Rejection letters are frequently short and vague. The first step is always to force the insurer to commit to a specific reason in writing, because that reason is what you then dismantle.
The escalation ladder
- Written rejection with reasons, and a copy of the policy document, the proposal form and the claim file. Ask for these expressly.
- Internal grievance redressal of the insurer. Every insurer must have one, with defined timelines.
- Insurance Ombudsman, under the Insurance Ombudsman Rules. It is free, no lawyer is needed, it covers personal lines up to a prescribed value, and the award is binding on the insurer though not on you. This is the most under-used remedy in Indian insurance.
- Consumer commission, on the footing of deficiency in service. You may also complain to IRDAI through the Bima Bharosa portal, though that is a regulatory grievance rather than an adjudication.
On the first rung, ask in writing for the whole file rather than the rejection letter: the proposal form as submitted, the policy schedule with endorsements, the terms in force on the date of the claim, the surveyor's report, and the internal claim notes. Insurers often rely on a document they have never shown the claimant, and a repudiation that cannot be traced to a specific clause and a specific piece of evidence will not survive. Our note on the the ombudsman ladder and how rejected claims actually get paid sets out the wording to use.
The Ombudsman rung deserves more attention than it gets. Approach it once the insurer has rejected your representation or failed to reply within a month, and do so promptly, because the Rules impose a time limit measured from that reply. The award binds the insurer but not you, so an unhappy claimant keeps the right to go to a consumer commission. An insurer must comply with an award within thirty days, failing which a penalty of Rs 5,000 per day is payable to the complainant, over and above the penal interest the Rules provide for. Few claimants know that, and it is worth putting in the covering letter.
Section 45 of the Insurance Act, 1938 provides that a life insurance policy shall not be called in question on any ground whatsoever after three years from the date of the policy, or its revival or rider, whichever is later. Within three years, the insurer may repudiate for fraud or misstatement only by communicating the grounds in writing. Insurers still reject old policies for alleged non-disclosure, and Section 45 answers that completely.
The common rejection grounds and how they are met
- Non-disclosure of a pre-existing condition. The insurer must show the fact was material and that it was suppressed. Conditions the insured did not know of, or which are unrelated to the cause of the claim, have repeatedly failed to justify repudiation.
- Delay in intimation. The Supreme Court and the IRDAI have both said that a genuine claim should not be rejected merely for delayed intimation, particularly in motor and health claims where the delay is explained.
- Policy exclusion. Read the exact wording. Exclusions are construed strictly against the insurer, since it drafted the contract.
- Cashless denied at the hospital. Denial of cashless is not rejection of the claim. Pay, collect all documents, and file for reimbursement.
What Section 45 actually says
Read the whole section, not just the three year rule. Within three years a life policy may be called in question for fraud, but the insurer must communicate the grounds and the materials relied on, in writing. The Act defines fraud narrowly and says in terms that mere silence is not fraud unless there was a duty to speak. No insurer may repudiate for fraud if the insured can show the statement was true to the best of his knowledge and belief, that there was no deliberate intention to suppress, or that the fact was within the insurer's own knowledge.
A quieter point sits in the same section: a person who solicits and negotiates a contract of insurance is deemed to be the agent of the insurer. That answers an insurer which disowns what its own agent wrote on the proposal form.
Health policies have their own protections
If this is a health claim, the regulator's consolidated position on health insurance business gives you several things the policy document will not mention:
- A moratorium of sixty months of continuous coverage, after which no policy and no claim can be contested on any ground of non-disclosure or misrepresentation, save for established fraud. Credits under ported and migrated policies count, so do not let an insurer restart the clock on a switch.
- Cashless authorisation to be decided within one hour of the request, and final authorisation for discharge within three hours, with any extra charged because of a longer delay borne by the insurer.
- No claim to be repudiated without the approval of the insurer's claims review committee, and any rejection to be conveyed with a reference to the specific terms and conditions relied on. A one line rejection does not comply.
Our note on health insurance claim rejection and the remedies available goes through the common grounds and the answering documents.
The claim has been rejected. Where does it go from here?
- First, a written representation to the insurer's Grievance Redressal Officer, with the policy number and the rejection letter.
- No reply, or an unsatisfactory one? The Insurance Ombudsman, which is free, needs no advocate, and has monetary limits.
- The claim exceeds the Ombudsman's limit, or you want compensation beyond the claim? The Consumer Commission, on deficiency in service.
- The dispute turns on complex questions of fact requiring full trial? A civil suit, which is slower but has no evidentiary ceiling.
- Note that approaching the Ombudsman and then the Commission are not both freely available on the same cause; take advice on sequencing before you elect.
Keep the proposal form
Most disputes turn on it. If an agent filled it and you signed a blank or pre-filled form, say so and prove it. That fact has defeated many non-disclosure defences. If that does not resolve it, the consumer commission remains open on deficiency in service, and it can award compensation for harassment and costs as well as the claim. Limitation runs two years from the repudiation; our guide on how to file a consumer complaint covers the pleading.