- Prabhakar Neupane
The incontentable clause is an important provision in life insurance. Which prevents the life insurance company from disputeing the legality of the life insurance policy and rejecting the claim after a certain period of issuance (usually 2 or 3 years in international practice) has passed. Under this provision, the insurance policy issued by the insurance company and in operation does not allow the claim to be rejected on the basis of concealing the substantive facts or giving false details after completing the stipulated period. This provision guarantees payment to the person wishing to receive the insurance death claim payment under the policy, except in the case of a few exceptions.
The principle of supreme faith applies to life insurance. According to this principle, both the parties to the insurance contract, the insured and the insurer, should accurately mention all the facts that have come to know or know about the life to be insured. Do not hide or conceal anything that may affect insurance or risk. If a fact is concealed or falsely insured, the insurance contract may be breached as a violation of the principle of supreme faith. For example, a person with high blood pressure and taking medication hid the fact and got life insurance and died of a heart attack within a year of insurance. If the insurance company’s investigation finds that the insured hid this fact while insuring, then the death claim under the insurance can be rejected. However, if the person dies after 5 years, the insurer cannot deny the death claim on the basis of concealing the facts.
In life insurance, the provision that the insurer cannot reject the claim is for the following purpose:
Ensuring that the willed person receives the claim: The provision that the insurer cannot reject the claim prevents insurance companies from conducting a long-term investigation into the completeness or veracity of the information provided by the insured at the time of application while taking action on the claims to be submitted after the death of the insured who has taken a long-standing policy. This ensures that the desired individuals can obtain a death claim without a long legal battle based on minor differences.
Incentive to disclose basic facts about insurance in insurance applications: This provision limits post-death claim investigation under the policy, but encourages insurance applicants to provide true and complete information about the facts required to assess the risk of insurance proposals in the application process itself. This is because the insurance policy may be cancelled if it is found to have provided false information, concealed facts, or given false details.
Confidence promotion in the insurance industry: This provision ensures the receipt of a death claim from insurance. Which helps to increase confidence in the insurance industry.
If the insurer finds the following within the period specified in the policy, the insurer has the right to investigate and potentially reject the claim or cancel the policy:
False statement regarding substantive facts: If the insurance applicant provides false or misleading information that is important for the decision to issue the insurance company’s policy and directly affects the terms of the policy. For example, buy an insurance policy by providing false information about your age, health status, occupation, or habits such as smoking÷dition.
Concealed substantive facts: If the insurance applicant hides information that is important to the insurance company’s decision to issue insurance policies.
deception: if intentionally manipulated by the applicant to obtain the insurance policy.
If a claim is made within the stipulated period, the life insurance company has the right to investigate the information provided by the insured in the application form. The insurance company may make one of the following decisions regarding the death claim if it is detected within the stipulated time in the policy policy:
- Reject claim: Reject claim of death benefit,
- Cancellation of insurance: The insurer will forfeit the insurance fee by declaring the policy void and invalid from the beginning or
- Refund of insurance fee: The insurance company will refund the insurance fee paid in the event of an innocent misrepresentation.
However, after the expiry of the period for rejecting the claim, the insurance company generally loses the right to question the legality of the policy on the ground that the application has been misinformed or deceived. This means that the insurance company cannot reject a death claim on the ground that the original application form has been misinformed or deceived. The policy becomes completely legal. However, there are limited exceptions, where the validity of the policy may be questioned even after the expiry of the period in which the insurance company can reject the claim. Such exceptions are usually associated with malafide or deceit. Which can make the insurance contract zero from the beginning. E.g.
Impersonation: If the insured is proved to be not the actual applicant for the policy, i.e. if it is proved that someone else, without the actual insured, has undergone a health check-up or signed the document.
Lack of insurable interest: if the insured does not appear to have an insurable interest. However, such a condition is often detected by the insurance risk assessment.
Criminal intent: If it is proved that the substance of risk with criminal intent has been concealed or falsely stated, the insurer may withhold any benefits to be enjoyed by the person desired under such policy. For example, insurance provided with fraudulent information with the intention of murder.
In short, the provision that the insurer cannot deny the claim guarantees to the person desired under the policy that the claim will not be canceled due to any knowing or unintentional error during the application process after the period specified in the policy (except in the case of malicious concealment or false statement of the risk) and the person wished in the policy will easily receive the claim amount.
Provision of provision that insurers cannot reject claims in Nepal
The concept of the provision that the insurer cannot reject the claim in Nepal has been mentioned in section 24 of the Guidelines on Life Insurance, 2079 issued by the Nepal Insurance Authority. As per the provisions of this section, the insurer shall not be able to deny the claim on the ground that the insured has not disclosed anything while proposing insurance after one year of the issuance of the policy or renaissance, except where otherwise provided in the insurance policy and mentioned in the exception clause. However, after the issuance of the policy, if it is proved that the insured has maliciously concealed or given a false statement regarding the risk, the insurer may always direct the insured to correct such details or withhold any benefits received by the insured.
In most countries, the period when the insurer cannot reject the claim is two years, but in Nepal, such a period is only one year. This arrangement has benefited the insured and their entitlements. Because the period for the death claim to be rejected for concealing substantive facts or giving false details has been limited to one year. However, this provision requires the insurer’s risk assessors to be more vigilant and adhere to prudential standards in insurance pricing to find that any potential substantive facts have been concealed or falsely stated at the time of accepting the insurance offer and to make an appropriate decision on whether or not to accept the insurance offer.
Neupane, who has a long experience of risk assessment at life insurance companies, is also involved in teaching insurance. )
