Life insurers oppose Sec 45

Life insurers have raised objections to a major change in one of the provisions of the revised insurance Bill, likely to be passed in the winter session of Parliament.

Section 45 in the new Bill says no claim can be repudiated after three years of the policy being in force, even if a fraud is detected, has sent life insurers into a tizzy.

According to Section 45 of the Insurance Act, 1938, no life insurance policy can be called into question on grounds of mis-statement or wrong disclosure after two years of the policy coming into force. However, if the insurer is able to prove that the claim was fraudulent, it need not be passed.

"No policy of life insurance shall, after the expiry of two years from the date on which it was effected, be called into question by an insurer on the ground that a statement made in the proposal for insurance...was inaccurate or false," says the Insurance Act. This is unless the insurer shows that such statement was on a material matter and that the policyholder knew at the time of making it that the statement was false.

Now, under the proposed Bill, this has undergone changes. Insurers said that in the new Bill, several organised rackets of fraudsters would use the facility to defraud insurance companies. This would mean the life insurer would have the onus of proving that the policy had been taken for false purposes and this has to be done within three years of the policy being taken.

Life insurers have sent a representation through the Life Insurance Council to the Rajya Sabha committee. Further, industry bodies have also taken up the matter with government officials. However, the government is yet to take a final call on this issue.