The amended Policyholder Protection Rules promulgated under
section 55(5) of the Short-term Insurance Act, 1998 and section
62(5) of the Long-term Insurance Act, 1998 published on 17 December
2010 come into operation on 1 January 2011. The rules which were
initially scheduled to be implemented on 1 Janaury 2010 are a
variation of the existing short-term Rule 7.4 (and the
corresponding long-term Rule 16.1 and 16.2) regulating an
insurer's decision to reject or accept claims as well as time
limitation provisions for the institution of legal claims. The time
periods provided for from date of publication to date of operation
are limited and insurers need to immediately put in place systems
in order to ensure compliance with the amended rules.
In terms of the new rules, the claims handling procedure from 1
January 2011, is:
Insurers must decide whether they accept, reject, or dispute
the quantum of the claim "within a reasonable
period". A reasonable period will depend on the facts and
circumstances of the claim, for example, how soon the insurer
receives the documents from the policyholder for purposes of
conducting investigations in respect of the claim. Notably, the
previous Rule 7.4 did not make provision for a period by which the
insurer should accept, reject or dispute the quantum of a
Insurers must in writing notify the policyholder of their
decision within 10 days of taking that decision.
If the insurer rejects the claim, such notice of rejection
Give reasons for the rejection. Presumably, this does not or
should not prevent the insurer from relying on other reasons which
become known at a later stage. Where the notice of rejection is
written by someone other than the insurer, the notice must include
the details of the insurer and advice to the policyholder that
further correspondence in respect of the notice must be sent
directly to that insurer.
Give the policyholder not less than 90 days "after the
date of receipt of the notice" to make representations
regarding the insurer's decision to reject the claim or dispute
the quantum of the claim. Insurers will have to put procedures in
place so as to ensure delivery of the notice to the policyholder
for purposes of calculating the 90 day period.
Inform the policyholder in " plain and understandable
language" of their right to lodge a complaint under the
Financial Services Ombud Schemes Act, 2004 with information
regarding the relevant provisions of the Act in respect of lodging
complaints. Plain and understandable language will also depend on a
number of factors including the sophistication of the
Inform the policyholder of any time limitation clause for the
institution of legal action and the implications of such clause in
an "easily understood manner".
If the policy does not contain any time limitation clause,
inform the policyholder of the prescription period under the
Prescription Act, 1969.
If the policyholder makes representations within the 90 day
period, the insurer must within 45 days (the previous rule provided
for 30 days) of receipt of the representation send a written notice
to the policyholder of its final decision whether to accept, reject
or dispute the quantum of the claim. This notice, which does not
suspend the limitation period, must:
Inform the policyholder of the reason for the decision.
Include the facts that informed the insurer's
Include the information on the policyholder's right to
lodge a complaint with the appropriate ombud under the Financial
Services Ombud Schemes Act, on the time limitation clauses in the
policy for instituting action and if the policy is not applicable,
the provisions of the Prescription Act mentioned above.
The new rule provides that any time limitation clause may not
include the 90 day period afforded to the policyholder for purposes
of making representations regarding a rejected or disputed claim.
From 1 January 2011, all policies must allow a period of not less
than six months after the 90 day period for the institution of
legal action. Insurers need to amend any policies with restrictive
limitations without delay so as to ensure compliance with the new
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