Insurers to Pay 2% Interest Above Bank Rate if Claims Delayed

The IRDAI has said that if there is a delay in claim payment by insurers (life, non-life and health), they will be liable to pay interest which is 2% over the bank rate which is now at 6.75%. Insurers have also been asked to avoid unnecessary delays in paying claims. “Any queries or requirement of additional documents, to the extent possible, shall be raised all at once and not in a piece-meal manner, within a period of 15 days of the receipt of the claim,” the regulator cautioned. Claim rejections have also been curbed by Section 45 of the Insurance Laws (Amendment) Act that was passed in 2015. This says that no claim can be rejected after three years of the policy being in force, even if a fraud was found and rejected.

Hence, this puts the onus on the insurer to investigate any discrepancies in the policy before three years, after which all claims have to be mandatorily paid. Also, where a claim is due for payment but the payment cannot be made due to any reasons what so ever it be, the life insurer has to pay interest at a rate, which is 2% above the bank rate. This is applicable for life, general and health insurers. The insurance regulator is cracking down on the practice of the agent filling up the proposal form for the prospective policyholder. Insurance Regulatory and Development Authority of India (IRDAI) has told insurers that if the prospect has not filled up the form, the agent/insurer should have a certificate saying that he/she was explained the terms of the policy. “Where for any reason, the proposal and other connected papers are not filled by the prospect, the insurer or the distribution channel shall explain the contents of the form and a certificate shall be incorporated at the end of the proposal form,” said IRDAI in a draft on protection of policyholder interests sent to insurance companies. This form will need to have a declaration that the contents of the proposal form and connected documents have been fully explained to the prospect and he/she has fully understood the significance of the proposed contract.

While earlier IRDAI had proposed the commissions payable to agents for any policy should also be disclosed, this is not part of the revised draft. However, insurers said that if a policyholder seeks this information, they will have to disclose it. This means banks, agents will not be able to push high commission products to customers. IRDAI has said that all prospective policyholders will have to be explained the provisions of Section 45 of the Act. There has been a complaint that insurance policy documents are difficult to understand, IRDAI has said that in case of unit-linked policies too, insurers in the policy document will need to explain the minimum lock-in, returns offered and also the risks involved with such investment products.

Know your rights :-

• A life insurer has to pay claims within 15 days of receipt of all documents
• If not, they have to state reasons for delay
• All death claims requiring investigation will have to be settled within 270 days of claim intimation
• Surveyors for assessing claim in general insurance have to be appointed in 72 hours of claim intimation
• Claimant has to be informed about documents needed within 7 days of claim receipt
• Surveyor report will have to be submitted within 30 days
• Claim has to be settled within 30 days of final
• Surveyor report receipt