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What is the purpose of an insurance policy? In the event of an unexpected calamity or loss, the policy holder has the assurance that the insurance will pay for that eventuality and help the policy holder overcome the monetary loss. However, that payment has to be timely or else the very purpose of insurance will be lost. To drive home this point, the regulator, the Insurance Regulatory and Development Authority (IRDA), has specified time limits within which an insurer has to pay the insured amount, failing which he has to pay interest on that amount, which should be 2 per cent higher than the current bank rate of interest (savings account). In case of non-life policies, the IRDA (Protection of Policy holders’ Interests) regulations say that on receipt of intimation about the loss from the policy holder, the general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/claim, it shall be so done within 72 hours of the receipt of intimation from the insured. On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. Now the purpose of fixing a time limit is to ensure that the insurance company does not deliberately delay the payment, even after the surveyor has assessed the loss, on some pretext or the other. Similarly, the penal interest of 2 per cent above the bank rate of interest is meant as a reminder to insurance companies that they ought to complete their investigations fast and make the payment early. Yet, here is a case where even a year after the incident leading to the claim the insurance company did not pay. The excuse for not paying was that (a) the amount involved was huge; and (b) the incident—- a fire—had occurred on the very day the policy came into existence. Now, from the point of view of the insurance company, it has to make sure that there is no fraud involved. Fair enough. But it cannot take a year to determine that. Besides, when the amount involved is huge, the loss to the policy holder is also considerable and the longer the insurer takes to indemnify the loss, the greater the suffering for the policy holder. The complainant in this case had taken an insurance cover from Oriental Insurance for his iron and steel plant and factory premises. On February 9,2005, there was a fire in the factory. The insurance company appointed a surveyor, who submitted his report on November 9, 2005. Despite the report, the insurance company did not release the amount, forcing the consumer to file a case before the apex consumer court — the National Consumer Disputes Redressal Commission. When the matter came up for hearing on November 13, 2006, the insurance company said it would pay the amount assessed by the surveyor — Rs1,50,47,206 — to the insured on or before November 20, 2006. Asked about the delay, the insurance company said this was a huge claim and the incident occurred on the very day of effecting the insurance. Observed the commission:" Merely because the claim is huge, it would not permit the insurance company to withhold the same. On the contrary, when the claim is huge and if the amount is not paid, the insured suffers a lot and the whole purpose of obtaining insurance cover is frustrated. Hence, for such delay, the insurance company should pay adequate compensation to the insured". It, therefore, asked the insurance company to pay interest at the rate of 10 per cent on the insurance amount, calculated from November 9, 2005, that is six months from the date of the fire.
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