Insurance companies rejecting or partially settling legitimate claims is one of the most frequently litigated issues before consumer forums in India. The Consumer Protection Act, 2019 provides a clear and accessible forum for policyholders to challenge such rejections — often without needing to engage in prolonged court litigation.
When Does a Rejection Amount to Deficiency of Service?
Not every rejection by an insurer is challengeable. However, the following situations typically amount to deficiency of service under the Consumer Protection Act:
- Rejection on grounds not covered by the policy exclusions
- Rejection citing non-disclosure where the non-disclosed fact was not material to the risk
- Delayed settlement beyond the period stipulated by IRDAI regulations
- Partial settlement without adequate justification
- Repudiation of a travel insurance claim on technical or procedural grounds
Which Forum to Approach?
The Consumer Protection Act, 2019 provides a three-tier structure. Where to file depends on the value of your claim:
- District Consumer Disputes Redressal Commission (DCDRC) — claims up to ₹50 lakhs
- State Consumer Disputes Redressal Commission (SCDRC) — claims between ₹50 lakhs and ₹2 crores
- National Consumer Disputes Redressal Commission (NCDRC) — claims above ₹2 crores
What Relief Can You Claim?
Before the consumer forum, you can seek the full insured amount or the claim amount, compensation for mental agony and harassment caused by the wrongful rejection, and costs of litigation. Consumer forums have awarded substantial compensation in cases where the rejection was found to be arbitrary or in bad faith.
The Insurance Ombudsman Route
Before approaching the consumer forum, you may also consider the Insurance Ombudsman — a free, faster alternative for disputes up to ₹50 lakhs. However, if the Ombudsman's award is not complied with by the insurer, the consumer forum remains the appropriate enforcement avenue.