Article By: MEENAKSHY V

BBA LLB 5^TH YEAR

KRISTUJAYANTI COLLEGE OF LAW

INTRODUCTION

The insurance claims process is a structured procedure that allows policyholders to seek compensation from an insurer after a covered loss or event. It involves multiple steps that both the insured and the insurer must follow. Understanding these stages is crucial for both policyholders and insurers to ensure that claims are processed efficiently, fairly, and in accordance with the policy terms.

STEP 1-NOTIFICATION OF CLAIM

The policyholder is under an obligation to immediately intimate the insurance company about the loss or incident. This shall be done via phone, online portal or in-person. Immediate notification of the loss to the insurer is important due to the following reasons:

• Preservation of evidence

Nature of loss and extent of loss can be best determined immediately after the occurrence of loss. Thus, an early notification can helps preserve evidence related to the claim, such as photos, witness statements, or physical damage, which may deteriorate over time.

• Accelerating claims resolution

Prompt reporting ensures that the insurer can initiate the claims process without delays, facilitating a quicker resolution.

• Most insurance policies provide for a stipulated timeframe within which a claim has to be reported. Failing to do so can result in denial of the claim.
• Quick and prompt notification allows the insurer to investigate the claim while the details are fresh, which enhances the accuracy of the assessment.
• Minimisation of losses

Immediate notification can help mitigate further losses. For e.g., loss involved in the process of repairs, replacement. Etc.

• Improve the reserve updating process

As and when a claim is reported, the insurer creates a reserve for their liability. Prompt notification can help improve this process.

Thus, loss or incident has to be immediately reported. However, there are certain cases where in insurance holder is not in a position to report immediately due to reasons beyond his control. In such cases, the delay should be condoned rather than denying the claim.

STEP 2. APPOINTMENT OF LOSS ASSESSOR

Settlement of claim cannot me made without obtaining the license from the loss assessor. A surveyor/loss assessor is are experts appointed by the insurer within 72 hours of notification of insurance claim, to assess the cause, nature and the amount of losses. The surveyor appointed must be a person who holds a license obtained Insurance Regulatory and Development Authority of India.

However, certain types of losses are exempted from this requirement, they are:

• General average
• Non delivery claims in marine cargo
• Motor third party liability
• Claims in areas like crop, burglary, liability, health. Etc.

The assessors provide for an impartial assessment of losses, thereby resolving disputes between the insurer and the policyholder. The assessor provides a detailed and professional evaluation that insurers can trust.

Overall, their role is to ensure that the claims process is fair, transparent, and as smooth as possible for all parties involved.

IRDAI Surveyors Regulation ,2015 provides for the duties and responsibilities of a surveyor

1. Declare any personal or business interest in the subject matter or relationships with relevant parties.
2. Inform the Authority of any changes to the information provided during licensing within 15 days.
3. Maintain confidentiality and neutrality to protect both the insurer’s liability and the insured’s claim.
4. Conduct initial and follow-up inspections of the property involved in the loss.
5. Examine and investigate the causes, circumstances, and extent of the loss, including ownership and insurable interest.
6. Carry out spot and final surveys as needed, commenting on issues like franchise and underinsurance.
7. Measure and determine the extent and nature of the loss.
8. Provide guidance on minimizing losses and improving security measures.
9. Comment on whether the loss is admissible under policy terms and conditions.
10. Survey and assess the loss for both the insurer and the insured, and determine liability under the insurance contract.
11. Identify discrepancies in policy wording.
12. Respond to questions from the insured, insurer, and related parties regarding the claim or loss.
13. Advise on the applicability and calculation of depreciation.
14. Provide explanations for any claim denials based on policy terms.
15. Seek expert opinions when necessary.
16. Offer insights on salvage and its disposal when relevant.

STEP 3. ASSESSMENT OF LOSSES

The assessor conducts a thorough inspection of the damaged property to evaluate the extent of the loss. They review relevant documents, such as insurance policies, photographs of the damage, and any previous reports, to understand coverage and context. The assessor investigates the circumstances surrounding the loss, including causes, timing, and any contributing factors. They measure the extent of the damage and estimate repair or replacement costs based on current market rates.

After collecting all the necessary information from the customer, the surveyor or loss assessor must submit their report to the insurer as quickly as possible, but no later than 30 days after their appointment. A copy of this report should also be sent to the insured, including comments on the insured’s agreement or disagreement with the loss assessment.

If the case is particularly complex, the surveyor can request an extension of up to six months from the insurer. It is important that the insured must be notified about the extension. The surveyor can publish final report even in cases of incomplete documentation, provided atheist 3 written reminders are send to the insured.

If the insurer is of the opinion that the report received is incomplete, they can ask the surveyor for an additional report on the missing information. This request must be made within 15 days of receiving the original report and can only be made once per claim. The surveyor must provide the additional report within three weeks of receiving the insurer’s request.

