FAQs – Utmost Good Faith

An insurance contract is known as a contract of 'Uberrima Fides', the Latin term for a contract based on 'Utmost Good Faith'. This means that both you, and the insurer must disclose all material facts^ such as, pre-diagnosed medical conditions, history of illnesses in the family, and other relevant details.

^Any fact which would influence the judgment of an insurer in fixing the premium or accepting the risk is a material fact.

When a fact that affects the policy issuance decision is not disclosed in the proposal, it is termed as, ‘non-disclosure’. Similarly, withholding information or providing incorrect information while answering questions in the proposal form* is termed as, ‘misstatement’

For example, when an applicant suffering from kidney failure does not inform the insurer about the same in the proposal form, it is termed as non-disclosure. Similarly, when an applicant states that he is salaried but does not mention that his job is highly hazardous, it is a misstatement.

*Proposal form is the document in which you provide all the relevant details while applying for an insurance policy.

Insurance is sharing of risk by creating a common pool of the premiums paid by all policyholders. This means that when a claim arises, the claim settlement is made from the same common pool, which belongs to all the policyholders#.

Hence, an insurer has a duty to protect the interests of all policyholders and cannot pay fraudulent claims out of the common pool. Based on this principle, a claim can be repudiated or rejected by the insurer because of non-disclosure or misstatement.

In legal terms, if one party commits breach of contract by not maintaining the declaration (in the proposal form) of having replied truly and correctly, the other party i.e. the insurer is not liable to honor the claim.

#A policyholder is the person in whose name an insurance policy is held.

We follow a practice of sending out a detailed written communication to the claimant explaining the reasons for rejection of a claim. We also send a copy of the proposal form to ensure complete transparency of the decision taken.

The claimant* is also informed about our Internal Grievance Redressal Committee as well as about the Office of Insurance Ombudsman** with the appropriate address. We advise the claimant to write to the Grievance Redressal Committee within 30 days of receiving the reason for rejection of claim.

After careful evaluation of the matter, the committee gives a decision on the representation made by the claimant within 30 days of receipt. If the claimant feels that the response is not satisfactory, he or she can approach the Office of Insurance Ombudsman for a re-examination. The Claimant can also approach Consumer Forums for grievance redressal.

*Claimant is the person that reports the claim.

**Click here to know more about Insurance Ombudsman.

In order to determine the reliability of a claim, we conduct verification from time to time. This helps us to identify fraudulent claims and protect the interests of all policyholders.

Click here to know more about the Claim Process.

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