Can insurers deny your claim if it is filed late?
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First the insurance regulator made it clear and now a Supreme Court ruling: insurers can’t reject an insurance claim on grounds of delay alone. On 4 October, the Supreme Court ruled in favour of a truck owner whose truck was stolen in 2010. The truck owner Om Prakash, unable to locate the truck, made a claim with his insurer Reliance General Insurance Co. Ltd after about 8 days of losing his vehicle. The insurer rejected the claim saying that a loss or theft needs to be reported immediately.
The matter went to the Supreme Court, which ruled that claims cannot be denied on grounds of delay alone. The court added: “It would not be fair and reasonable to reject genuine claims which had already been verified and found to be correct by the investigator. The condition regarding the delay shall not be a shelter to repudiate the insurance claims.”
In this case, an investigator was appointed by the insurance company to verify the theft. As per the judgement, after verifying the theft the claims manager approved an amount of Rs7.85 lakh. The Supreme Court directed the insurer to pay Rs8.35 lakh to Om Prakash, with interest of 8% per annum from the date of filing of the claim petition till the date of payment. According to Reliance General Insurance, the claim is under process and will be paid as per court’s directive. In an emailed response, the insurer stated that as per the standard condition in a motor insurance policy, a notice needs to be given immediately to the company and police on happening of theft. In fact there have been judgements in the past that say that delay in informing a theft claim to police and the insurer is a breach of policy terms and condition. As per the insurer, the claim was considered basis the terms and conditions of the policy and judicial trends.
The Supreme Court judgement has brought much-needed relief to Om Prakash but for many of the others, a delay in filing a claim can lead to a lot of unnecessary problems, especially if there is no satisfactory reason for the delay. Thus, it is advisable not to delay. But question remain: How does one define ‘delay’? Why do insurers not like delayed claims? Does the Insurance Regulatory and Development Authority of India (Irdai) have a view on it?
The trouble with delays
According to Balachander Sekhar, chief executive officer, RenewBuy.com, an online car insurance broker, most policy wordings clearly state the timeline within which customers need to report a claim: “The problem however is that this timeline is not communicated to the policyholders clearly at the time of sale. This is one of the main reasons why genuine claims can get delayed.” So, make sure you inform the insurer as soon as a claim occurs. Also, at the time of buying a policy, add this question to the must-ask list: “What is the process and deadlines for filing a claim?”
From an insurer’s point of view, a delayed claim is cause for suspicion. “There has been ample historical data globally that point out that delayed claims are prone to be fraudulent, so insurers prefer to have a deadline...to report a claim. Also, the sooner a claim is made, better is the chance for the insurer to run a thorough investigation,” added Sekhar. Also, if there isn’t a deadline, then the insurers won’t know their liabilities and won’t be able to provision for it.
So, what are these timelines? “In case of motor insurance, typically insurers have a timeline of up to a week to register a claim. But it’s always advisable to ask the insurer and get clarity,” said Puneet Sahni, head, product development, SBI General Insurance Co. Ltd.
While a delay ‘technically’ allows an insurer to deny your claim, Irdai prohibits it: until the reasons for delay are ascertained and the insurer is sure that the delayed claim would’ve been rejected even if it was reported on time, it cannot reject a delayed claim.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.