12 reasons motor claims are rejected
2016-05-16 13:55:00 UTC
Cars are costly items to maintain, and the insurance costs for vehicles can run into thousands of rupees. For example a small compact family car costs upwards of ₹ 4, 00,000/ and the insurance costs around ₹ 6,000/ per annum.
Coughing up the premium for comprehensive insurance and ensuring your vehicle is insured at all times is important; but making a claim on your car insurance policy can be a very frustrating(as well as expensive) experience if you do not pay attention to the basics. Apart from the fact that you could potentially lose your no claim bonus, there is also a fair chance that you will suffer the misfortune of having your claim rejected.
10 % of car insurance claims are rejected by insurers
It is not unusual for vehicle insurance claims to be rejected. In fact, according to published IRDA statistics, an average of 10% of all car claims made are either fully or partly rejected by top insurers in the country often for valid reasons. The graph below shows claim settlement ratio (CSR) for various car insurers. The list features only the top 10 in terms of CSRs, and CSRs for the rest of the insurers not featured here are a lot worse. While it is a good idea to choose insurers with higher than 85% CSR as a rule, this does not guarantee that your claim will be settled favourably. You have to understand the terms and conditions of your policy and read the fine print, as violation of the terms of a policy is certainly the most common cause for claim rejection by insurers.
Therefore, it is imperative that you understand the pitfalls of motor insurance, be aware of how you can stay a step ahead and avoid claim rejection. Read on and be aware of the most common and genuine reasons for claim rejection.
1. Invalid driving license
Most people are vigilant as they monitor the expiry of their car policies, and renew on time. However, driving licenses are valid for a significantly longer period and one has to remember to renew the license before expiry. A valid driving license is a fundamental requirement and the fact that the motor vehicle involved in a claim is insured is immaterial, if a driver unlicensed for the class of vehicle was at the wheels at the time of accident. All claims made in such situations are liable to be summarily rejected.
2. Drunk driving
Your insurer has all the rights to reject your claim if you are found drunk (or under the influence of drugs) at the wheel at the time of accident. There is no ground for appeal in such cases. In fact, you could be criminally prosecuted and imprisoned, if you endanger the lives and properties of others.
3. No registration
As per the motor vehicle act, the vehicle registration should be valid at all times and should not be allowed to lapse. You cannot file an insurance claim even if your vehicle insurance is valid under such circumstances.
4. Insurance cover not in registered owner’s name
It is mandatory to transfer the insurance cover in the name of the new registered owner of the vehicle, within 14 Days of purchase of a used car. Failure to transfer insurance could mean rejection of claims by insurers. Some people insure the car in the name of someone else, who is not actually the main driver to lower premium costs or wrongly claim NCB. In such cases, the insurance companies could possibly reject your claim if these facts come to light.
5. Material non-disclosure at underwriting stage
Wrong no claim bonus (NCB):
- NCB is a discount in premium offered by insurers as a reward for not making any claims in the preceding years. However, wrongly claiming NCB during policy renewal from a new insurer and concealing claim information, could lead to claim rejection as the insurer will surely investigate before paying out any claim.
Anti theft devices:
- Unless your car is fitted with an anti-theft system or a burglar alarm don’t tell your insurer it is. If your car is stolen or broken into, your insurer will surely investigate and ask for evidence such devices were indeed fitted in the first place.
CNG /LPG Kit information:
- Insurers consider CNG/LPG cars a riskier proposition to insure and accordingly charge a higher premium. Failure to let them know that your vehicle was fitted with such a kit, could lead to disappointment and rejection in the event of a claim.
- Beware! Modifying a vehicle or customizing it, even slightly, without informing the insurer could well be a cause for claim rejection. Some insurers allow for some modifications, but any distinct material alteration will invalidate your cover.
6. Delay in intimation
You need to notify your insurer about an accident or theft immediately after the event as per policy. Delay in communicating the incident denies the insurer an opportunity to take urgent measures for recovery of the vehicle, especially in the event of theft. It is also important to register a complaint with police promptly in case of theft and failure to do so could potentially lead to claim rejection.
7. Negligent behaviour
If, for example, you leave your car windows open, doors unlocked, and keys in the ignition when the vehicle is unattended, your insurer has the right to conclude that your neglect contributed to the cause of theft and you did not act appropriately to protect the vehicle. Consequently, any loss claims could be rejected.
8. Class of use
If you use your personal vehicle for commercial purposes, your claim may not be upheld and you could be in trouble in the event of an accident. Abnormally high wear and tear and mileage on a private car are tell-tale signs of abuse and insurers will investigate prior to paying out.
9. Carrying out repair work before informing insurers
The insurer should generally have an opportunity to inspect the vehicle and assess the damage in the event of an accident. Therefore, claimants should make it a point to inform the insurer promptly and consult him prior to undertaking any repair work. In most cases, the insurer probably has the right to insist on getting the repair work done in a garage of his choice and not allowing him the opportunity to do so could lead to a claim rejection. Most insurers do allow repairs upto insured amount in any garage, but it is best to call and confirm first.
9. Carrying out repair work before informing insurers
Vehicle insurance policy generally excludes the following and insurers will not entertain any claims in this regard:
- General wear and tear due to aging.
- Mechanical and electrical failures.
- Damage to tyres(standalone damage; if tyres are damaged as part of accident then policy will cover repairs)</li>
11. Consequential damage
Many motorists drive through waterlogged roads(during monsoons) causing vehicles to stall due to overloading. Or, in some cases, once a vehicle is damaged, they drive it to the garage instead of having it towed, which causes further damage.
The damage due to such overloading is called consequential loss and is not payable by insurance. Insurers expect you to avoid driving in such circumstances and as they say, prevention is certainly better than cure in such situations.
Packing a car with either people or goods, or both to the point of compromising safety of the vehicle, safety of the passengers and road users at large, will certainly invalidate your policy and lead to claim rejection. There is generally a permitted seating capacity specified in the registration certificate, exceeding this will invalidate your cover.