IRDAI Prohibits General Insurance Claim Rejections Due to Document Shortage

In a significant move aimed at reforming the general insurance sector, the Insurance Regulatory and Development Authority of India (Irdai) announced on Tuesday that general insurance companies are now prohibited from rejecting claims due to the absence of documents. This directive is part of a comprehensive master circular that seeks to overhaul the general insurance business, particularly after the de-notification of tariffs and policy wordings. This step marks a shift towards more simplified and customer-focused insurance solutions.

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The master circular not only introduces reforms but also repeals 13 previous circulars, streamlining regulations in the sector. Irdai's initiative is designed to facilitate the provision of insurance products that are easy to understand and tailored to meet the diverse needs of customers. The aim is to offer customers a wide range of choices and significantly improve their insurance experience. According to the circular, insurance claims cannot be rejected on the grounds of missing documents. Insurers are instructed to request necessary documents at the underwriting stage of the proposal.

Furthermore, in situations where cashless settlement is not available, customers may be required to submit only those documents that are essential for claim settlement. The circular also empowers retail customers with the right to cancel their policy at any time by notifying their insurer. However, insurers are restricted from cancelling policies except in cases of proven fraud. Upon cancellation, insurers are mandated to refund a proportionate premium for the remaining policy period.

Irdai has also set strict timelines for claim settlement processes, including deadlines for appointing surveyors and submitting their reports. Insurers are tasked with ensuring timely acquisition of survey reports as part of their duty towards their clients. Additionally, the circular introduces innovative options in motor insurance such as "pay as you drive/pay as you go," prioritizing customer choice without imposing any burden regarding salvage disposal.

For homeowners seeking fire insurance, the circular mandates that policies should offer the flexibility to include or exclude add-on covers like flood, cyclone, earthquake, landslide, rockslide, and terrorism. This allows policyholders to tailor their coverage according to their specific needs. Moreover, insurers are required to provide a Customer Information Sheet (CIS), which clearly outlines policy details including coverage scope, exclusions, warranties, and claim settlement procedures. This initiative by Irdai is aimed at making insurance policies more transparent and user-friendly for consumers across India.