CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

IRDAI learns that an insurer settled a claim of Rs 40 lakh after an approved surveyor's report. IRDAI calls for an independent report from another approved surveyor under Section 64UM(5), which suggests the claim should have been Rs 31 lakh. The insurer has already paid the full Rs 40 lakh, and recovering Rs 9 lakh would cause undue hardship to the insured. Which statement is correct?

IRDAI cannot direct a lesser payment in this case. Under the second proviso to Section 64UM(6), once the amount is paid and the Authority believes recovering the excess would cause undue hardship to the insured, no direction for a lesser sum is made; the report cost stays with the insurer.

1. AIRDAI can still compel recovery, since the insurer is always bound by its directions
2. BThe cost of the independent report is borne by the insured
3. CNo direction for payment of a lesser sum shall be made where the amount is already paid, and IRDAI is of opinion that recovery would cause undue hardship to the insuredCorrect
4. DThe insurer is relieved of all civil and criminal liability once IRDAI's direction is withdrawn