Claim Investigation — When & Why Insurers Investigate

What investigation is for

Claim investigation is the insurer's check that a death claim is genuine and that the proposal was truthful. Life insurance is priced on what the proposer declares about health, habits, occupation and income, so the insurer has a legitimate interest in confirming those declarations when a claim arises.

An insurer may look into any claim. Investigation is not an accusation; it is a check of facts.

What prompts it and what is checked

Common triggers are an early death, meaning a death soon after the policy starts or is revived, a large sum assured relative to income, suicide, and a suspicious cause or circumstances of death. The way premiums are paid, whether by auto-debit, online or cheque, is not a trigger.

Investigators check three things: the medical history of the life assured, the circumstances of the death, and the answers given in the proposal. The aim is to see whether a material fact was misstated or suppressed, or whether the claim itself is not genuine.

The limit set by section 45

Section 45 of the Insurance Act, 1938 limits what the insurer can do with its findings. A life policy can be called in question only within three years of the latest of the date of issue, commencement of risk, revival or a rider, and only for fraud or material misstatement, with the grounds given in writing. After three years no challenge is possible. The section's heading still says two years, but its text, as amended in 2015, says three.

This is why early deaths attract attention: they fall in the period in which the insurer is still allowed to contest the policy.

A fact that was disclosed cannot later be called non-disclosure. If the proposer disclosed a condition and the insurer accepted the risk, with or without an extra premium, the insurer cannot repudiate for non-disclosure of that condition, and section 45 bars a fraud plea where the fact was within the insurer's knowledge. The claim is then assessed like any other under the policy terms, so an exclusion written into the policy could still apply.

The clock keeps running

Investigation does not suspend the insurer's deadline. An investigated claim must still be decided and paid within 45 days of intimation under the Master Circular on Protection of Policyholders' Interests of 5 September 2024; older material quotes 90 days. A late payment carries interest at bank rate plus 2% from the date of intimation.

Rules at a glance

Key points

• Investigation checks that the claim is genuine and that the proposal was truthful.
• Common triggers are early death, a large sum assured relative to income, suicide and suspicious circumstances; the mode of premium payment is not one.
• Investigators look at medical history, the circumstances of death and the proposal answers.
• Under section 45 the findings can be used to contest a policy only within three years, and only for fraud or material misstatement, with written grounds.
• An investigated claim must be decided and paid within 45 days of intimation.

Common misunderstandings

• An investigation is not a rejection: it is a check, and the claim must still be decided and paid within 45 days of intimation.
• Paying by auto-debit, online or by cheque does not prompt an investigation.
• Section 45 is not a two-year rule any longer: the text says three years, although the heading was not updated.
• A disclosed and accepted condition cannot be turned into non-disclosure, though a policy exclusion could still apply.

Questions people ask