The Insurance Regulatory and Development Authority of India (IRDAI) has asked non-life insurance companies to adopt a clear and uniform definition of what qualifies as an insurance claim.
Along with this, IRDAI also wants all companies to follow a standard method for calculating claim settlement ratios.
The aim is to bring transparency and help customers understand how efficiently insurers are handling claims.
Right now, different companies follow different practices, which often creates confusion for policyholders.
Why Current Claim Systems Are Confusing
At present, insurance companies do not follow a single standard for defining claims.
Some companies register a claim immediately after receiving a request.
Others first check whether the claim is actually payable under the policy before officially treating it as a claim.
This difference in approach leads to inconsistent reporting across the industry.
For customers, a “settled claim” usually means they have received their money.
But in reality, some companies also count rejected or closed claims as “settled” if they are denied due to missing documents or policy exclusions.
This can make a company’s performance look better on paper, even when customers have not received compensation.
What Experts Say About Claim Settlement
Experts believe that a claim should only be called “settled” when the customer is fully satisfied and agrees that the payment process is complete.
According to former IRDAI member K.K. Srinivasan, if a claim is rejected, the customer still has the legal right to challenge it within three years.
Until the case is fully resolved through legal process or mutual agreement, the claim should not be considered truly settled.
In some cases, customers are also asked to sign “full and final settlement” documents even when they are not satisfied, which raises further concerns about fairness.
Why a Uniform Definition Is Needed
Industry sources say that the General Insurance Council has already submitted recommendations to IRDAI to improve the system.
The main goal is to create one clear standard for all insurance companies so that claim settlement data becomes transparent and comparable.
With a uniform definition, customers will be able to better understand:
How quickly companies actually settle claims
Whether claims are genuinely approved or simply closed
How trustworthy an insurance company really is
What This Means for Policyholders
If IRDAI implements these changes, insurance reporting is expected to become much more transparent.
Customers will get a clearer picture of claim performance, and companies will no longer be able to use different definitions to make their records look better.
This move is aimed at improving trust in the insurance system and ensuring that policyholders get fair treatment when they file claims.
