Page 53 - The Insurance Times April 2025

sion (the "State Commission"), requesting reimbursement ment procedure and the appropriateness and legality of the
for mental distress and the insured value of Rs. 50,00,000, insurance company's decision to reject the claim.
plus interest. The insurance company contended that the The late husband first acquired a Rs. 50 lakhs life insurance
reinstatement of the policy was justified by the deceased policy in 2010, but it lapsed in 2012 as a result of unpaid
husband's signed Certificate of Insurability (COI), which de- premiums. 2013 saw the return of the policy. It's true that
clared the absence of any illness or damage. He did, how- the husband was receiving dialysis for a kidney condition at
ever, have renal issues prior to his readmission. The insur- the time of the revival. According to the complaint, the in-
ance company further argued that the deceased husband surance advisor was informed of this information but ne-
should have given correct health information and that res- glected to include it in the revival form. But there was no
toration of a lapsed policy is considered a new contract. They hard proof to back up her assertion.
also underlined that agents are only able to make promises
The insurance company, on the other hand, argued that the
that adhere to the terms and conditions set by the insur-
reinstatement of the policy was a distinct contract and that
ance company.
the insured had a duty to furnish full and correct informa-
The premium was returned to the complainant after the tion, including his medical history. It cited court rulings that
claim was rejected. The State Commission denied the com- emphasize the proposer's obligation to notify the insurance
plaint, claiming that although the insured's kidney condition company of any pre-existing conditions. The NCDRC looked
was reported to the advisor, it was not mentioned in the over the State Commission's decision to reject the
revival form. They concluded that the insurance company's complainant's complaint again, noting that her husband died
choice was appropriate since it is essential that health in- as a result of a medical issue he neglected to disclose dur-
formation be accurate when resuming coverage. The Na- ing the policy reinstatement process. The NCDRC concluded
tional Consumer Disputes Redressal Commission ("NCDRC") that the insurance company's choice was appropriate as a
received an appeal from the Complainant, who was once result.
again displeased with the ruling.
The NCDRC affirmed the State Commission's ruling, stress-
The NCDRC noted that the case included a disagreement ing the importance of the insurance contracts' requirement
over the rejection of a life insurance claim. The complain- of the highest good faith. It also underlined the insurance
ant, who is the late husband's nominee, asserted that the company's prerogative to reject a claim in the event that
insurance company had incorrectly denied her claim. The crucial information is withheld. The NCDRC rejected the
principal matter concerned the purported withholding of the appeal after concluding that the insurance company's de-
husband's medical records throughout the policy reinstate- nial of the claim was appropriate.

latory and Development Authority of India) solvency norms," brate their exposure dynamically without distorting second-
he said. ary market liquidity. This move aligns well with global best
practices," he said.
The IRDAI requires insurance companies to maintain a mini-
mum solvency ratio of 1.5. This means that the required An on-tap bond, also known as a tap bond or tap issue, al-
solvency margin (RSM) is 150%. lows an issuer to raise additional funds by issuing more bonds
with the same terms as an existing series, ensuring quick
Srinivasan further added that the introduction of a 50-year and efficient capital infusion.
sovereign bond would be a natural progression in the
government's debt management strategy, as it not only In contrast, a regular bond is a standalone issuance with
caters to insurers' demand for stable, risk free long-term unique terms. The key advantage of a tap bond is that it
assets, but also aids the government in smoothing its re- builds on an existing bond structure, eliminating the need
demption profile, reducing refinancing risks, and extending to create a new issuance each time capital is required.
the duration of its overall debt stock.
Meanwhile, the IRDAI had agreed with the standing
"Moreover, the introduction of an on-tap issuance frame- committee's recommendation to issue on-tap bonds with
work for ultra-long bonds would provide greater market maturities of up to 50 years to provide insurers with long-
depth and flexibility, allowing institutional investors to cali- term investment options. (Source: Mint)

48 April 2025 The Insurance Times