According to Shilpa Arora, co-founder and chief operating officer of Insurance Samadhan, the rule provides certainty to long-term policyholders by restricting claim rejections linked to non-disclosure of medical information.
The provision forms part of regulatory guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI) and applies to life and health insurance policies.
What the five-year moratorium means for claims?
The moratorium sets a time limit for insurers to review disclosures made at the time of buying a policy. Once a policy has completed five continuous years, insurers generally cannot deny claims solely on the basis that certain medical details were not disclosed earlier, unless they can establish deliberate fraud.
Arora said the rule addresses a common source of disputes between insurers and policyholders. In the past, claims were sometimes rejected because of omissions in proposal forms or medical conditions that were not recorded during the application process.
Under the new framework, if a policyholder maintains the policy continuously for five years, the insurer must demonstrate evidence of fraud to justify rejecting a claim based on non-disclosure.
The protection also extends to cases where policyholders shift insurers through portability, provided existing illnesses are disclosed during the switch. If a medical condition is concealed during portability, insurers may exclude that illness from coverage.
Options available if a claim is denied
Policyholders who face claim rejection after the moratorium period can challenge the decision through established grievance channels.
Arora said the first step is to seek a review through the insurer’s internal grievance department. If the response is unsatisfactory or delayed beyond 30 days, the complaint can be escalated through the Integrated Grievance Management System operated by the Insurance Regulatory and Development Authority of India.
Consumers may also approach the Insurance Ombudsman, which handles disputes between insurers and policyholders, or pursue the matter through consumer courts.
Digital buying risks for insurance customers
While online platforms have simplified insurance purchases, rapid digital transactions can also lead to misunderstandings about policy coverage.
Arora noted that many consumers buy policies online within minutes, often relying on marketing messages or price comparisons without examining exclusions, waiting periods or disclosure requirements in detail.
Such gaps may lead to difficulties at the claim stage, particularly if medical information was not fully disclosed or if treatments fall outside the scope of the policy. In some cases, policyholders discover during claim settlement that the coverage differs from what they assumed at the time of purchase.
Correcting errors in policy applications
Mistakes in proposal forms can also occur when agents or intermediaries incorrectly record a customer’s medical history. If policyholders notice such discrepancies, experts recommend notifying the insurer immediately and requesting a formal correction through an endorsement.
Maintaining written communication with the insurer can help establish that the customer did not intentionally conceal information. If the policy is still within the free-look period, cancellation and repurchase may also be an option.
Accountability in cases of mis-selling
Banks distributing insurance products are also responsible for explaining policy terms to customers. When banks sell insurance, they act as corporate agents and must ensure that proposal forms are filled accurately and disclosures are properly recorded.
If customers believe a policy was sold through misleading information or pressure selling, complaints can be filed against both the insurer and the bank with the Insurance Regulatory and Development Authority of India, the Insurance Ombudsman, or consumer courts.