Insurance claim rejected? A guide for policyholders to seek redress

In case, the complaint is not resolved within two weeks or if you are not satisfied with their resolution, You can directly register your grievance on Bima Bharosa System

Insurance is increasingly becoming a necessity for Indians, with over 52 crore persons covered under health insurance during the fiscal year 2022, according to government data. However, another reality is the rejection of claims by insurance companies. 

In recent months, several cases have surfaced in which courts and regulators have imposed fines on insurers for denying claims, even in instances where insurers argued that hospitalisation was not required.

If you are facing a similar situation, where your insurance provider has rejected the claim or you are not satisfied with the response of the company, here is what you can do:

What do to if the insurance claim is rejected?

According to the Insurance Regulatory and Development Authority of India’s (Irdai) guidelines on standardisation of general terms and clauses in health Insurance, claims cannot be rejected by insurance providers after a policyholder has paid the premium regularly for eight continuous years also known as the Moratorium period. 

However, if this is not the case, according to Irdai, you will have to first lodge a complaint with the grievance redressal officer(GRO) of the insurance company. 

“Give your complaint in writing along with the necessary supporting documents. Take a written acknowledgement of your complaint with the date. The insurance company should resolve your complaint in any case not later than two weeks of receipt of the complaint,” said the insurance regulator on its website. 

You can find e-mail IDs of GROs of all the Insurance companies on IRDAI’s website.  

In case, the complaint is not resolved within two weeks or if you are not satisfied with their resolution, you have three options: 

1. You can directly register your grievance on the Irdai's online portal, known as the 'Bima Bharosa System.' 
2. Alternatively, you can lodge a complaint with the Insurance Ombudsman within one year from the date of rejection by the insurance company. 
3. Another option is to file a complaint with the consumer court.

Bima Bharosa System

According to the Irdai, you can approach the Grievance Redressal Cell of the Policyholder's Protection & Grievance Redressal Department of Irdai through the following means:

1. Register complaint directly in Irdai's online portal - Bima Bharosa System-https://bimabharosa.irdai.gov.in/  
2. Send the complaint through email to complaints@irdai.gov.in
3. Call toll-free number 155255 (or) 1800 4254 732

Point to note: IRDAI prescribes a set format of complaint registration forms that can be found on its website.   

Further, if necessary you can fill and send the complaint registration form along with any letter or enclosures, if felt necessary, by post or courier to:  General Manager, Policyholders Protection and Grievance Redressal Department- Grievance Redressal Cell, Insurance Regulatory and Development Authority of India(Irdai), Sy. No.115/1, Financial District, Nanakramguda, Gachibowli, Hyderabad-500032

In 2022, Irdai launched the Bima Bharosa Portal, serving as a platform for registering complaints with insurance companies. The portal employs predefined rules to categorise complaint types and assigns unique complaint IDs, facilitating efficient tracking. It notifies stakeholders within the workflow and adheres to defined target Turnaround Times (TATs), triggering alerts for pending tasks. 

Complaints registered on Bima Bharosa flow to both the insurer's system and the Irdai repository. A generated Token Number allows complainants to track the status, with updates mirrored between the insurer system and Bima Bharosa Portal. The final resolution from the insurer is accessible in the complainant login of the portal.

Here is how the Grievance process in Bima Bharosa works:

Source: Bima Bharosa Portal

Bima Bharosa Portal provides a standard platform for all insurers to resolve policyholder grievances and provides Irdai with a tool to monitor the effectiveness of the grievance redress system of insurers.

However, according to Irdai, in case the complaint is not attended to within 15 days of registration of complaint in Bima Bharosa or the resolution provided by Insurer is not satisfactory, you can approach the Insurance Ombudsman as per the procedure laid down under Insurance Ombudsman Rules, 2017.

Insurance Ombudsman 

The Insurance Ombudsman scheme, established by the government, provides a cost-effective and impartial avenue for individual policyholders to resolve complaints outside the court system. Currently, there are 17 Insurance Ombudsman offices in different locations. According to Insurance Ombudsman Rules, 2017, you can approach the Ombudsman if:

1. You have previously approached your insurance company, and they have rejected, not resolved to your satisfaction, or not responded to your complaint within 30 days.

2. Your complaint pertains to an individual policy, and the claim's value, including expenses, is not above Rs 50 lakh.

Point to note: Earlier, the maximum compensation that ombudsman offices could award to policyholders was capped at Rs 30 lakh. On November 10, 2023, the finance ministry amended the insurance ombudsman rules to increase the maximum compensation amount to Rs 50 lakh.

