Saar: If the bill is approved by Rajya Sabha, it would prohibit any claim after six months of the event.

Presently, any general insurance, including motor, doesn’t have a time limit as to when the beneficiary can apply for a claim after an event (accident in case of the motor) has occurred. This particular detail might get a change if the pending bill in the Rajya Sabha gets approved. In that bill, the general insurance industry has argued that a time limit to the aforementioned scenario should be put. That limit should be six months. In other words, the beneficiary of the insurance will be prohibited from any claim if the compensation is applied for after six months of the actual event.

This potential change can have a number of effects on the general insurance industry. For starters, it can lead to better overall profitability. How? The number of claims will, in all probability, plunge and most importantly, the majority of fraudulent cases will be dished out too. For the consumers, it will be good news too. The compensation procedure will quicken up because the insurance invigilators will have less fishy business to look into. Additionally, with insurance companies better equipped in accounting their reserves, they will be able to put more accurate pricing for various insurance policies. It is possible that insurance premiums may fall further as the companies will face lesser liability.

Design Four-Year Insurance Policies For Four-Wheelers, Proposes IRDA

The trend shows that between 5 to 10 per cent claims are filed after five years of an accident. That makes things incredibly difficult for the insurance companies to settle claims. As of now, insurers are required to set aside funds for incurred but not reported claims and reserves for outstanding claims. This hassle will be tossed, helping insurers to forecast their fund reserves.

The insurance industry is under scrutiny in India. Recently, Ministry of Road Transport and Highways (MoRTH) directed IRDAI (Insurance Regulatory and Development Authority of India) not to issue insurance without valid PUC (pollution under control) certificate. This was based on the ruling of our country’s Supreme Court, which came to light in August last year.

Source: ET Auto