The Hindu Business Line : Insurers do say No

IF you have been pestered to take a policy by an army of agents (nearly one million agents are around), it may be hard to believe that insurance companies sometimes pass up the opportunity to thrust insurance on your heads. But decline, they certainly do, and oftener than you think.

Enquiries with various companies and regulatory authorities reveal that the number of people whose insurance proposals were rejected exceed 6,000 in the fiscal 2002-03. The number could go up, as a couple of companies are still filing in their declined lives details with the Insurance Regulatory and Development Authority (IRDA.)

Industry sources said that for new companies, the rejection rate could be close to 5 per cent of applications.

Life insurance proposals could be rejected for various reasons.

Om Kotak Life Insurance Company's Managing Director, Mr Shivaji Dam, says "rejection happens due to medical underwriting i.e. a person not having sufficiently good health, for instance, high blood pressure or sugar complaints.

Second, there are financial reasons i.e. income of the person being inadequate to justify the insurance cover. Besides cover may be rejected for inadequate information, since some people do not want to give full information on health or income, and also for concealment or giving deliberate wrong information".

Mr R. Ramakrishnan, Consultant Actuary and former Executive Director, Life Insurance Corporation (LIC), said that in addition to the above reasons, companies may also decline lives on grounds of political risk (for example, lives of political leaders in disturbed areas such as Jammu & Kashmir or the North-East) and moral hazard (where applicants are known to be engaged in criminal activities).

He said that LIC had never refused cover on grounds of political risk since it was a national insurer and till recently the sole insurer. When some cases were declined on health grounds, applicants had the right to ask for cover under the Declined lives treaty, where the risk was taken over by a reinsurer.

Companies are now expected to notify the regulator about every policy that they decline along with the reasons for the same. This is being compiled into a database by IRDA, which can be used by all insurers.

This arrangement is to ensure that the insurers do not get cheated and underwrite a proposal, which is inherently unviable. Companies would now be able to find out whether a particular proposal has been declined by another insurer on some ground earlier. This due diligence service from IRDA comes to companies free-of-charge.

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