No insurer will hand life insurance claim amount on a platter!

Do not assume that your insurer will hand out your life insurance amount (term, endowment, ulip etc.) on a platter to your nominee!

Deepak Shenoy of capital mind posted about how ICICI Pru Life bitterly fought a claim settlement and delayed it by about 7 years.

Has ICICI Prudential Life Taken To Fake Doctors Prescriptions To Avoid Paying Out Claims?

This led to the swift clamour that one should not buy term insurance from ICIC Pru Life  or anything from anything that starts with ICICI.

Such articles strike fear in the minds of those who have term plan from ICICI. It also gives an opportunity for LIC agents to say, see I told you so. All privates are like that only.

This post is to assure and assuage you that while the case mentioned above is a bit extreme, no insurer, repeat no insurer, including our beloved LIC, would hand over the life insurance claim settlement amount on a platter.

Claims will only be settled only after due diligence which often includes hiring private detectives.

Do not assume, repeat do not assume that just because your policy is two years old, section 45 will apply and that your claim cannot be rejected. There are many ways in which ‘proof’ can be provided by the insured that material information was suppressed by the (late) policyholder.

It is entirely another matter if the proof is legitimate or not!

For those who do not know what section 45 is,

Section 45 of Insurance Act 1938 – Indisputability Clause
No policy of Life Insurance shall, after the expiry of two years from the date on which it was effected, be called in question by an Insurer on the ground that a statement made in the proposal for insurance or any report of a medical officer or referee or friend of the Insured or in any other document leading to the issue of the Policy, was inaccurate or false, unless the insurer shows such statement was on material* matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose.

(*) “Material” shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the corporation.

Corollary of section 45:  I am not a legal expert but to me section 45 implies, ‘if the policy is not two years old the insurer can dispute claim without proof’. Of course, the ombudsman will offer judgment in favour of the nominee … eventually”.

I would like to reiterate that existing ICICI Pru life policy-holders have nothing to worry. They are in no way worse off wrt LIC policyholders or other company policyholders.

Smooth claim settlement is pot luck! So buy a term plan, invest as much as possible and hope you outlive the policy.

In May 2013, I wrote a post with several stories (including about LIC) like the one above catalogued by the insurance ombudsman.

The Games Life Insurers play!

There are stories and a link to the several more stories:   (Change no from 1 to 8 for a delightful Sunday read!)

If this post does convince you not to take claim settlement ratios seriously, nothing will!

If you already have a term plan, do read this:

Things to do AFTER you take a term insurance policy!

If you don’t have a term plan, do not get discouraged by this post! Be sure to be honest while applying and pray.

See if this can help you choose:

How to Buy a Term Life Insurance Policy

Happy Sunday!


About the Author M Pattabiraman author of freefincal.comM. Pattabiraman is the co-author of two books: You can be rich too with goal based investing and Gamechanger. “Pattu” as he is popularly known, publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners. Contact information: freefincal {at} Gmail {dot} com He conducts free money management sessions for corporates (see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints.

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Updated: January 3, 2016 — 7:54 pm


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  1. you know what is the most disturbing part of this article ?

    the sentence .. “Be sure to be honest while applying and pray.”

    it is high time people realized any form of insurance is a great scam.
    medical insurance is a necessary evil nowadays.

    i really think the number of premature deaths as well as the number of successful claims among those premature deaths will fall well beyond the 6-sigma limits.

    may be a calculator will prove me wrong.

  2. you know what is the most disturbing part of this article ?

    the sentence .. “Be sure to be honest while applying and pray.”

    it is high time people realized any form of insurance is a great scam.
    medical insurance is a necessary evil nowadays.

    i really think the number of premature deaths as well as the number of successful claims among those premature deaths will fall well beyond the 6-sigma limits.

    may be a calculator will prove me wrong.

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