No-Claim or Cumulative Bonus in Health Insurance Plans

The No Claim Bonus offered on a health insurance policy is usually in the form of a cumulative bonus. This is offered by insurers on indemnity based health insurance policies. This is offered to the policy holder under the following situations:

1. There is a progressive increase in the Sum Assured, by a value of at least 5%. This is the cumulative bonus accrued during one policy year in which no claim has been made by the insured. The cumulative bonus can be accumulated for a maximum period of 10 years.
2. The cumulative bonus that a policy holder is eligible to receive on his/her health insurance policy will be stated in the policy document.
3. The cumulative bonus can be applied to the sum assured for a 3-year period. This can help to renew the policy by the due date as well.
4. The cumulative bonus will expire if the person does not renew the health insurance policy by the due date.
5. The rate at which the sum insured is increased each year varies from 10% - 50%.
6. Claims made during overlapping periods of two health insurance policies will receive the benefit of the available sum insured and the cumulative bonus will not be reduced to zero.

Low-Value Claims and Their Impact on Bonuses

When the policy holder files a low value claim, he/she does not lose the entire No Claim Bonus. Only a small percentage will be deducted from the same.

Renewal of Health Insurance Policy

The No Claim Bonus will also act as a discount on premium payable for the health insurance policy at the time of renewal. Generally, in order to avail this benefit, the policy should be renewed within 30 days of the due date for renewal.

Transferability of the No Claim Bonus

The No Claim Bonus that has been accrued by the policy holder on a particular health insurance policy can be transferred to a new health insurance policy from another insurance provider. This can be availed at the time of renewing the policy.

Disbursement of No Claim Bonus

The No Claim Bonus can be withdrawn at the rate at which it was provided on the policy document or it can be provided to the policy holder as a part of the sum insured after deducting the premium payable for the policy.

Claim Settlement Ratio

Under Health Insurance, the claims which have not been settled are subdivided into - Claims Closed and Claims Repudiated. Claims closed are those which have not been paid out due to lack of follow-up or documentation offered by the policyholder. Closed Claims are generally not clubbed with the claims rejected by the , thus this would not reflect in the claim settlement ratio projected by the company. As per existing regulations laid down by the IRDA, claims registered by a policyholder has to be settled within 30 days. This feature is added to the policy documents

Claims during Overlapping Policy Tenures

If a claim has been raised at a time when two health insurance policy periods are overlapping, the sum insured that is available during both the policy periods can be availed. However, the sum insured that has been claimed during this period, will be reduced in the second overlapping year and will reflect on the premium at the time of renewal.

Limitations of TPA

Third Party Administrators can only process a claim and cannot settle a claim. Settling a claim is the duty of the insurance provider only, at their discretion.

Good Claim Record Incentives

By maintaining a low claim record, you can avail a rebate on premium as well as enhanced protection through the health insurance policy.

Claims on Two Policies

When a claim is made on 2 policies, the sum insured is split among the two insurers equally. However, with the advent of the new IRDA guidelines, a policyholder can choose which insurer should settle his/her claim.

Deduction in No Claim Bonus after Raising a Claim

Earlier, the IRDA guidelines on NCB for Health Insurance policies stipulated that once an individual files for a claim, he/she loses the entire No Claim Bonus accrued over the years. However, this norm was later changed to offer cumulative bonus to the insured who files for a low value claim.

Example of No-Claim Bonus Application

Mr. Sainath has availed a health insurance policy with a sum insured of ₹5 lakh for a policy term of 10 years. The policy offers a No Claim Bonus (NCB) of 5% for each claim-free year, and it is due for renewal in the 11th year.

In the 11th year, the insured contracts an illness and is hospitalized. He files a low-value claim of ₹50,000 out of the total sum insured of ₹5 lakh. In such cases, the NCB for that year (5%) is deducted from the total accumulated No Claim Bonus accrued over the 10 claim-free years.

As a result, Mr. Sainath is eligible for a 50% NCB initially. After deducting the 5% NCB applicable for the claim year, he can avail a net NCB of 45% in the 11th year.

GST rate of 18% applicable for all financial services effective July 1, 2017.