Insurers can't deny claims for delay in intimation, says Irda

From now on, insurers cannot deny any claims on the ground of delayed filing and intimation of documents, particularly if the delay was due to unavoidable circumstances.

The Insurance Regulatory and Development Authority (Irda), in a circular to insurance companies, said it had been receiving many complaints that claims were being rejected by the insurers on the ground of delayed intimation and submission of documents.

“The current contractual obligation imposing the condition that claims shall be intimated to the insurer with prescribed documents within a specified time period is necessary for insurers for effecting various post-claim activities like investigation, loss assessment, provisioning and claim settlement. However, this condition should not prevent settlement of various claims, particularly when the delay in intimation or submission of documents is due to unavoidable circumstances,” Irda said in a circular.

The regulator has asked the companies to incorporate additional wording in policy documents. Terming the current clause as “limited”, it said the insurers should reject claims on the basis of sound logic and valid grounds.

The insurers should treat such claims on “merit” and “good spirit” of the clause, with “utmost care” and “caution”, without compromising on bad claims, Irda said. “Rejection of claims merely on technical grounds and mechanical fashion will result in policy holders losing confidence in the insurance industry, giving rise to excessive litigation,” it added.

RELIEF FOR AGENTS
Irda has also decided to keep the persistency requirement for insurance agents at 50 per cent from 75 per cent as prescribed earlier. Persistency ratio refers to the number of clients retained during a year.

“The average persistency rate is uniformly set as 50 per cent, which is to be reckoned only on the number of policies,” Irda said in a circular. Earlier this year, the regulator said the persistency ratio should go up to 75 per cent by 2015-16.

The regulator also clarified the policies which have matured or the death and surrender benefits provided, should not be included while calculating the persistency levels. Policies for auto cover or those where benefits continue even after the premium payment term, will have to be included while calculating the persistency ratio of the agent. Agents will be allowed to get a transfer from one insurance company to the other only if the average persistency ratio is at 50 per cent.