Death claim ten months after issue: material non-disclosure, agent-completed proposal and Section 45

The statutory test. Section 45 of the Insurance Act, 1938 prevents an insurer from calling a policy in question after three years from issue or revival, save where it proves that a statement on a material matter was fraudulently made and that the policyholder knew at the time that it was false or that it suppressed a material fact. The death is ten months after issue, so the policy sits inside the three-year window and can be questioned; the burden, however, is on the insurer, and the standard is fraud, not mere inaccuracy.

Limb 1 - materiality. Hypertension on medication since 2020 and a 2022 admission with HbA1c of 9.8% are squarely material to a term plus critical illness risk. A prudent underwriter would have declined standard rates, imposed exclusions or postponed. This limb is strong.

Limb 2 - falsity. Certified hospital records objectively contradict the 'No' answers. This limb is strong, provided the records are obtained directly from the hospitals in a sealed cover and the treating doctor's certificate identifies the dates of diagnosis.

Limb 3 - knowledge and fraudulent intent. This is the weak limb. The form was filled by the agent and only e-signed; if the agent wrote 'No' without putting the questions, the insured may not have known a false answer was recorded. The signed declaration is evidence of knowledge but is not conclusive.

Conclusion. Repudiation is legally available but not presently safe. Before deciding, the insurer should record the agent's statement, the e-proposal audit trail and certified hospital records, and must issue a reasoned decision identifying the questions, the answers and the documents relied on. A bare one-line letter is itself vulnerable: the Supreme Court in LIC v. Asha Goel requires a considered, non-arbitrary decision communicated to the claimant, and the IRDAI (Protection of Policyholders' Interests) Regulations, 2017 require the claim to be decided within 30 days of the last necessary document with reasons for any repudiation.

The three-year period under Section 45 runs from 14 June 2024 and expires on 14 June 2027. A death on 20 September 2027 therefore falls outside the protection window, and the legal position inverts.

After three years the policy cannot be called in question on the ground of inaccurate or false statements in the proposal or medical report unless the insurer establishes fraud, that the statement was on a material matter, and that the policyholder knew it was false when made. Practically, the insurer is reduced to a fraud case, which requires positive evidence of deliberate concealment - for example, a document showing the insured procured a false medical report or deliberately avoided a diagnostic test that had been advised. The fact of the 2020-2022 history, however stark, is no longer enough, because the statute presumes the policy to be beyond challenge after the expiry of three years.

Two further points matter. First, if the policy had lapsed and been revived, the three years run afresh from the date of revival, so the revival date must be verified from the system rather than assumed. Second, rider additions restart the clock for that rider only.

On these facts the claim would have to be paid, with interest for delay beyond the 30-day period, and any attempt to repudiate on the 2022 diabetes records alone would be indefensible before the Insurance Ombudsman or a consumer commission. The lesson for the file is that if the insurer intends to rely on non-disclosure it must complete its investigation and decide inside the three-year window; delay converts a good defence into no defence.

Underwriting failures.

1. The proposal was completed by the agent rather than the prospect. Best practice, and the substance of the code of conduct for agents, is that the proposer answers the questions personally; a form wholly written by the intermediary is the single largest source of contested repudiations.
2. The medical examiner recorded BP 138/88 at age 38 and no sugar or urine test was ordered, although a raised BP reading plus a sedentary occupation should have triggered basic biochemistry under any reasonable non-medical limits grid.
3. The insurer accepted a sum assured of ₹1 crore without income proof or a financial underwriting check, so the moral hazard dimension was never tested.
4. There is no evidence that the agent's persistency and claim history was reviewed at proposal stage.

Claim-handling failures. The repudiation letter is unreasoned; the file does not show that the hospital records were certified; and there is no record of a decision within 30 days of the last document. These are procedural defects that will be read against the insurer even if the defence is otherwise sound.

Action against the agent. The insurer should obtain a written statement, verify whether the health questions were actually put to the proposer, and check other proposals sourced by the same agent for the same signature pattern. If the agent recorded answers without asking, that is a violation of the code of conduct under the IRDAI (Insurance Agents) Regulations, 2016; the insurer should caution or terminate, record the finding in the agent's file, and report the case to IRDAI so that it is considered at licence renewal in March 2026. It should also recover any commission paid on the case where the policy is avoided.