In a significant move to protect insurance policyholders, the Insurance Regulatory and Development Authority of India (Irdai) has issued new guidelines mandating that general insurance companies cannot reject claims due to lack of documents. This initiative aims to streamline the claim settlement process and ensure fair treatment for policyholders.
Essential Document Collection
Irdai has instructed insurance companies to collect all necessary documents when issuing policies to customers. The new regulations emphasize that customers should only be required to submit documents directly related to claim settlement. These documents include the claim form, driving license, permit, fitness certificate, FIR, untraced report, fire brigade report, post-mortem report, books of accounts, stock register, wage register, and repair bills, especially in cases where cashless options are unavailable.
Non-Rejection of Claims Based on Irrelevant Conditions
The regulator has clearly stated that insurers cannot reject claims entirely or partially if the breach of warranty or condition is irrelevant to the nature or circumstances of the loss. Additionally, claims cannot be denied due to delays by the policyholder unless such delays result in an increased assessed loss. This ensures that policyholders are not unfairly penalized for minor infractions that do not impact the claim’s validity.
Partial Losses and Salvage Disposal
For cases of partial loss, insurers have been directed not to burden policyholders with the disposal of salvage. Instead, the insurer will take responsibility for collecting the salvage amount, allowing the customer to receive the claim amount without additional hassle.
Streamlined Claim Settlement Process
To expedite claim settlements, Irdai has mandated that general insurers assign surveyors within 24 hours of a claim report using the General Insurance Council’s (GIC’s) technology-based solution. Surveyors are required to submit their reports within 15 days, and insurers must settle claims within seven days of receiving the report. Any delays beyond these timelines will be considered a violation, subject to penalties.
Technology-Driven Surveyor Allocation
Irdai has directed the GIC to develop a technology-based solution for assigning survey work, which will be operational by October 31, 2024. This system will randomly assign surveyors based on various factors such as area, line of business, qualification, and more, enhancing transparency and efficiency in the surveyor allocation process.
Policy Cancellation Flexibility
The new guidelines also provide flexibility for policy cancellation. Retail customers can cancel their policies at any time without providing reasons, while insurers can only cancel policies on established fraud grounds with a minimum seven-day notice. Statutory motor third-party liability insurance or legally mandated insurances can only be canceled in cases of double insurance or total loss.
Shift to Principle-Based Regulations
These changes reflect Irdai’s shift from rule-based to principle-based regulations, aiming to facilitate business operations, encourage innovation, and adapt to changing market dynamics efficiently. Insurers are also required to introduce customer information sheets and establish governance mechanisms to strengthen insurance contract stages, ensuring pricing reflects risk exposure and is fair and non-discriminatory.
Conclusion
Irdai’s new guidelines are a significant step towards enhancing transparency, fairness, and efficiency in the insurance sector. By ensuring that claims cannot be rejected due to lack of documents and streamlining the claim settlement process, these regulations aim to protect policyholders and promote a more reliable and trustworthy insurance industry.
