Know Your Rights and Responsibilities: The Insured and the Insurer

Insurance has become an indispensable part of modern life, offering a financial cushion to individuals, families, and businesses when unexpected events occur. Whether one invests in health, life, motor, property, travel, or commercial insurance, every policy represents a contractual relationship based on trust and transparency. Understanding the rights and obligations of both the insured and the insurer is essential not only for ensuring smooth interactions but also for building a fair and dependable insurance ecosystem. This article provides a detailed overview of these rights and responsibilities and explains how they work together to maintain a balanced insurance framework.

---

1. The Principle of Utmost Good Faith

At the heart of every insurance contract lies the doctrine of uberrimae fidei, meaning “utmost good faith.” This principle obligates both the insured and the insurer to act honestly and share all relevant information that might affect the policy.

For the insured, this means fully disclosing material facts such as existing medical conditions, previous claims, vehicle condition, construction details of property, or any other circumstance that influences risk assessment. Withholding or misrepresenting information can lead to policy cancellation or claim rejection.

For the insurer, utmost good faith requires complete transparency regarding the scope of coverage, exclusions, premium computation, deductibles, claim procedures, and policy limitations. The insurer must not conceal critical information or introduce hidden clauses.

A breach of this principle by either party can result in disputes, legal consequences, or termination of the policy. Thus, utmost good faith serves as the foundation of a stable insurance relationship.

---

2. Rights of the Insured

Policyholders are granted several rights to ensure they are treated fairly and receive the protection they pay for.

a. Right to Full and Clear Information

Insured individuals have the right to obtain complete and accurate details about their policy. This includes information on coverage, exclusions, benefits, waiting periods, premium schedules, renewal requirements, and claim procedures. Insurers must provide this information in simple and easy-to-understand language, enabling policyholders to make informed decisions. Clear communication helps prevent confusion and future disputes.

b. Right to Fair and Non-Discriminatory Treatment

Every policyholder is entitled to fair treatment throughout the insurance process. Insurers must evaluate proposals objectively without discrimination based on gender, age (beyond risk-based factors), occupation, or any other irrelevant parameter. Similarly, claims should be assessed impartially, without bias or unfair justification for rejection.

c. Right to Privacy and Data Protection

The insured must be assured that personal, financial, and medical information shared during the application or claim process will be handled confidentially. Such information should be used strictly for legitimate policy-related purposes and not disclosed unless required by law or essential for processing the insurance contract.

d. Right to Timely and Transparent Claim Settlement

Policyholders have the right to a smooth and efficient claim experience. This includes timely acknowledgment of claims, transparent communication during assessment, clear explanation of required documents, and swift settlement of approved claims. If a claim is rejected, the insurer must provide detailed reasons supported by policy terms.

e. Right to Appeal and Grievance Redressal

If the insured is dissatisfied with claim decisions or service quality, they may escalate the matter. Options include approaching the insurer’s internal grievance redressal mechanism, the Insurance Ombudsman, consumer forums, or other legal channels. These safeguards ensure accountability and offer remedies when disputes arise.

---

3. Responsibilities of the Insured

While policyholders enjoy several rights, they must also fulfil certain responsibilities to maintain the validity of their insurance coverage.

a. Honest and Complete Disclosure

The insured must disclose all relevant information truthfully at the time of purchasing or renewing the policy. Concealing or misrepresenting material facts can lead to denial of claims or cancellation of the policy. Transparency is necessary for accurate risk assessment.

b. Providing Accurate Documentation

All documents submitted—whether during proposal, claim filing, or policy modification—must be correct and genuine. The submission of false documents or inflated claims constitutes fraud and may result in legal action or penal consequences.

c. Timely Payment of Premiums

Insurance coverage remains active only when premiums are paid within the stipulated due dates. Delays or non-payment may lead to policy lapse, adversely affecting coverage and claim eligibility. Policyholders must track due dates and ensure timely payments.

d. Reporting Changes Promptly

Any significant change affecting the risk profile must be reported to the insurer. This may include changes in medical conditions, property renovations, vehicle modifications, change of address, or alterations in business operations. Timely intimation ensures that the policy remains accurate and valid.

e. Taking Reasonable Steps to Prevent Loss

Policyholders must make efforts to minimise or prevent damage. For example, securing property, following prescribed safety measures, maintaining health precautions, or promptly seeking medical treatment. Insurance is not a substitute for carelessness; it provides support only when reasonable precautions have been taken.

---

4. Rights of the Insurer

Insurance companies also possess rights that enable them to operate fairly and sustainably in a risk-based market environment.

a. Right to Evaluate and Underwrite Risks

Insurers may request relevant information, medical examinations, surveys, or inspections to assess the risk associated with an applicant. Based on this evaluation, they may accept, reject, or modify proposals as per their underwriting guidelines.

b. Right to Investigate Claims

To ensure the legitimacy of claims and safeguard against fraud, insurers can conduct investigations, verify documents, inspect the loss site, or seek expert opinions. This is important to protect the interests of all policyholders.

c. Right to Cancel the Policy

Insurers have the right to cancel a policy if they identify fraud, deliberate concealment of material facts, or breach of policy conditions by the insured. However, such cancellation must comply with regulatory norms and be communicated clearly to the policyholder.

---

5. Responsibilities of the Insurer

Insurers must uphold ethical practices, comply with regulatory standards, and protect the interests of policyholders.

a. Transparent and Honest Communication

Insurance companies must clearly communicate all terms, conditions, exclusions, deductibles, and limitations. Information should not be misleading or hidden in complex language. This ensures that policyholders understand exactly what they are purchasing.

b. Fair and Objective Risk Assessment

Insurers must evaluate policy proposals and claims impartially. Their decisions should be based solely on risk-related factors and policy terms, ensuring neutrality and fairness.

c. Prompt and Efficient Claim Handling

Timely processing of claims is a key responsibility. Insurers should avoid unnecessary delays, request documents reasonably, and provide regular updates to claimants. Efficient service strengthens trust and enhances customer experience.

d. Maintaining Financial Strength and Solvency

Insurance companies must maintain required solvency margins and financial stability to meet claim obligations. Regulatory bodies monitor solvency regularly to ensure policyholders’ interests are protected.

e. Effective Grievance Redressal Mechanisms

Insurers must operate robust, accessible, and efficient systems to handle customer complaints. They must cooperate with regulatory authorities and the Insurance Ombudsman to resolve disputes fairly and promptly.

---

6. Creating a Balanced Insurance Relationship

A strong and transparent insurance ecosystem emerges when both parties—insured and insurer—fulfil their roles responsibly. Policyholders benefit by carefully reading policy documents, complying with disclosure requirements, and submitting accurate claims. Insurers, on the other hand, build credibility by ensuring fairness, prompt service, and ethical conduct. Together, they create an environment built on trust, accountability, and financial security.

---

Conclusion

Understanding the rights and responsibilities of both the insured and the insurer is essential for navigating the insurance landscape confidently. Policyholders must provide truthful information, pay premiums on time, and take reasonable steps to prevent loss. Insurers must communicate clearly, evaluate risks fairly, and settle claims efficiently.

When both sides uphold their respective obligations, insurance fulfils its true purpose: offering protection, stability, and peace of mind in an uncertain world.

"Unlock the Potential of Legal Expertise with LegalMantra.net - Your Trusted Legal Consultancy Partner”

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc

Prerna Yadav

LegalMantra.net

Print