New Delhi : Kabir Zaidi, a resident of Singrauli, Madhya Pradesh, had no idea that he would have to face the troubles to come. insurance claims Compromise after the death of his father Iram Mujtaba Zaidi. His father, a businessman who died of Covid-19 infection in August 2020, had taken life insurance policies, including two policies, from several insurance companies. 25 Crore – One from Life Insurance Corporation of India (LIC) and a leading private insurer. Mujtaba Zaidi also bought a Keyman insurance policy 6 crore from a single private insurer.
LIC settled the insurance claim after father’s death, but Zaidi’s troubles started when private Insurance company The claim is rejected stating that the policyholder has not provided any information about the LIC policy. “Our insurance agent says that he had disclosed the details of every single insurance policy to the insurer, including the one taken from LIC, and yet the claim has been rejected. I intend to go to consumer court now,” says Zaidi.
Does Zaidi stand a chance against the insurer? Too much. His defense may be section 45 of the Insurance Act, 1938, which states that the policy shall not be called in question after three years on the ground of false statement or false disclosure. In other words, if the policyholder has paid three consecutive annual premiums, the insurer cannot deny the claim on grounds of non-disclosure or otherwise. In Zaidi’s case, his father had paid four premiums till his untimely death.
Section-45. power of
Section 45, in its earlier form, had a window of two years for insurers to question any approved policy on the basis of false statement, false disclosure or fraud. Insurers could also reject a claim two years after the policy was in place if they could prove that the claim was fraudulent. However, insurance regulator IRDAI partially amended section 45 in 2015 in the light of increasing number of rejections of claims.
Section 45 of the Insurance Laws (Amendment) Act 2015 states that no claim can be denied or denied even after three years of policy coming into force even if fraud is detected. “Section 45 provides a very strong regulatory intent to protect the interests of policyholders and prevent frivolous claim rejection,” says Kapil Mehta, co-founder, Secureno Insurance Broker.
“Misrepresentation and fraud are usually done with short-term gains in mind. It is unlikely that a fraud will be committed with a view beyond three years. may die, but it is difficult for him to predict death beyond three years. So, if a person has paid premiums for three years, it is quite possible that their claim is correct.”
In addition, three years is sufficient to review the genuineness of the approved policies. “The life insurer may, within three years, call into question the policy on the ground that any statement or suppression of any material material to the life expectancy of the insured was wrongly made on the basis of which the policy was issued. Probus Insurance Broker Ltd. Director Rakesh Goel says, “They can also question the policyholder on fraudulent grounds within three years. If the policy is terminated within three years, the premiums collected from the date of commencement to the date of rejection are refunded to the policyholder.
If the insurer rejects the claim on nondisclosure after three years, it must prove that they would have refused the insurance if they had received the undeclared information. “For example, if an insurer states that another life insurance was not declared, they will be required to prove that the maximum sum insured permissible for an individual would have been exceeded if the other insurance had been known.” would have happened,” says Mehta.
If in Zaidi’s case the private insurer is able to prove that they were unaware of the existing policies and that her father did not need that much insurance coverage, they may not have to settle the claim. However, in this case, the company will have to settle the claim, says a retired insurance official. For now, the insurer has canceled the license of the agent who sold the policy and laid off the employees involved in this particular case.
“Zaidi’s case pertains to a high-net-worth man. Insurers should have done their due diligence within three years, even if other policy details were concealed. They are using pressure tactics. Eventually, they have to settle the claim. Section 45 is very applicable here,” he says on condition of anonymity.
There is no denying the fact that the racket organized by fraudsters may have misused Section 45 to file fraudulent claims, but it certainly does not deny the belief about settlement of claims of insurance policies among the people. bridges the gap.
“One of the consequences of section 45 is that insurers must undertake an additional effort underwriting and risk assessment before issuing life insurance. The mode of inquiry at the time of claim should be less as most of the claims would have to be paid after a period of three years.”
health insurance
A similar provision exists in health insurance policies. If the policy has completed eight years, then the claims of the policyholders cannot be disputed except by proven fraud and permanent exclusion. “The claim of the policyholder will not be rejected from the ninth policy year unless they indulge in fraud or are claiming permanent exclusion in the policy,” says Goyal.
One needs to be cautious about disclosures made in the policy application, even if recourse is available. Don’t leave it to the agent alone. Check all the details individually.
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