Claim repudiation

What is claim repudiation?

Claim repudiation is the insurer's decision not to pay a claim, or to pay only part of it, because it believes the loss is not covered or the contract should not be honoured. Common grounds are a policy exclusion, a waiting period still running, the policy having lapsed, a breach of a condition or warranty, non-disclosure of a material fact in the proposal, or fraud. Insurance data in India often separates "repudiated" claims (refused on merits after examination) from "rejected" or "closed" claims (for example, a claim made on a policy that was not in force).

How claim repudiation works in India

The rules differ by line of business, but some apply to all insurers as of October 2026.

Rules for every line.

• Documents and delay are not grounds on their own. The Master Circular on Protection of Policyholders' Interests, 2024 says no claim shall be rejected or closed for want of documents or for delayed intimation.
• Reasons in writing. A repudiation must be communicated with the specific policy terms relied on. In life insurance, Section 45 of the Insurance Act, 1938 requires the insurer to state in writing the grounds and the materials on which the decision rests.
• Evidence. The circular states that no claim shall be repudiated without legally tenable evidence to support it.
• Exclusions must be in the policy. All applicable exclusions must be printed in the policy document, and no deduction can be made from a claim in the name of an exclusion that is not there.

Life insurance. In the first three years from issue, risk commencement, revival or rider date, a life insurer can question a policy for fraud or for a misstatement of a fact material to the life's risk. After three years it cannot question the policy on any ground. Where it repudiates for misstatement rather than fraud, it must refund the premiums collected within 90 days. See Section 45.

Health insurance. A health insurer cannot repudiate a claim without the approval of its Product Management Committee or a three-member Claims Review Committee drawn from it. Partial disallowances must also be explained with reference to the specific policy terms.

General insurance. For retail general insurance, the master circular bars repudiation, in full or in part, where a breach of warranty or condition has nothing to do with the nature or circumstances of the loss, or where a policyholder's delay did not increase the assessed loss.

Courts. Indian courts read these rules strictly against insurers that cannot prove their case. In Mahakali Sujatha v. Future Generali India Life Insurance (April 2024), the Supreme Court set aside a repudiation based on alleged non-disclosure of other policies because the insurer did not prove the suppression.

How to challenge a repudiation

1. Write to the insurer's grievance officer, quoting the claim number and the reasons given. Insurers must resolve a complaint within 14 days.
2. If unresolved or unsatisfactory, file on Bima Bharosa or approach the Insurance Ombudsman, which handles disputes up to ₹50 lakh free of charge. The complaint must reach the Ombudsman within one year of the insurer's rejection, or of the insurer failing to reply within a month.
3. Consumer commissions and civil courts remain open for larger or more complex disputes.

What claim repudiation means for distribution

Repudiations hurt the customer most, but they also hurt the channel: complaints, lost referrals, and in many insurers a direct hit on the channel's quality scorecards.

• Repudiations start at the proposal. The single largest controllable cause in life and health is incomplete disclosure: illness, medication, tobacco, alcohol, occupation, income or other policies. Train sellers to ask every question in the proposal form and record the answer as given. Under Section 45, a person who solicits and negotiates a policy is treated as the insurer's agent for forming the contract, so a gap the seller fills or skips can come back to the insurer and the channel.
• Explain exclusions and waiting periods before payment. Many health repudiations are for conditions still in a waiting period or a pre-existing disease clause. Customers who were told at sale rarely complain.
• Do not sell a lapsed-policy revival as "fresh cover". A revived life policy restarts the three-year Section 45 window for the revival.
• Read repudiation data by channel. Early claim repudiations concentrated in one branch, partner or advisor are a strong sign of sales misconduct and should trigger a sampling review.
• Support, do not argue. When a family's claim is refused, the adviser's job is to help them read the letter, collect what was missing and use the grievance route. Promising to "get it passed" through contacts creates false hope and conduct risk.