Interpretations on life claim rejection clause vary

Section 45 in new Bill says no claim can be repudiated after three years of policy being in force

The insurance Act passed in 2015, which contained provisions for no life insurance claim rejection after three years, has now led to different interpretations being made by insurers. While many are looking at it retrospectively from 2012, others are looking it at from the date of passage of the ordinance.

Section 45 of the Act says no claim can be repudiated after three years of the policy coming in force. Even if there is a misrepresentation of facts, claims cannot be rejected. Life insurers had sought clarifications from the regulator Insurance Regulatory and Development Authority of India (Irdai) on whether premium would be refunded for a policy that has run for more than three years and acquired paid-up value results in claim within three years from the date of last revival and it is found that there was suppression of material facts at the time of issuance of policy.

Vighnesh Shahane, chief executive officer, IDBI Federal Life Insurance, said they were following the section from the date of passage of the Ordinance, that is from  December 24, 2014. Hence, he said all claims were being treated according to the new law, irrespective of the issuance date.

Hence, the claims guarantee norms would undergo a change. Shahane said their eight-day claims guarantee still continued and they would pay eight per cent interest on death claim amount for delay beyond eight working days.

“We have made a minor change – earlier, this guarantee was not applicable to death claims arising within two years of issuance, commencement or revival of policy or addition/deletion of any rider; now we have increased this cap to three years,” he added.

Similarly, like before, they will not extend this guarantee to cases that require investigation in our opinion. Eight working days will be calculated from the date of receipt of all documents requested by the company.

The chief risk officer of a private life insurance company said, "There have been two interpretations of the section about when it will be applicable. While a clarification is yet to come from the regulator's side, if there are some customer grievances that come at this point, it will be settled in the court."

Even in its clarifications to questions asked by insurers, the insurance regulator has not mentioned from which year the provision comes into force.