There are many reasons why insurance claims are rejected.
Insurance is meant to provide financial security to individuals and businesses against unforeseeable losses. It is a protective measure whose importance cannot be overemphasised. With insurance policies, it is common belief that policyholders can always get compensated in the event of a covered loss or damage. However, this is not always the case, as insurance companies can reject a claim. Claim rejection can be a frustrating experience that can leave policyholders in distress, especially if the loss was significant.
Insurance companies can reject a claim for several reasons, and it is crucial to understand these reasons to avoid the possibility of rejection. In this article, we will delve into the top five reasons why insurance claims get rejected, along with tips on how to avoid them.
The top 5 reasons why insurance claims get rejected.
1. Lack of Evidence:
One of the main reasons why an insurance claim can be rejected is the lack of evidence to support the claim. Evidence is essential in proving that the loss or damage occurred, and it is vital to have this evidence at the time of filing the claim. Without adequate evidence, the insurer can find it challenging to ascertain the validity of the claim and may reject it.
To avoid the rejection of a claim due to lack of evidence, it is essential to document the loss or damage thoroughly. Take photos or videos to provide visual evidence of the damage and ensure that you have supporting documents such as receipts and invoices that prove the cost and ownership of the lost or damaged item.
2. Policy Exclusions:
Another reason why insurance claims can be rejected is when the claim falls under an exclusion listed in the policy. Insurance policies have clauses that exclude certain types of losses or damages. For instance, a typical homeowners’ policy may exclude damage caused by natural disasters such as floods or earthquakes.
To avoid rejection based on policy exclusions, policyholders must read and understand their policy’s terms and conditions. They must ensure that they are aware of all the exclusions and limitations of their policy to avoid disappointments.
3. Filing Errors:
Filing errors can result in a claim rejection, even when the policy covers the damages. Insurance companies require claimants to fill out forms accurately and provide all the necessary information. Filing errors can be in the form of an incomplete form, incorrect information, or wrong dates.
To avoid filing errors, policyholders should ensure that they review their claim forms before submitting them. They should provide accurate and complete information to avoid the possibility of claim rejection.
4. Late Filing:
Late filing of insurance claims can also result in claim rejection. Insurance policies have deadlines for filing claims, and if the policyholder fails to file the claim within the stipulated period, the claim may be rejected.
To avoid late filing, it is essential to be aware of the claim filing deadline. Policyholders should make sure that they submit their claims as soon as possible after the loss or damage occurs, as this increases the chances of approval.
5. Fraudulent Claims:
Insurance fraud is a significant problem worldwide, and it is not uncommon for insurers to reject claims that they suspect to be fraudulent. Fraudulent claims can include falsifying evidence or overstating damages.
To avoid having a claim rejected based on fraud, it is essential to provide accurate and complete information. Policyholders should never exaggerate the loss or damage or attempt to deceive the insurer.
6. Insufficient Policy Coverage:
Policyholders may experience claim rejection if the policy coverage is insufficient to cover the cost of the loss or damage.
To avoid this, policyholders should regularly review their policies to ensure that they have adequate coverage to meet their insurance needs. They should also ensure that they are aware of the policy limits and maximum pay-outs.
7. Medical History:
Insurance claims related to medical conditions can be rejected if the policyholder fails to disclose their medical history during the underwriting process.
To avoid claim rejection, it is important to provide accurate medical information during the underwriting process. Policyholders should never hide or misrepresent their medical history, as this can result in claim rejection.
8. Unreported Damage:
Insurance companies may reject a claim if the policyholder fails to report damage promptly. Unreported damage can become worse, and the insurer may argue that the policyholder’s negligence contributed to the damage.
To avoid rejection based on unreported damage, policyholders should ensure that they report any damages to the insurer promptly. They should also ensure that they have a clear understanding of the policy’s notification requirements.
9. Tips for Avoiding Claim Rejection:
To avoid claim rejection, policyholders should read and understand their policy terms and conditions, document losses or damages, provide accurate information when filing claims, report damages promptly, and ensure adequate policy coverage. They should also review their policies regularly and notify the insurer of any changes that may impact their coverage.
How can Alphatec’s ClaimControl software help?
There is functionality to submit claim evidence directly into each claim record. You can also detail and link specific policies within the software so that you can review the policy details, exclusions, and coverage at the time of the claims, flagging up any issues immediately at the time of filing the claims. Critical dates can also be inputted so that auto-workflows can be set up to meet all deadlines. The functionality of the system, real-time data sharing and first notification of loss forms can reduce double keying too and minimise the likelihood of errors.