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Insights Into Insurance Claims: A Legal Guide For Policyholders

By - King Stubb & Kasiva on February 2, 2024

Living in a world full of uncertainties, insurance has become our safety net against the unexpected. And what is more devastating is getting a claim rejected, this makes the policyholders confused and frustrated. The rejection of the claims should be based on reasonable grounds rather than mere technicalities, as this leads to policyholder's distrust in the insurance industry and results in unnecessary legal battles.

Recognizing this issue, the Insurance Regulatory and Development Authority of India (IRDA) has mandated insurers to have careful mechanisms for handling claims. The IRDA's guidance is straightforward – that insurers should not hastily reject claims without clear reasons, encouraging transparency and fairness in the process. This ensures that policyholders understand the rationale behind claim denials and have the opportunity to address any issues.

Besides policyholders, legal heirs and individuals authorized by a court of law can also make claims. However, third parties seeking compensation can only get it through the policyholder, not directly. All these legalities are important to understand and, empower policyholders with knowledge, and stress the need for insurers to assess claims with fairness. This article explores the legal side of the relationship between individuals (the insured) and insurance companies (the insurers), providing insights into the complex process of filing an insurance claim, aiming to simplify the process of claiming Insurance.

Understanding the Claim Process: A Step-by-Step Walkthrough

  • Initiating the Claim by Notifying the Insurance Company

In the event of an unforeseen incident, such as damage or loss covered by an insurance policy, the insured, or policyholder, holds a crucial responsibility to act promptly and initiate the claims process within the specified timeframe as outlined in the policy terms. This clear and swift communication marks the commencement of a structure and allows the insurer to promptly assess the situation to evaluate the claims.[1]

  • Surveyor's Role:

In cases where a surveyor is involved, their role becomes pivotal. A prompt evaluation of the damage or loss must occur within 72 hours of the claim notification. This timeframe is critical for ensuring a comprehensive assessment, and the insured plays a crucial role in facilitating this process. Cooperation with the surveyor by providing all relevant information is imperative, as it directly influences the accuracy of the assessment.

  • Claims Adjudication Report:

Following the surveyor's evaluation, a comprehensive claims adjudication report is compiled. Within 30 days of the claim notification, the insurer is mandated to make an offer for settlement or, in some cases, reject the claim.[2] In either scenario, the insurer is obligated to provide detailed explanations for their decision, contributing to transparency in the claims handling process.

  • Acceptance and Settlement:

If the insured chooses to accept the offer, the insurer is then required to fulfil their obligation promptly by making the agreed-upon payment within seven days.[3] Delays in payment trigger interest payments from the insurer, stressing the importance of timely and fair settlement. This well-defined process ensures that both parties adhere to their responsibilities, promoting a relationship built on trust and transparency in navigating the uncertainties that insurance aims to mitigate.

Possible Reasons for Rejection of an Insurance Claim:

Several factors may lead to the rejection of an insurance claim, highlighting the importance of accurate and timely information from the insured. Understanding these potential reasons for claim denial can help policyholders navigate the claims process more effectively:

  • Concealment of Material Information:

Failure to disclose crucial details or intentionally conceal material information during the application process can lead to claim rejection. Insurers rely on accurate information to assess risk and set appropriate premiums.

  • Lack of Information in the Proposal Form:

Incomplete or inaccurate information provided in the proposal form can be grounds for claim denial. It is essential for policyholders to carefully and honestly fill out all required details when applying for insurance.

  • Delay in Filing for the Claim:

Timeliness is crucial in the insurance claims process. Delays in notifying the insurance company about a covered loss or damage may result in claim rejection. Policyholders should promptly report incidents as per the stipulated timeframe outlined in the policy.

  • Pre-existing Condition/Disease:

If a claim is related to a pre-existing condition or disease that was not disclosed during the application, the insurer may reject the claim. Full disclosure of health conditions is essential to ensuring coverage and preventing claim disputes.

