Insurance companies cannot reject claims made on policies over three years. According to the Insurance Laws (Amendment) Act 2015 Section 45 no claim can be repudiated (rejected) after 3 years of the policy being in force even if the fraud is detected. This comes as a relief to policyholders and decreases the probability of their claims being rejected by insurance companies.

What is Section 45 of The Insurance Act?

Section 45 of The Insurance Act states that no life insurance policy claim can be rejected or repudiated for any reason whatsoever after a period of 3 years from the date of commencement of policy or risk or reinstatement or addition of rider whichever is later. This amendment has taken away the right of insurers to reject any claims after 3 years.

Under what grounds can the policy be rejected within 3 years?

The policy can be rejected within the period of 3 years from the date of issuance or commencement of risk, whichever is later. The insurer can reject (repudiate) the policy on the ground of misrepresentation or suppression of material facts. The premiums collected from the date of commencement until the date of repudiation shall be refunded to the policyholder. However, if fraud is detected then the claim can be rejected and premiums can be fortified.

What if fraud is detected after 3 years?

The insurer on any ground cannot reject a claim after a period of 3 years even if the fraud is detected. Once the time period of 3 years lapses the insurer has no right to reject a claim.

However, the insurer within 3 years can inspect any policy. If fraud is detected they can reject a claim or even deny refunding the premiums paid. If the fraud is not proven the insurers can deny a claim on the grounds of non-disclosure or misstatements but they will have to refund the entire premium to the policyholder. These rules have forced insurers to exercise at most care while selling policies to customers.

What does it mean for customers?

This is good news for customers as the insurers have only 3 years to inspect a policy and once this time lapses no claim can be rejected. Customers don’t have to worry about their claims being rejected. But, insurance has become more alert and are practising due diligence while selling policies.

What should policyholders do?

Policyholders should ensure that they have disclosed all material facts and read all terms and conditions while signing the proposal. This is a basic duty on behalf of the customers. It is always better to disclose all the information and read the terms and conditions. This prevents the policyholders from falling into the trap of the insurers. In this case, the chances are very less that the claim can be rejected.