurance through a proposal form. “PROPOSAL FORM” means that you are proposing to the insurance company giving all your required details and asking them to consider your case. So your case goes to the underwriter of the company and if they consider you fit enough then only they will consider(buy) your case and accept it else they might refuse to take your case.

The PROPOSAL FORM asks you to fill up many details out of which the most important is your “EXISTING MEDICAL CONDITION if any”. This is where our role as a FINANCIAL ADVISOR comes wherein we have to extract the medical information (if any) in such a way that client does not feel hurt and at the same time we get the correct information.

In my experience, the moment I ask a client about his medical complications and background, the first and most instant answer I see is, “NO, there are no complications”, but at the same time, there are chances that if the same client gets hospitalized and when the Doctor asks him about his medical background, the client tends to answer it truthfully. Why is that a Client answers this Truthfully to a Doctor and not to the Financial Advisor who is trying to minimize his future Risk? This does not happen knowingly with the clients but because of Ignorance, as the client does not realize how this will impact his claim in the future!

A simple example which I can recall is, where I had done the Mediclaim of a client in May’14 – floater policy for husband, wife, and children. When I had asked them about their existing health condition they said, they are absolutely fit and fine with no problems and so the policy was issued. Later in August/September 2014, the wife was hospitalized. During the interaction with the doctor, about her previous health history, she had said that a few years earlier she had realized she had diabetes but then it had always been under control.

At the time of claim settlement, the initial consultation letter (between the patient and doctor) also went to the insurance companies. Here the insurance company found that doctor had written diabetes under the previous history which was not mentioned in the policy, which resulted in claim rejection saying facts was not declared in the proposal form.

In this case, it’s not that the client wanted to hide something knowingly but maybe I thought as an advisor I did not do my due diligence.

Here is how you can ask for the medical history, to check if the client has any.

First, ask generic questions like: “Have you ever suffered from any medical condition in the past? Have you undergone any kind of surgery?  Are you suffering from any medical condition as of now? Is there any surgery pending which doctor might have recommended you and you want to undergo sometime in the future?”. Irrespective of whether you get the answer as YES or NO, now you should go one step ahead and read out the medical problem one by one as mentioned below. Before reading out the same, tell them that it is your duty!

Psychiatric illness/mental disorder, Fits (epilepsy) , Slipped disc, Backache, Any congenital defect(any birth-related defect), Blood pressure, Asthma or any respiratory problem , Any blood related disorder, Any disease related to Brain/Nervous system, Diabetes, Thyroid, Kidney related probe, Ulcer or any digestion problem, Arthritis/Spondylosis. For a female client, do ask if they have any gynecological problem and whether they are pregnant (if yes, then expected date of delivery). Also ask about the consumption of alcohol/smoking/pan masala-Gutkha – if yes, write the quantity. Any other illness or injury which is not mentioned above

The above is just an indicative list and most of these conditions are being asked in the proposal form. Still, you might find the PROPOSAL FORM of some companies not asking in such details. Here I would suggest you to keep the above list with you and ask the client one by one.

If the answer is YES to any of the above, then take additional details like:

1. When was it first diagnosed? (if it had happened a few years back, do not stress for the exact year and date. Even tentative date will do)
2. How was the treatment given? (whether through hospitalization/surgery/OPD)
3. Is there any impact of that medical condition as of now?
4. Is there any medication which is undergoing currently for the same?

As a first underwriter, it’s your duty to take the medical details of the client and present all the details in the PROPOSAL FORM so that it becomes easy for the company’s underwriter to take a decision.

In case you find a shortage of space in the PROPOSAL FORM to write the answer for the above 4 questions, then I would suggest you attach a separate application and mention the details.

Now the case goes to the underwriter of the company who might take any of the three decisions:

1. Either the case will be accepted. (Hurray)
2. Either the case will be rejected. (normally insurance company provides an official letter stating the reason for rejection)
3. Else your client will get a cross proposal, asking for an additional premium: Company releases a formal letter stating the % of extra premium (Loading) and the reason for asking the same. It’s a cross proposal and not a compulsion so depending on the % of the extra premium, we can take a call whether to proceed ahead or not. Remember that this extra loading will be for life long.

Here the important thing to note is there will be times when if a company has rejected a policy on the basis of some medical ground, then there will be some other company who might accept such cases. So it actually depends on the underwriting process of the company.

Also here you need to understand the difference between DIAGNOSIS and PROGNOSIS.  DIAGNOSIS means what is the problem which is existing today. PROGNOSIS means depending on the current diagnosis, what is the likelihood of the future damage which will happen to the body. Insurance company normally do PROGNOSIS.

I know there are companies who are very stringent in terms of underwriting. There are two ways of looking at such companies.

1. This company is creating so much trouble at the time of taking the policy itself, then how much problem will they create at the time of claim settlement. So let me not go to this company.
2. This company is not accepting substandard cases which means the probability of claim coming will be on the lower side which means the company will be making a decent profit, so the probability of this company increasing their premium frequently will be lower and if at all increment happens, it will be on a lower side.

As a Financial Advisor, my suggestion to fellow Advisors is – do not panic if the underwriter decision is not as per the expectation. Rather this is the time to meet the client and explain him/her the entire thing. Remember if it is just NO from one insurance company, it does not mean NEVER and approach a second company.

As financial advisors, we should remember not to fit the insurance product of a particular company (because that’s the company with whom we are associated with) to all kind of clients. Rather have a business model wherein you have access to 2/3 insurance companies at least and then depending on the requirement and health status of the client, recommend a suitable product.

Note: Although this article has been written keeping HEALTH INSURANCE in mind overall the risk assessment process will be the same for all kind of insurance policies whether it is LIFE INSURANCE or CRITICAL ILLNESS policy.