New rules stop insurers from denying claims over minor technicalities

Insurance policyholders are poised to receive stronger protections as the industry regulator cracks down on widespread practices that have continued to be used to deny motor and health claims.

Under a sweeping new regulatory framework, drivers can no longer have their insurance claims thrown out simply because of an expired license, nor can patients be denied critical health coverage for conditions they were genuinely unaware of before seeking treatment.

The draft Insurance (Claims Management) Guidelines, 2025, published by the Insurance Regulatory Authority (IRA), target the technicalities and fine-print tricks used by rogue insurers to evade payouts, a vice that has plagued the sector for years. 

The new safeguards promise aim to restore consumer trust and spur the growth of the insurance industry, which has long struggled with public skepticism fueled by frustrating payout disputes. The new rules aim to rein on the widespread practice of rejecting claims based on “unreasonable or unfair grounds.” 

This eliminates two of the most notorious loopholes used by insurers. 

For motorists, the guidelines explicitly state that a claim shall not be declined due to the “expiry of a driving licence at the time of the accident,” provided that the driver was otherwise qualified to hold that licence and not legally disqualified. 

This crucial change voids a common technicality that has seen countless motor claims rejected over a minor administrative oversight, irrespective of whether the lapse had any bearing on the accident itself.

Similarly, health insurance policyholders are now protected against retroactive denials. 

This means that insurers are barred from refusing coverage based on “pre-existing or congenital medical conditions which had not been previously diagnosed.” This critical clause prevents insurers from labelling a newly discovered serious illness as a ‘pre-existing condition’ merely to avoid paying out, ensuring coverage for patients who were genuinely unaware of their condition prior to diagnosis.

Beyond these specific denials, the IRA is seeking a much more faster and more transparent claims process. Insurers must now acknowledge a claim within two working days of notification, eliminating the “delay and frustrate” tactics used to wear down claimants. 

The entire process is now also governed by strict timelines, requiring the insurer to either make a settlement offer or issue a full written denial with a detailed justification once all necessary documents are submitted.

For the motor repair process, policyholders are finally gaining control. 

The new rules allow claimants to choose their own repairer and guarantee them the right to receive a copy of the assessment report detailing the damage and repair costs. 

At the same time, claimants will only be asked to contribute funds for parts, subject to normal wear and tear, such as tyres or batteries, and will not pay for repairs directly related to the accident damage. 

This aims to prevent insurers from unfairly transferring costs to the policyholder.

Transparency is also now legally mandated when a claim is not fully paid. 

If an insurer offers a settlement figure less than the claimed amount, they must provide a full written explanation and the supporting assessment report to the policyholder, preventing arbitrary reductions. To ensure compliance with this new regime, the IRA has significantly sharpened its teeth. Non-compliant firms face loss of licences.