The Hidden Cost of Not Having a Claim-Ready Insurance Policy

Inconsistencies such as an outdated address, a nominee’s misspelled name or undisclosed health conditions can lead to outright rejection.

In India’s fast-evolving financial landscape, insurance has come to symbolize responsibility, foresight, and increasingly, aspiration. With rising incomes and heightened risk awareness post-pandemic, more Indians than ever are purchasing life, health, and term policies to secure their families’ futures.

On the surface, this appears to be a quiet revolution in financial maturity. But behind this façade of progress lies a dangerous illusion: the assumption that owning an insurance policy automatically guarantees protection.

The truth is more sobering. Across urban and semi-urban India, millions of families discover – often in moments of crisis – that their policies are not claim-ready. That despite paying premiums dutifully, they are caught in a web of outdated details, missing documents, and uninitiated nominees. The policy exists, but the payout doesn’t. Not without delays. Not without battles. And sometimes, not at all.

This isn’t a policy problem. It’s a preparedness problem.

Insurance penetration in India has steadily risen – 3.2 percent of GDP in FY23 for life insurance (IRDAI, Annual Report 2022–23) – but that figure tells only part of the story. It indicates growing coverage, not necessarily growing effectiveness.

In FY22 alone:

Over Rs 1,026 crore worth of life insurance claims were either repudiated or rejected.

15,088 life claims were denied—most due to avoidable issues like incomplete paperwork or discrepancies in nominee information (IRDAI).

These aren’t isolated lapses. They are systemic blind spots. According to a report, nearly 1 in 5 urban policyholders are unaware of how to file a claim under their own policy.

Yet, it is important to acknowledge the role that India’s insurance regulator, IRDAI, has played in bringing transparency to this reality. By mandating disclosure of claim settlement data and pushing for better customer service norms, IRDAI has laid bare the challenges—and, in doing so, made it possible to address them. Its insistence on publishing granular claim data is a step few regulators globally have taken with such consistency.

Insurance, it appears, is being bought. But not understood.

What does ‘claim-ready’ actually mean?

A claim-ready policy is not a premium product. It is not a special rider. It is a basic condition of preparedness. One that requires:

— Current and verified documentation

— Clear, updated nominee information

— Awareness of claim steps—by the policyholder and their family

— A support mechanism for guidance, should the worst happen

In most cases, the failure to make a policy claim-ready isn’t deliberate—it’s neglected. Policyholders assume the insurer will “figure it out later.” What they don’t realise is that claim departments are guided by process, not sympathy.

The cost of lack of readiness

The real burden of not being claim-ready is not in the paperwork. It is in what that paperwork fails to unlock when it matters most.

1. Delayed access to funds – Medical emergencies, sudden deaths, or major accidents often create a financial vacuum. In such moments, liquidity is critical. But when claims are delayed due to missing documentation, grieving families are forced to borrow, liquidate assets, or stall critical decisions. A 2022 BCG India survey noted that 65% of Indian urban household’s face cash flow stress within 30 days of an emergency event.
2. Denial of claims due to technicalities – Even minor inconsistencies—an outdated address, a nominee’s misspelled name, or undisclosed health conditions—can lead to outright rejection.
3. Legal and bureaucratic hurdles – When nominee details are missing or unclear, families often end up in legal grey zones. Succession certificates, affidavits, or probate proceedings become necessary. These aren’t just slow—they are emotionally and financially draining. Legal costs for basic inheritance formalities in urban India range from Rs 20,000 to Rs 2 lakh (Bar Council of India, 2023).
4. Emotional decisions with long-term impact – In moments of grief, families under pressure may make poor decisions—selling long-term investments, taking expensive loans, or sacrificing children’s education plans. All this, while the claim—meant to prevent exactly this—remains in limbo.

Why are so many policies not claim-ready?

The reasons are neither dramatic nor uncommon:

— Lack of engagement after policy purchase

— No annual review of policy details

— Nominee changes not updated after life events

—Family members unaware of policy existence or process

According to a 2023 LIMRA-MDRT global study, only 42 percent of Indian policyholders have communicated their policy details to their family.

The system is not failing. But its success is overly dependent on policyholder vigilance, which is rarely encouraged post-sale. Once again, IRDAI deserves recognition for recognising this gap and introducing regulations around e-insurance accounts and standardisation of claim forms—both aimed at simplifying future access.

Conclusion: The policy is only as good as its paperwork

In the end, insurance is not a product. It’s a process. And like all important processes, it needs to be reviewed, understood, and kept current.

The day a claim is filed should not be the day a family learns that their loved one’s policy isn’t ready. Because by then, it’s not just money that’s lost. It’s dignity, time, and peace of mind.

The good news? Making a policy claim-ready cost little.

And with regulators like IRDAI leading from the front – through transparency, technology mandates, and consumer-first reforms – India’s insurance ecosystem has the right foundation. But the final step lies with the policyholder.

The cost of ignoring that step? Often, immeasurable.