STEP 4. INSURERS DECISION

Once the surveyor assesses the losses, it is upon the insurer to decide whether the claim is payable or not. Even the quantum of losses payable is ultimately determined by the insurer. However, the insurer has to cite the reasons for the deviations, rather than making an arbitrary decision. The insurer is not bound by the surveyor’s report.  This was held In UNITED INDIA INSURANCE COMPANY Ltd. V M/S. HARYANA AGRO INDUSTRIES.

IS THE CLAIM ADMISSIBLE?

To ascertain if a claim is admissible or not, the following points has to be considered, they are:

1. COVERAGE

The following factors determine if a loss is covered under an insurance policy

• Date of loss

The loss must occur within the policy period, meaning the date of loss must fall between the start and end dates of insurance cover. In most of the cases it is easy to determine the date of loss, however in certain complex cases like Marine Transit Policies it becomes quite difficult. It is important to note that the policyholder can only claim for losses that happen within the insurance period.

The date of loss thus acts as a key factor in establishing the legitimacy of a claim and whether the policy provides coverage for that particular event.

• SUBJECT MATTER

Subject matter is the core focus of the insurance policy. The subject matter refers to the specific item, property or interest that is being insured under the policy. It is the thing or entity at risk of loss or damage for which the insurance coverage is provided. Properly identifying and describing the subject matter is crucial because it determines what exactly is covered by the insurance contract. If the subject matter is incorrectly described or misunderstood, disputes can arise between the insurer and the insured regarding coverage.

• THE INSURER MUST HAVE AN INTEREST IN THE PROPERTY

Insurable interest is the legal and financial stake the insured has in the subject matter of the policy. For instance, you cannot insure a house unless you have a financial interest in that property, such as being its owner, tenant, or mortgagee. Without insurable interest, the policy would not be enforceable, and the claimant would not have a right to recover losses. In life insurance, the person purchasing the policy must have an insurable interest in the life of the person being insured (usually a family member, business partner, or creditor). If no nomination (i.e., designating beneficiaries) is made in a life insurance policy, there may be delays in settling claims, as the legal heirs need to be established.

• JURISDICTIONS AND LOCATION

Coverage may be limited to specific locations or jurisdictions. Property policies often cover specified locations, but some may allow for coverage across multiple or unnamed locations. In liability policies, claims made outside the covered jurisdiction may not be valid.

• OPERATING PERIL

 In insurance, the operating peril plays a crucial role in determining whether a loss is covered. The concept of Operating Peril in insurance relates to the specific cause or peril that leads to a loss. In named peril policies, the insured must prove the loss was caused by a covered peril, while in all-risks policies, the insured must only prove the loss was accidental, and the burden shifts to the insurer to show if an excluded peril was responsible. The correct understanding of these principles helps both the insured and insurer manage claims effectively.

• COMPLIANCE WITH CONDITIONS IN THE POLICY

 Insurers often include specific conditions and warranties that the insured must adhere to. Conditions in an insurance policy outline the responsibilities of both the insurer and the insured. These conditions serve as guidelines for how the insured must behave before, during, and after a loss occurs. Failure to meet these conditions can affect the insurer’s liability for the claim.

Examples of such conditions include:

1. Timely Notification: The insured must notify the insurer about the loss within a stipulated time frame. Delayed intimation may lead to a claim denial.
2. Due Diligence: The insured must take reasonable steps to protect and preserve the insured property after the loss. For example, if the insured fails to take steps to minimize damage after a fire, this might be considered non-compliance.
3. Providing Information: The insured must furnish all required documentation, information, and evidence to the insurer, enabling them to assess the claim. Without proper evidence or disclosure, the insurer cannot determine whether the claim is valid.
4. Preserving Recovery Rights: The insured must not take any action that would harm the insurer’s right to recover compensation from third parties responsible for the loss. For instance, if the insured settles with a third party without involving the insurer, it may affect the insurer’s subrogation rights and lead to claim denial.
5.  COMPLIANCE WITH WARRANTIES IN THE POLICY

Warranties are specific promises or guarantees made by the insured about the insured property or certain conditions. These are stricter than general conditions, and the insured must comply with them exactly as stated. Warranties are often tied to risk management and mitigation. Breaching a warranty can led to the automatic denial of a claim, regardless of whether the breach contributed to the loss.

• REJECTION

Not all claims are admissible. Claims may be rejected because nondisclosure or misrepresentation of a material fact. When a claim is rejected, the Insured Customer should be informed about the reasons for Rejection via a rejection letter. The grounds of rejection should be clearly specified.

STEP 4. SETTLEMENT

If the claim is approved, the insurer arranges for payment or reimbursement to the insured as per the policy terms. This may include direct payments to service providers or a lump sum to the insured.

STEP 5. CLAIMS CLOSURE

Once the settlement is made, the claim is formally closed. The insurer may provide a summary of the claim and payment, and the insured should retain records for future reference.

CONCLUSION

The insurance claims process is designed to balance the rights and obligations of both the insurer and the insured. By following the various stages both parties can ensure a smooth and transparent resolution of the claim. Ultimately, a clear understanding of the process helps minimize disputes and ensures that valid claims are settled promptly, while preventing fraudulent or ineligible claims from being paid.