Faking NCB to save insurance premium–: There is no point!
No-claim-bonus for mediclaim or car insurance is given as an incentive for not making a claim. Car insurance NCB can be transferred to the new insurer. Resist the temptation to save on premium by faking the NCB while moving to a new insurer, else you will face problems when a genuine claim is filed
Amit Kumar (name changed) had a car insurance with Royal Sundaram in 2009-10 and 2010-11. There was one claim in each year. He says, “When I renewed it with HDFC ERGO in the third year (2011-12), I was told by the insurance agent, that he will give No-Claim-Bonus (NCB) and bring the insurance premium amount down.
When I told him that I had made an insurance claim that year, he said, nothing to worry as I am switching the insurance company and he will manage it. So, I was offered a 20% NCB by the new insurer. Fortunately there was no accident in the third year. In the fourth year (2012-13), I purchased online insurance from Royal Sundaram. I was offered 25% NCB as there was no accident or claim in that year and also there was 20% NCB mentioned in my HDFC ERGO policy.”
Kumar met with a small accident in last week of Nov 2012 and was in for a shock. TheRoyal Sundaram executive called up after a good 5 days and told him that he had wrongly claimed NCB, for which he was not eligible from HDFC ERGO in his third year. HDFC ERGO had gone back and checked the claims made in prior years and unilaterally reduced his insurance tenure from 12 months to 10 months to adjust for the NCB claim. In effect, says Kumar, “My insurance with HDFC ERGO ended in August 2012 itself. After I made claim in December 2012, I was told by the Royal Sundaram executive that I had misrepresented the facts when buying online policy in October 2012.”
Clearly, Amit Kumar fell for a glib-talking sales agent who said he could fix the problem. However, on the face of it the fact is simple—Kumar knew he had claimed insurance and was still claiming a NCB. Remember, buying car insurance with fake NCB is as good as not having any insurance. You may be tempted to ask for NCB when changing your insurance company in the hope that the new insurer will not find out and that you get a clean slate going forward. After all, NCB can give up to 50% discount on Own Damage premium. But someone who is in the habit of claiming insurance almost every year ought to be even more careful.
Faking NCB is like washing away the sin of being involved in an accident. Today, insurers share far more data than they did in the past and it is easy to get caught. This is supposed to happen at the time of underwriting and not really when a claim is made, but don’t be surprised if insurance companies share data only when there is a claim.
The NCB rule is clear—“You can avail of the NCB facility if you change the insurer on renewal.
You would have to produce proof of the NCB earned by way of renewal notice from the current insurer.
Alternately, you can produce your original, expiring policy along with a certification that you have lodged no claims on the expiring policy.
For this, the proof can be in the form of a letter confirming the NCB entitlement from the previous insurer.”
Manipulation of NCB is a major cause of claims denial. Don’t get lured by agent to ‘fix’ your NCB and give good premium rates. The insurance company may just play dumb until there is a claim even though they should validate the NCB claimed by customer at underwriting. It is as though the insurance company is underwriting with understanding that they don’t have to pay the claim. Giving any amount of discounts in this case is still profitable for company. There cannot be anything more risk-free for the insurance company!
The customer is supposed to have signed the insurance contract in utmost good faith. Amit Kumar is clearly at fault, but does it completely absolve HDFC ERGO and Royal Sundaram? Did they do the necessary due diligence?
There are five points worth pondering –
• Do insurance companies really do underwriting or accept the NCB desired by the customer to make a quick sale?
• How did the HDFC ERGO agent manipulate the system? Did HDFC ERGO also mis-sell the policy?
• Did HDFC ERGO realise the misrepresentation and reduce the policy term from 12 to 10 months?
• If Amit Kumar (policyholder) knowingly misrepresented facts, what happens to the pending claim with Royal Sundaram and the status of existing insurance cover (2012-13)?
• Was Royal Sundaram aware that Amit Kumar availing 25% NCB (2012-13) was already insured by it in 2009-10 and 2010-11 and had claims in both the years?
Agents represent insurance company while brokers represent you. Brokers have more responsibility than agents in case of mis-selling. What are the steps taken by some brokers to ensure that NCB is not manipulated by their client?
