The Indian insurance industry has over the years slowly and steadily witnessed an upward trend in the growth of insurance business through the introduction of a host of new products and extensions of coverage for existing products. While the people of India were conservative in their approach to insurance initially, it is commendable how with increasing purchasing power and globalization, a wide range of people see insurance not only as a means of mitigating risk, but also as an investment.
With increased awareness, the insurance industry’s biggest challenge is not its expansion and permeability, but its ability to pay claims in a timely manner. Given that the foundation of insurance is the mitigation of financial risk whose foundation is trust, it is surprising that an increasing number of policyholders are facing serious challenges in admitting and paying claims. While statistics show that the claims payout ratio, particularly in the life and health sector, is generally high, the general sentiment among policyholders in the commercial sector is most often that insurers are delaying claims and that there is no urgency. follow the process of evaluation and resolution of complaints in an efficient and timely manner. This generally erodes trust in insurance and adds to the existing stresses and pressures faced by commercial organizations. It can also be due to a general misunderstanding of the reading of the insurance conditions by the insured and not always the fault of the insurers.
Policyholders generally feel that the repeated requests from insurers are incessant and endless, however, more often than not, it has been observed that the conditions of insurance, in particular those relating to the “notice clause”, are often poorly understood, misread or ignored by the insured. Buying insurance does not mean that every loss is covered. Only those where all the conditions are met will lead to a political response. Policyholders should therefore exercise caution, as late or non-notification is often one of the common reasons for claims being rejected.
Each policy has a notice of loss clause, which specifies how an event/incident which triggers the policy or is likely to trigger the policy, must/should be notified to the insurer. However, what often causes ambiguity in terms of notice is the nature of the notice clause, which is either: (i) Claims made; or (ii) Claims made and reported. The difference between the two is significant with respect to the timing of incident notification under the policy which has a major impact on the acceptance or rejection of a claim.
Whereas under a “Claims Presented” policy, the insured is required to give notice of their claim promptly or as soon as possible, but not necessarily during the term of the policy, thus providing wider coverage, a “Claims Presented” policy presented and declared” requires that the claim be notified under the same policy, within a stipulated period, within which the claim arises. This implies that under a “Presented and Declared Claims” policy, if the insured has knowledge of a claim but has not notified it during the same period of insurance, the insurer may release of its obligation to pay, which would otherwise be construed as a covered claim. Claims Presented policies offer better coverage in this regard, as the insured is not bound by strict reporting requirements for notification of claims, as in the case of the Claims Presented and Reported policy. In other words, a claim under a “Claims Made” policy can actually be made in the next policy period, as opposed to a claim under a “Claims Made and Reported” policy. where the insured is required to notify the incident within the prescribed period. limit. In fact, a claim arising from a circumstance known to the insured before the policy took effect is more problematic in “Claims Made and Reported” policies than in “Claims Made” policies, because does not signal a circumstance likely to give rise to a claim. may lead to the rejection of the application even if the policy is renewed with the same insurer under similar conditions.
Accordingly, notification, whether under a “Complaints Made” or “Complaints Made and Reported” policy, is a condition precedent and therefore any failure to notify, of any fact, circumstance or claim, whether innocent or deliberate, may have adverse consequences for an insured.
It is in the aforementioned circumstances that a “continuous coverage” clause in the policy comes to the rescue of the insured. A continuous coverage clause is a clause that provides uninterrupted coverage for the insured under the policy even after the policy is renewed. In other words, a continuous cover clause allows cover in respect of a circumstance which was known to the insured during a previous period of insurance but was not notified during this insurance period for any reason. It is relevant that in such a situation, the insured be covered, without interruption, by the same insurer. This clause ensures that even if there has been an unforeseen and involuntary delay in notifying the incident, the police will respond upon notification. Indeed, this clause obliges the insurer to consider the loss even if it is not notified within the same period of insurance notwithstanding the notification clause. However, this clause only guarantees the notification obligation provided for by the policy and the insured is responsible for ensuring compliance with all the other conditions of the policy to be covered. The “continuous cover” clause therefore provides, in a way, for an extended period for reporting a claim after the expiry of the insurance period, thus bringing a feeling of relief to the insured in the event of a delay in notifying the claim, but increases the cost of the policy and requires the policy to be renewed with the same insurer.
To protect the interests of policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) also issued a circular in 2015, including that insurers should not deny a claim solely because of late notification and that They must ascertain the reason for the delay and ensure that the delayed request would have been rejected, even if it had been reported in time. The obligation in such a situation therefore rests with the insured not to take advantage of the situation and to comply with the terms of the policy, including but not limited to the notification of the policy.
It is therefore absolutely essential for an insured to understand and evaluate every inclusion, exclusion and condition of the policy that will impact a claim. If it is impossible to control the circumstances, incidents, events or triggers of the policy, it is essential that the police respond and that the insured does not fall into the traps posed by technical details such as notification, while being attracted by lower premiums. Well-designed wording for the continuous coverage clause in insurance policies can serve as a safeguard for policyholders against rejection of claims by insurers for mere technical reasons and protect the interest of parties by ensuring that claims are assessed. on their merits and align with the very essence of insurance.