Life insurers are in the process of sending a proposal to the Insurance
Regulatory and Development Authority of India (Irda) on the issue of
payment of claims after three years.
The insurers would send a draft seeking clarifications on whether all
claims received would be payable after the duration of three years.
As per the Section 45 of the Insurance Laws (Amendment) Ordinance, no
policy can be called into question after three years of it being into
force. This was an amendment to an earlier provision of the Insurance
Act 1938 that said that a policy cannot be called into question after
two years except cases of fraud.
"Several organised cartels operate in the insurance space that file
fake claims. As an industry, we do not want to pay claims that are not
genuine and hence are approaching the regulator with our concerns," said
a chief risk officer in a bank-promoted life insurance company.
The concept of insurance works on the principle of pooling. This means
that the money paid as premiums by the policyholders are pooled together
to pay for any claim received by one or more members of this pool. If
there are fraudulent claims filed, which are then mandated to be paid by
the insurer, it impacts all the other policyholders because the claim
amount goes out of their pool.
A senior life insurance executive explained that the industry-wide losses due to fake claims being filed has been growing by atleast 20-25% every year.
Industry sources said that they would seek some safeguard against such claimants.
"If we are forced to pay such claims, it will only lead to increase in
overall premiums as we also take into account the claims experience
before fixing prices for any product," said the chief actuary of a large
private life insurer.
COURTESY: RB KISHORE
