Insurance claim dispute: taking a rejected claim further

What it is

An insurance claim dispute is a case against your insurer when it has rejected (or repudiated — refused, treating the policy as not binding) a claim, or paid less than the policy covers. It covers health, motor own-damage, life, home, travel and other policies.

Insurance is a service under Section 2 of the Consumer Protection Act, 2019. Rejecting a valid claim, or delaying it without reason, can be a deficiency in service — a failure in the quality or manner of a service the contract requires. That is what lets you take an insurer to the Consumer Commission, the consumer court.

The Insurance Act, 1938 adds rules of its own, chief among them Section 45 for life policies.

When it applies

• Health: cashless authorisation refused, or a reimbursement claim rejected for "pre-existing disease", "waiting period", "not medically necessary", or "non-disclosure".
• Motor own-damage: a claim rejected over the driver's licence, the use of the vehicle or a late intimation, or settled well below the repair cost. For a loss above an amount set by the regulator, the insurer must get a licensed surveyor's report before settling, though it may still settle at a different figure (Section 64UM).
• Life: a death claim repudiated for suppression of a fact in the proposal form. Under Section 45:
  • after three years from the policy date, or its revival or rider, whichever is later, the policy cannot be questioned on any ground;
  • within three years, it can be questioned for fraud, or for a misstatement or suppression of a material fact — one with a direct bearing on the risk — and the insurer must give the grounds and material in writing;
  • silence alone is not fraud unless there was a duty to speak, and the insurer cannot repudiate for fraud if the policyholder shows the statement was true to the best of their knowledge, or there was no deliberate suppression;
  • where it repudiates for misstatement, not fraud, it must return the premiums collected up to that date within 90 days.

Not covered here: a claim against another vehicle's insurer for injury or death in a road accident. That goes to the Motor Accidents Claims Tribunal.

The steps and the timeline

1. The written complaint to the insurer (first two weeks). A written complaint to the insurer's grievance cell, with the policy and claim numbers, the reasons the rejection is wrong, and the papers. It gives the insurer a chance to correct itself and puts its answer on record.

2. Choosing the route. If the insurer does not put it right, the usual routes are:

• the Insurance Ombudsman — a complaint scheme for policyholders, with its own limits on the type and size of claim and its own time rules, set outside the Acts covered here;
• the Consumer Commission — the steps below.

3. The legal notice (optional, usually sent). A notice to the insurer setting out the claim and the deficiency. The Act does not require one, but the insurer's reply often shows how it will defend the case.

4. Filing the complaint. In the District Commission where you live or work for gain, where the insurer has an office or branch, or where the claim arose (Section 34), if what was paid is up to ₹50 lakh; above that, the State or National Commission. Complaints can be filed online on e-Daakhil (Section 35). The fee is nil at the District Commission when what was paid is up to ₹5 lakh (Rule 7, Consumer Disputes Redressal Commissions Rules 2020).

5. Admission. The Commission should ordinarily decide within 21 days whether to admit the complaint, and cannot reject it without hearing you (Section 36).

6. The insurer's version. The insurer gets a copy and has 30 days, extendable by up to 15 more, to give its version (Section 38). If it does not, the case can go ahead on your evidence.

7. Mediation, if both agree (Section 37). Many insurance disputes settle here, once both sides have seen each other's papers.

8. Evidence and hearing. On affidavits and documents (Section 38(6)): the policy, proposal form, claim file, medical or survey records, and the rejection letter.

9. The order. The Commission can order the claim paid with interest, compensation for loss or injury caused by the insurer's negligence, and costs (Section 39). An appeal lies to the State Commission within 45 days; an insurer ordered to pay must first deposit half the amount (Section 41). The order is enforced like a decree (Section 71), and disobeying it is an offence (Section 72).

Time limit. Within two years of the cause of action — the event that gives you the right to sue, usually the rejection (Section 69). Later only with sufficient cause, recorded by the Commission.

Documents needed

• The full policy document: schedule, terms, conditions and endorsements.
• The proposal form, and any medical examination done before the policy was issued.
• The claim form and everything sent with it, with dates.
• The rejection letter and all correspondence.
• Health: discharge summary, bills, prescriptions, test reports, the hospital's letters on cashless approval.
• Motor: survey report, estimate and final bill, photos, FIR if any, driving licence, registration certificate.
• Life: death certificate, cause-of-death records, medical history, and the nominee's papers. On a life policy, the money is paid to the nominee (Section 39, Insurance Act).
• Your complaint to the insurer, any ombudsman papers, and your legal notice with proof of sending.

Typical cost

• Commission fee: nil at the District Commission when what was paid is up to ₹5 lakh; above that, as in the fee table in Rule 7 — see the Consumer Commission guide.
• The advocate's fee varies with the Commission, the amount and how hard the insurer contests. An independent advocate from our panel quotes their own fee before you pay anything.

What the advocate does

• Reads the policy wording, the proposal form and the rejection letter, and tells you whether the rejection holds.
• Advises on the route: the ombudsman, the Consumer Commission, and which Commission.
• Drafts the complaint to the insurer and the legal notice.
• Files the consumer complaint, with the medical or survey evidence in order.
• Answers the insurer's version, prepares your evidence affidavit, and argues the case.
• Handles mediation, any appeal by the insurer, and enforcement of the order.

The self-serve document that comes before it

A consumer legal notice (₹899, checked and sealed by a panel advocate and sent by registered post) puts your claim to the insurer formally before a complaint; the consumer legal notice format shows what it says. If you are still working out whether you have a case, read what to do when a claim is rejected, or book a 30-minute call with an independent advocate from our panel from ₹999.