Provisions Under Section 45 of Insurance Act,1938 (Amended): Impact on Insurer and Insured

Sunday, December 6th, 2015 Amritesh 10 responses

It has been observed in the past that Insurers and Policyholders are often embroiled in ugly and lengthy litigation process regarding the claim settlement. The previous provisions under Section 45 of the Insurance Act made it possible for the Insurers to repudiate the claim on account of suppression/misinterpretation of facts at the time of settlement of claims.
The provisions under section 45 of the Insurance Act, 1938 provided that facts submitted in support of a policy cannot be questioned after the expiry of 2 years from the commencement of the policy. However, it empowered Insurers with a right to repudiate the claim, in case they had evidences that Policy was taken by misrepresenting/suppression of facts. As it was considered that material facts relating to terms and condition of the policy, premium rate got impacted by the incorrect information provided by the Insured relating to age, health, illness, income, etc.
This has lead to lengthy litigations involving the Insurers and Claimants in the past. The provision under the Act was to safeguard the Insurers from the fraudulent practices adopted by the Claimants but it resulted in undue delay and misuse of the provisions from either side.
Going forward, the amendment is aimed at reducing litigation and also takes due care of the interest of both Insurers and Insured.
Amendments made to the Section 45 of Insurance Act
  • Facts or Documents may be questioned by the Insurer within 3 years from the date of commencement of risk or date of issue, or date of rider of the policy or date of revival of the policy, whichever is later. Previously the duration was for 2 years.
  • Provision to repudiate the claim even after completion of two years on account of misrepresentation/suppression of facts (not amounting to fraud) has been dropped. This means that from now on a policy cannot be questioned or repudiated after completion of 3 years even if some facts were suppressed or provided incorrectly.
  • Date to reckon the validity and completion of 3 years has been clearly defined.
  • A policy can be called in question within 3 years even if no claim has arisen during that period.
  •  Irrespective of whether the claim has arisen or not and when it is intimated. Once this period of 3 years is over, the policy cannot be called in question.
  • The revival of a policy is treated as a fresh contract and if the policy (revival) is called into question within 3 years of such revival, the premium collected from the date of revival of the policy to the date of repudiation is to be refunded along with all the admissible benefits accrued as on the preceding day to the date of such revival.
  • Reinstatement of Surrendered Policy can be treated at par with revival of policy.
How does it Impact the Insurers and Insured?
  • Insurers now have to be more careful with the documentation and verification of the credentials shared by the insured. The onus lies with the Insurer to make sure that they have verified all the details provided by the Insured and the facts have not been suppressed or misrepresented.
  • Insured/Nominees will be saved from hassles arising at the time of claim, as Insurers cannot deny claims on charges of suppression of facts on and after completion of stipulated 3 years.
  • Insurers are provided with adequate time to verify the facts shared by the insured and protect their interest against any malpractice or error made by the Insured.
  • It will help in smoothening the claim settlement process and ensure that genuine claimants are not harassed, at the same time the Insurers are not duped by the policyholders.
Amritesh is an experienced professional in the field of HR, Finance and Compliance. He is currently working in the IT Industry with an US based firm. He took up Blogging as a hobby which eventually turned into passion. He primarily focuses on topics related to Personal Finance, HR, Compliance and Technology.

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R. K. Datta ChaudhuriamitMUKUND SHARMAP.Anbarasanmm Recent comment authors
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Does amended sec. 45 of insurance act 1938 covers 3 years from December 2015 or does it become effective from the date of inception in case of policy bought in say for example 2005.


My client took Life Insurance Policy for 9 crores and paid Rs.30,00,000/- as annual premium. Next year he paid only Rs.10,000/- as against Rs30,00,000/-. But thereafter he could not pay the premium. Whether he could get back the amount as per the new circular of the IRDA if yesl please furnish a copy of the circular to my email ID. Thank you


I have to ask one query. Is there any possible ground on which claims can still be repudiated after the amended S.45 of Insurance (amendment) act, 2015 ? Any case law which supports the same.


So while obtaining a policy if medical conditions are not stated.. And neither does the insurer in their medical test trace those than after 3 years if a claim arises would it be honoured

R. K. Datta Chaudhuri
R. K. Datta Chaudhuri

No period of limitation for making insurance claim in Indian Insurance Act is provided. So, one can prefer claim beyond 03 years of the date of policy for taking benefit of sec 45 of the Indian Act..It may happen if the assured died on the date or 2/3 days before expiry of 03 years. The provision has to be reexamined.