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Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part III)

Claims Management and Settlement in Insurance

Updated 11 October 2026 · Fact-checked

Claims management is the insurer's process of receiving a claim, checking cover, investigating and surveying the loss, then paying or repudiating it with reasons. Under the Insurance Act, 1938, losses at or above the notified limit need an approved surveyor's report (Section 64UM), and claims must be recorded (Section 14).

Understand Claims Management and Settlement

A claim is the policyholder's demand that the insurer perform its promise after an insured event. The contract is only worth what the insurer pays. So claims handling is the point where the insurer's compliance is tested most.

The usual flow has five stages. First, intimation: the insured or nominee informs the insurer of the loss. Second, registration and document collection: the insurer records the claim and asks for proof. Third, investigation and survey: the insurer checks that the policy was in force, the peril was covered and no exclusion applies. In general insurance, a surveyor assesses the loss. Fourth, decision: the insurer settles the claim or repudiates it. Fifth, payment or communication of the decision.

In general insurance, Section 64UM of the Insurance Act, 1938 governs surveyors and loss assessors. A person can act as one only if they have the academic qualifications set by regulations and are a member of the Indian Institute of Insurance Surveyors and Loss Assessors. For a firm or company, every partner or director who may survey a loss must meet both conditions. Every surveyor must follow the code of conduct set by regulations.

The Act links the survey to the claim amount. For a loss in India, payable in India, at or above the amount specified in the regulations, the insurer cannot admit or settle the claim without a report from an approved surveyor or loss assessor. The insurer is still free to pay or settle at an amount different from the surveyor's assessment. The report is an input, not a binding order.

The Authority (IRDAI) also has oversight. It can call for an independent report from another approved surveyor and then direct how the claim is settled. Section 14 requires insurers to keep a record of policies and of claims, including the date of claim, claimant details, date of discharge, and, for a rejected claim, the date and grounds of rejection. This record supports policyholder protection and inspection.

Key rules to remember

Surveyor requirement for large claims (Section 64UM(4))
Loss in India + payable in India + amount ≥ limit set by regulations → report of approved surveyor needed before admission or settlement
The Authority may direct otherwise. The actual limit comes from regulations, so do not quote a figure unless you are sure of it.
Eligibility of a surveyor (Section 64UM(1))
Academic qualification as per regulations AND membership of the Indian Institute of Insurance Surveyors and Loss Assessors
Both conditions must be met. For a firm or company, every partner, director or person who may survey must meet them.
Insurer's freedom on amount (proviso to Section 64UM(4))
Insurer may pay or settle at an amount different from the surveyor's assessed amount
The surveyor's report is mandatory but not binding on the amount.
Payment of fee (Section 64UM(7))
Fee for surveying, verifying or reporting on a claim → only to an approved surveyor or loss assessor
Section 64UM(8) allows another person for claims below the limit where an approved surveyor would be disproportionately costly.
Claim record (Section 14(1)(b))
Record = every claim + date of claim + claimant name and address + date of discharge, or date of rejection and grounds
May be kept in electronic form as specified by regulations.

How to solve Claims Management and Settlement questions

For a case-based question on a claim, work through the facts in the order of the claim lifecycle and tie each step to the provision.

  1. 1Identify the type of insurance (general or life) and the loss alleged.
  2. 2Check basics: was the policy in force, is the peril covered, is any exclusion or non-disclosure involved?
  3. 3Check the claim amount against the surveyor threshold in Section 64UM(4) and whether the loss occurred and is payable in India.
  4. 4If a survey is needed, test the surveyor: qualification, membership of the professional body, licence, code of conduct.
  5. 5Apply the insurer's freedom to settle at a different amount, and the Authority's power to call for an independent report and give directions under Section 64UM(5) and (6).
  6. 6State the outcome: settle, partly settle or repudiate. For repudiation, written grounds must be recorded.
  7. 7Add compliance points: Section 14 record of claims, communication to the claimant, and fee payment only to approved surveyors.

Quickest way: Five-line claims answer

When to use it: Use when time is short and the question asks you to advise on whether a claim can be settled.

  1. Line 1: name the provision (Section 64UM or Section 14).
  2. Line 2: state the rule in one sentence with its condition.
  3. Line 3: apply it to the facts, including amount and surveyor status.
  4. Line 4: give the conclusion.
  5. Line 5: add one compliance point such as the claim record or the reasons for rejection.