  • Lapse of Policy:

Allowing the insurance policy to lapse due to non-payment of premiums can result in a loss of coverage. Claims made during the period of lapsed coverage are likely to be rejected. Maintaining consistent premium payments is vital for continuous coverage.

In the realm of insurance claim disputes, seeking resolution through a legal forum is a nuanced process, and there are various options are available to policyholders. Understanding these is crucial for those facing challenges in claims settlement:

  • Insurance Ombudsmen:

Governed by Rule 12 of the Redress of Public Grievances 1998, the Insurance Ombudsman assumes the role of a counsellor or mediator, specifically addressing partial or total repudiation of claims by an insurer.[4] This allows for an alternative and less adversarial approach to dispute resolution. The Insurance Ombudsman provides a relatively faster resolution for disputes under Rs. 20 Lakhs.[5]

Binding Decision: Notably, decisions made by the Insurance Ombudsman carry significant weight. They are binding and final on both parties involved in the dispute, providing a resolution that both the insured and the insurer must adhere to.

  • The IRDA (Insurance Regulatory and Development Authority of India)

The Consumer Affairs Department of the IRDA plays an important role in addressing complaints and grievances from policyholders. However, it is essential to note that complaints must be formally registered with the insurer's Grievance Redressal Cell before escalating the matter to the IRDA.[6]

These complaints can also be filed online through the Integrated Grievance Management System (IGMS),[7] and recent guidelines stress expedited claim settlements.

  • Consumer Forum or a Court of Law

In situations where resolution through the Insurance Ombudsman or internal mechanisms proves ineffective, policyholders have the option to take the dispute to client forums or civil courts. While this avenue offers a comprehensive legal framework for resolving disputes, it is important to acknowledge that the process might be lengthy and not constrained by strict timelines

  • Commercial Courts

Established under the Commercial Courts Act, these courts aim for swift resolutions in high-stakes commercial disputes, offering advantages such as expedited proceedings.

Limitation Period

Knowledge of the limitation period for filing insurance claims is pivotal. According to the Limitation Act 1963, the clock begins ticking from the date of the event causing the loss or the date of claim denial. Civil court claims have a three-year limitation,[8] while consumer court claims must be filed within two years.[9]


In the complex regime of insurance claims, the guidance for choosing an apt forum proves invaluable. The choice of forum depends on the specifics of each case, and a strategic approach can expedite resolution. In a world characterized by uncertainties, securing insurance is not just a financial decision but a legal one. Whether opting for regulatory oversight, the civil and consumer courts, the expeditious nature of commercial courts, or the alternative route of the Insurance Ombudsman, informed decisions are key. This article aims to empower policyholders with the knowledge to navigate the complexities of the claim process, ensuring that their rights are protected and justice is served.


Q 1: Why is it crucial to initiate the insurance claim process promptly?

Answer: Initiating the insurance claim process promptly is crucial because it allows for a structured and timely assessment of the situation by the insurer. Delays may result in complications, and adhering to the stipulated timeframe outlined in the policy terms is essential for a smoother claims process.

Q 2: What are common reasons for the rejection of insurance claims?

Answer: Common reasons for the rejection of insurance claims include concealment of material information, lack of information in the proposal form, delay in filing the claim, pre-existing conditions or diseases not disclosed, and lapses in policy due to non-payment of premiums. Policyholders should ensure accurate and timely information to prevent claim denials.

Q 3: How can policyholders seek legal remedies for claim denials?

Answer: Policyholders facing claim denials have various legal avenues. They can approach the Insurance Ombudsman for disputes under Rs. 20 Lakhs, file complaints online through the Integrated Grievance Management System (IGMS), or escalate the matter to civil courts, commercial courts, or consumer forums. Each avenue has its own processes and timelines, and seeking legal advice is recommended for informed decisions



[3] Rule 9(6), IRDA (Protection of Policyholders~ Interest) Regulations, 2002


[5] or can visit nearest ombudsman office and file an offline complaint.


[7] online portal:

[8] Schedule, The Limitation Act, 1963

[9] Section 69, Consumer Protection Act, 2019

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