Here is how to file a complaint with the insurance Ombudsman:  

The complaint must be in writing and signed by the policyholder, claimant, legal heirs, assignee, or submitted electronically via email or through the online platform on the Council of Insurance Ombudsmen's website www.cioins.co.in. The complainant can send the complaint letter, along with photocopies of supporting documents, to the Insurance Ombudsman Office through post or email.

Required supporting documents include:

1. Policy copy (all pages of the policy under which the complaint is lodged).

2. Copies of all old policies covering insurance for the last 48 months before this policy if the claim is rejected based on pre-existing diseases or waiting period.

3. Repudiation/Denial letter/Partial settlement letter issued by the Insurer.

4. Representation letter sent to the Insurer/Insurance Broker.

5. Any other correspondence exchanged with the Insurer/Insurance Broker and TPA.

Alternatively, the complainant can register the complaint online on the website www.cioins.co.in under the heading "Register" - Lodge/Track Complaint Online. The required documents, proof of identification, and a photograph can be uploaded on the online registration platform. 

You can track the status of his complaint by clicking "Track Complaint" button provided under the heading "Complaint Online" on home page of the website. Complaint can also be tracked by submitting the registered mobile number. 

The Ombudsman acts as a mediator to arrive at a fair recommendation based on the dispute's facts. If accepted as a full and final settlement, the insurer must comply within 15 days, as per the ombudsman rules. Further, if a settlement by recommendation is unsuccessful, the Ombudsman passes an award within three months, binding on the insurance company. The insurer must comply with the award within 30 days and inform the Ombudsman of the same, according to the ombudsman rules. 

According to the Ombudsman Rules, if there is an ongoing or resolved case related to the same issue in a court, consumer forum, or through arbitration, you cannot file a complaint with the Insurance Ombudsman.

Consumer Forum 

If policyholders are dissatisfied with the decision of an Insurance Ombudsman, they have the option to seek legal remedies. They can choose to pursue their case in either a civil court or a consumer forum.

Notably, there is no obligation for the policyholder to approach the Insurance Ombudsman before seeking recourse in the courts. They are free to directly approach the consumer forum to address their grievances.

According to Bharat Chugh, Advocate Supreme Court and Former Judge, the Consumer Forum is the simplest and most suitable forum for filing a complaint. 

How to file a complaint at the consumer court?

“The procedure for filing a complaint before the Consumer Court is similar to that in a Civil Court. The process begins by serving a legal notice to the insurance company. If this doesn’t lead to a resolution, it is followed by submitting a formal complaint, along with the necessary documents, to the appropriate Consumer Forum,” said Chugh.  

He further explained that the choice of the Consumer Forum depends on the amount of compensation sought: disputes under Rs 50 lakh are addressed by the District Commissions; disputes involving more than Rs 50 lakh but under Rs 2 crore go to the State Commissions, and disputes over Rs 2 crore are handled by the National Commission.

“However, consumers should keep a few things in mind: Firstly, the period of limitation (i.e., the time within which the case must be filed in a court of law for it be considered); this period is three years for civil courts and only two years for consumer courts, counted from the date the cause of action (i.e., broadly speaking, the grievance) arises,” said Chugh. 

What is the most suitable option? 

“Whilst a consumer forum suffers from issues of lack of appointed members, huge pendency, however, on account of the fact that no evidence is required in consumer proceedings they are relatively faster,” said Ankur Mahindro, Managing Partner, Kred Jure. 

According to Chugh, consumer courts are consumer-friendly, less expensive, and faster. 

“Consumers can represent themselves if they choose. Moreover, consumer forums are established under a special law aimed at providing a robust and effective mechanism to resolve consumer disputes. Therefore, for an aggrieved person or consumer, it may be quicker to approach a consumer forum,” said Chugh. 

Reasons for claim rejections 

To address claim rejections, we have to first start by understanding the reason for rejection and follow the policy's recommended course of action. According to data collected by Policybazaar between April 2023 and September 2023, a significant 25 per cent of claims were rejected due to undisclosed pre-existing diseases like Diabetes or Hypertension, highlighting transparency issues.

Additionally, more than 18 per cent of rejections were attributed to incomplete waiting periods. Claims outside coverage, constituting 25 per cent of rejections, encompass both ailments not covered (16 per cent) and non-payable OPD or daycare claims (9 per cent), underscoring the need for policyholders to grasp their coverage scope. 

Wrongly filed claims accounted for 4.5 per cent of rejections, emphasising the necessity for improved customer guidance during the claims submission process. Rejections due to exhausted limits and other factors, such as unsubmitted query reverts (over 16 per cent), and unjustified hospitalisation (4.86 per cent), contribute to a comprehensive understanding of common rejection categories.