Common mistakes in Claims Management and Settlement

  • Saying the surveyor's report fixes the amount the insurer must pay.

    Students read 'report required' as 'report binding'.

    Fix: Quote the proviso to Section 64UM(4): the insurer may pay or settle at a different amount.

  • Quoting a specific rupee threshold for compulsory survey as if it is in the Act.

    Students memorise figures from practice.

    Fix: Say the limit is specified in regulations by the Authority. Give a number only if you are certain.

  • Ignoring that surveyor rules apply to general insurance business.

    Claims are studied as one topic for life and general insurance.

    Fix: State that Section 64UM concerns surveyors and loss assessors in general insurance business.

  • Forgetting that every partner or director of a surveyor firm or company must qualify.

    Students focus on the individual surveyor.

    Fix: Add the proviso to Section 64UM(1) whenever the surveyor is a firm or company.

  • Leaving out the record-keeping duty for rejected claims.

    Students treat rejection as a closed matter.

    Fix: Mention that Section 14(1)(b) needs the date of rejection and its grounds to be recorded.

Worked examples

Example 1

A general insurer receives a fire claim for a factory in Pune. The loss is above the amount specified in the regulations. The insurer settles it after a report from a retired bank officer who is not an approved surveyor. Advise on compliance.

Show the solution
  1. The loss occurred and is payable in India, and the amount is at or above the specified limit, so Section 64UM(4) applies.
  2. The insurer must obtain a report from an approved surveyor or loss assessor before admitting or settling the claim.
  3. A retired bank officer who lacks the qualifications and membership under Section 64UM(1) is not an approved surveyor.
  4. Section 64UM(7) bars paying any fee for surveying or reporting on a claim to a person who is not an approved surveyor.
  5. The Authority can call for an independent report from an approved surveyor under Section 64UM(5), at the insurer's cost, and issue directions under Section 64UM(6).

Answer: The settlement is non-compliant. The insurer should obtain a report from an approved surveyor. Paying the retired officer a fee is also contrary to Section 64UM(7). The Authority may order an independent survey at the insurer's cost and direct how the claim is settled.

Example 2

A surveyor's report assesses a motor own-damage loss at ₹4,80,000. The insurer wants to settle at ₹4,50,000. The claim is above the regulatory limit. Can it do so, and what must it record?

Show the solution
  1. The claim is above the limit, so an approved surveyor's report was required, and it has been obtained.
  2. The proviso to Section 64UM(4) lets the insurer pay or settle at an amount different from the assessed amount.
  3. The insurer may therefore settle at ₹4,50,000, but should be able to justify the difference, because the Authority can call for an independent report and direct settlement at a higher or lower figure.
  4. Under Section 14(1)(b) the insurer must record the claim, its date, the claimant's name and address and the date of discharge.

Answer: Yes, the insurer may settle at ₹4,50,000, as the surveyor's report is not binding on the amount. It carries the risk of review by the Authority under Section 64UM(5) and (6), and it must record the claim and its discharge date under Section 14.

Exam tips

  • Write the section number with the rule. Section 64UM for surveyors and Section 14 for records earn clear marks.
  • Use the order: provision, facts, conclusion. Do not just narrate the claim process.
  • Separate the mandatory survey from the non-binding assessment. Examiners like this distinction.
  • Where a figure is left to regulations, say so instead of guessing.
  • Mention the Authority's role. Its power to call for reports and direct settlement is often missed.

Practice questions from Functions in Insurance and Compliance related thereto (Part III)

Claims Management and Settlement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Claims Management and Settlement: frequently asked questions

What are the steps in settling an insurance claim?

The usual steps are intimation, registration, document collection, investigation and survey, decision, and payment or repudiation. In general insurance, large losses need an approved surveyor's report under Section 64UM.

Is a surveyor's report compulsory for every claim?

No. It is compulsory for claims at or above the amount specified in the regulations, for losses in India payable in India, unless the Authority directs otherwise. Below that limit, Section 64UM(8) lets the insurer use another person where an approved surveyor would be disproportionately costly.

Can the insurer settle for less than the surveyor's assessment?

Yes. The proviso to Section 64UM(4) says the insurer's right to pay or settle at a different amount is not taken away. The Authority can still review the claim and give directions.

What records must an insurer keep about claims?

Section 14 requires a record of every claim with its date, the claimant's name and address and the date it was discharged. For a rejected claim, the date of rejection and its grounds must be recorded.