The Insurance Regulatory and Development Authority (Protection of Policy Holders' Interest) Regulation makes it clear that the insurer or his agent or an intermediary has to clearly and explicitly explain to the consumer at the time of sale of a policy, all material information, including the scope of benefits, the extent of cover, the warranties, exceptions and conditions.
Yet, you find insurers blatantly violating it. So much so that the consumer is completely taken by surprise when an insurance claim is denied on account of one such exclusion clause that was never explained or made known to him or her. Here is a typical example.
N Srivastava: When I bought my car, I was told that the radio-cum-CD player fitted in the car came with an insurance cover against theft, valid for a year. Six months hence, someone stole the music system while I had parked the car in front of my house in the night. When I approached the car dealer, he referred me to the insurance company, which in turn pointed to an exclusion clause that I was not even told about and said unless there is evidence of force or violence or threat involved in the theft, they would not pay. How do I deal with this?
Answer: Whatever the exclusion clause, the insurer in this case has no option but to indemnify your loss, for the simple reason that he has failed to inform you of the exclusion clause at the time of selling you the policy. In other words, the unexplained exclusion clauses are not binding on you.
To put it differently, the insurance company has clearly violated the IRDA Regulation on the Protection of Policy Holders Interest. This has two serious implications for the insurer.
(a) He is liable for regulatory action - IRDA is in fact now taking a very serious view of such violations and slapping heavy penalties on insurers.
(b) By failing to inform you of the exclusion clauses, the insurer has lost the right to repudiate a claim on the basis of one such unexplained clause.
I must also mention here an important order of the National Consumer Disputes Redressal Commission that has a direct bearing on your case. Here, following the theft of an insured cell phone from the car of the consumer, the insurance company quoted an exclusion clause that the consumer had no knowledge of and said it would not indemnify the loss.
Rejecting such a contention, the highest consumer court in the country pointed out that having failed to adhere to the mandatory requirement of explaining the exclusion clauses to the consumer, the insurer cannot reject a claim on the basis of such clauses.
So send a strong letter explaining these points to the insurance company and ask them to pay, along with the mandatory penal interest for delayed payment. If they fail to do so, lodge a complaint with the IRDA complaint cell. You can do so online. If necessary, file a complaint before the insurance ombudsman or the consumer court.