If No-Claim-Bonus (NCB) is wrongly claimed, your claim will be rejected and your policy cancelled. The agent is contractually not liable to you. Don’t fall into the agent’s trap of a false NCB lure. The company will wake up at the time of claim and uncover your wrongdoings
Brokers have more responsibility than agents in case of mis-selling. According to Avadhoot Mavlankar, principal officer, Shinrai Insurance Broking Services, “We take the renewal notice from the client, but we also insist on a NCB confirmation letter duly signed by the client, especially from unknown clients. This is because the renewal notice is generated one to two months before the policy expiry. A claim can occur after renewalnotice issuance and prior to the expiry of the policy.”
He added, “An agent represents the insurance company, so contractually the agent is not liable to the insured. In my opinion, this is purely Mr Kumar’s fault. Insurance contracts are contracts of utmost good faith. Let alone the good faith, Mr Kumar has purposely declared wrong NCB entitlement. So his case is weak.”
Sure, Mr Kumar is at fault by blindly agreeing to HDFC ERGO’s agent, but how did Royal Sundaram not know that Mr Kumar was their customer for two previous years with the same car and had made a claim in each year? In era of computerisation, it is almost certain that the insurance company knows or should know more at time of underwriting. Once the claim is filed, the insurance company goes in overdrive mode to scrutinize your NCB and it is indeed a perfect trap to proclaim that policyholder erred with NCB while buying the policy and hence no claim is payable.
When contacted by Moneylife, Royal Sundaram claims that HDFC ERGO had unearthed the fake 20% NCB and hence reduced policy term from 12 to 10 months. Interestingly, Royal Sundaram is unwilling to give that in writing to the policyholder. The only reason given for claims rejection is that the customer misrepresented the facts while buying policy with Royal Sundaram.
HDFC ERGO has maintained stoic silence when asked by Moneylife. If Royal Sundaram is true about its assertion, did HDFC ERGO take any action against its own agent who lured Mr Kumar to go for 20% NCB even though the agent was told by the customer that he has one claim in each of the previous years? The agent claims that he does not remember as he had sold the policy more than one year ago. How true, considering that it may be routine for this agent to bait a prospect with NCB manipulation!
According to Mr Kumar, “I tried to check with HDFC ERGO executives if they had intimated to me about the shortfall in the policy. They are saying that they are unable to retrieve the details and that they would have informed me by phone or letter. I am sure that I have not received any letter or phone or mail from them about the shortfall. I have not changed my address.”
Avahoot Mavlankar, says, “In normal course HDFC ERGO (new insurer) would confirm the NCB entitlement from the old insurer (Royal Sundaram), till this time the policy is already issued with NCB declared by the client. Now, HDFC ERGO would have got the reply from Royal Sundaram that client has made a claim and hence there is no NCB entitlement. So, there is NCB recovery amount due from the client. In normal course, HDFC ERGO would have sent the notice for the same on the policy address (which may be different from communication address). The insurer might not have received any reply from the client within the stipulated period, so the only option available to it is short binding of the policy i.e. adjust the recovery amount by curtailing the period of insurance. HDFC ERGO must have also issued endorsement to that effect.”
After the claims rejection by Royal Sundaram due to misrepresentation, the insurance policy is technically no longer valid. Mr Kumar did not get any response from the company about the status of the policy. He was kept in a limbo for few days until Royal Sundaram agreed with Moneylife that the issue needs to be closed to ensure that Mr Kumar is covered going forward.
Royal Sundaram agreed that they will make a decision on underwriting fresh policy or recover the NCB amount to continue with existing policy. If not, then Mr Kumar will not have any cover during the interim, which can be huge liability for him considering that he has been having accident almost every year! Mr Kumar, if your car driving is so bad, how dare you to go for NCB considering that you are financially well-to-do working in the IT field?
On 18 January 2013, Mr Kumar received email response from Royal Sundaram that the OD (Own Damage) portion of the policy stands cancelled with effect from 15 January 2013. Looks like the insurance company decided to cut-off business from Mr Kumar.
source : http://www.moneylife.in/article/faking-ncb-to-save-insurance-premiumndashii-there-is-no-point/30835.html?utm_source=PoweRelayEDM&utm_medium=Email&utm_content=Subscriber%23111138&utm_campaign=Today%27s%20Exclusives
