Premature claims: Some insurance cos accused of denying valuable right

LAHORE: Not all, but some insurance companies are found condemning insurance policyholders unheard and denying their valuable rights in case of premature claims.

In most cases, no notice is issued to the policyholders for the payment of the premium within a due period, and the policy issuers terminate the policy single-handed once a premature claim becomes due in case of sudden death or inability of the policyholder to pay the remaining amount of the premium, said sources.

Premature claim means if the death has occurred within two years from the commencement of the policy or the date of the last revival or medical examination. The insurer takes certain precautions before making payment under such a premature claim.

However, sources from the insurance industry have pointed out that the payment schedule is always available in the policy documents. Therefore, there is no need to issue any notice to policyholders for the payment of the remaining premium.

Accordingly, the policy is supposed to be lapsed in case of default on the payment of any premium on the due date, and the insurance companies are not under any obligation to pay the claim.

However, independent sources have disagreed with the industry approach. They said such issues generally arise in the case of tripartite agreements. They have further questions that the insurance companies do not include the grace period in declaring default on the part of policyholders so far as payment of an instalment of a premium within a stipulated period.

In some cases, they added, the insurance company does not record the date against the premium payment by the policyholder to play with the situation in case of a premature claim.

According to the sources, since all the policy documents are drafted and prepared by the insurance companies and happily receive premiums, they should also be held responsible for the consequences of early claims against the insurance policies.

Even the insurance companies hesitate to pay already paid premium amounts in case of default following the termination of the insurance policy.

Most of the complaints during landing at the regional office of the Federal Insurance Ombudsman carry issues of similar nature, and the Ombudsman staff prefers to recover the maximum premium amount on behalf of the policyholder once he loses interest in any further continuity of the insurance policy.

Copyright Business Recorder, 2023