Partial Settlement Without a Calculation Sheet: Challenging Standard Deductions, Co-Payments and Unstated Limits

Partial Settlement Without a Calculation Sheet: Challenging Standard Deductions, Co-Payments and Unstated Limits

Introduction

A policyholder files a claim for ₹10 lakh. Weeks later, an email arrives from the insurer: “The claim has been settled for ₹6.20 lakh after applying standard deductions, depreciation and the applicable co-payment.” On its face, the matter looks closed. In substance, it is not explained at all.

The policyholder has no way of knowing whether the insurer first assessed the loss at ₹10 lakh and then deducted ₹3.80 lakh, or whether it treated only ₹6.20 lakh as admissible from the outset. The settlement letter rarely names the items that were rejected, the specific policy clause behind each deduction, the depreciation rate applied, the method used to calculate underinsurance, or the documents the assessment relied on.

None of this means an insurer must pay whatever is claimed. Liability is governed by the policy, and exclusions, deductibles, depreciation, underinsurance, salvage and co-payment clauses can all legitimately reduce the amount payable. The narrower point this article makes is that once an insurer decides to pay only part of a claim, it should be able to show how it got there. A policyholder ought to be able to trace the settlement from the amount claimed, through each assessment step, to the figure finally paid.

The question, then, is not whether a partial settlement is inherently unlawful. It is whether a settlement that offers no clause-wise, item-wise explanation can still be called a fair and reasoned claim decision. To be precise about the terminology used throughout: the concern here is not that a policy limit, sub-limit, deductible or co-payment is “unstated” merely because it is not separately repeated in the settlement letter — a validly incorporated policy term does not need to be restated to remain enforceable. The concern is narrower and more specific: deductions that are undisclosed in their application, unexplained in their basis, incorrectly applied, or unsupported by any identifiable contractual clause.

What the Settlement Letter Conceals

Take a settlement letter that says only this: “Your claim has been assessed and settled for ₹6,20,000 after standard deductions, depreciation and applicable co-payment.” Read closely, that single sentence leaves a long list of questions unanswered — what the gross assessed loss actually was; which items were accepted and which excluded, and under which clause; what depreciation rate was used, and whether it was applied item by item; whether underinsurance was invoked, and against what sum insured; whether the deductible was a flat amount or a percentage; whether the co-payment was calculated on the gross loss or only the admissible portion; which invoices, survey reports or medical records were actually relied upon; and, not least, whether the insurer itself approved the figure or a TPA simply computed it.

A purely illustrative example — simplified for clarity and not a claim about how any real insurer’s arithmetic is sequenced — might look like this:

• Gross assessed loss: ₹10,00,000
• Less: excluded items (not covered under the policy): ₹1,00,000 → admissible loss ₹9,00,000
• Less: depreciation, applied to the admissible loss at the rate specified for the relevant item category: ₹80,000 → ₹8,20,000
• Less: underinsurance, applied proportionately where the sum insured is lower than the value at risk: ₹60,000 → ₹7,60,000
• Less: policy deductible, a fixed first amount borne by the policyholder: ₹40,000 → ₹7,20,000
• Less: co-payment, calculated as a percentage of the amount remaining after the above deductions: ₹1,00,000 → net payable ₹6,20,000

The point of setting the sequence out this way is not that every insurer calculates in exactly this order — underinsurance, depreciation and co-payment can each operate on a different base depending on the policy, and a real settlement may sequence them differently. The point is that whatever sequence and base an insurer actually uses, it should be stated, so the policyholder can check the arithmetic rather than simply be told a final number. An itemised settlement statement, in this sense, is not a demand for money outside the four corners of the policy — it is a demand that the policy be applied transparently.

The Regulatory Framework

The Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations, 2024 were notified at Hyderabad on 20 March 2024 and appeared in the Gazette of India on 22 March 2024. They took effect from the later of Gazette publication or 1 April 2024, and they consolidate what were previously several separate sets of policyholder-facing obligations covering product disclosure, policy issuance, servicing, claims and grievance redressal.

Several of its provisions bear directly on the problem described above, even though none of them uses the phrase “calculation sheet.”

• Regulation 9 (Prospectus). Regulation 9 governs the prospectus accompanying an insurance product and requires that the information given to a prospective customer present a clear, accurate and realistic picture of the product’s features, benefits, exclusions, risks, options and exit-related matters, along with details of the grievance redressal mechanism. This matters here because a policyholder should not be discovering material restrictions for the first time at the claim stage — the prospectus is meant to surface them at the point of sale, in a form an ordinary buyer can actually use.

 

• Regulation 11 (Policy Language). Regulation 11 requires policy terms and conditions to be written in simple and clear language, free of unnecessary jargon, and free of coercive, unfair and one-sided clauses. It further requires every policy issued to contain the minimum details the Authority specifies. Regulation 11 does not itself demand a post-settlement calculation sheet, but it reinforces the same underlying idea: a clause that permits a deduction is only meaningful if the policyholder can actually understand how that clause operates.

 

• Regulation 12 (Customer Information Sheet). Regulation 12 makes it mandatory for insurers to provide a Customer Information Sheet along with the policy document. IRDAI has described the CIS as a plain-language summary of the policy — sum insured, coverage, major exclusions, claims procedure and grievance channels, set out in a form a policyholder can absorb without wading through the full contract. It is useful at the pre-loss stage; it does not, and is not meant to, answer every question that arises once an actual claim is being assessed.

 

• Regulations 22 and 23 (Claims Handling). Regulation 22 requires the policy document itself to specify the documentation needed to support a claim and the procedure for settling it, with the same information displayed prominently on the insurer’s website; claims must then be settled in line with the insurer’s own board-approved policy and within the prescribed turnaround time. Regulation 23 goes further, requiring insurers and distribution channels to assist policyholders in registering claims, process claims fairly, share information at each stage of settlement, request documents in the manner the policy specifies, and settle claims with reasonable speed. It also expressly discourages the practice of calling for documents in instalments when they could have been asked for together.

Taken together, these provisions describe — as a matter of analytical characterisation, not a separately codified statutory label — a disclosure obligation that operates both before a loss and after one: before the loss, through the prospectus, plain policy language and the CIS; after the loss, through fair and informative claims handling. None of these provisions, on their own text, mandates a document called a “calculation sheet.” The controlling proposition for this article is therefore a modest one: the Regulations require fair treatment and clear, prompt information during claim settlement, but they do not expressly prescribe a universal, named calculation-sheet document for every partial settlement. An itemised settlement statement is best understood as the practical means by which an insurer can demonstrate it has actually complied with these existing obligations — evidence of compliance, and a proposed best practice, rather than a freestanding requirement that already exists in the text of the Regulations.

Quantification and Judicial Scrutiny

• National Insurance Co. Ltd. v. Meghana (Bio-Tech) Tissue Culture Nursery

In National Insurance Co. Ltd. v. Meghana (Bio-Tech) Tissue Culture Nursery, First Appeal No. 39 of 2018, decided by the NCDRC on 8 April 2024, the insured ran a tissue-culture nursery covered under a Standard Fire and Special Perils Policy. A failure in the air-conditioning system had pushed up the temperature in the growth room and damaged the banana tissue cultures inside. The insurer repudiated the claim on the footing that the loss simply wasn’t covered by the policy. An independent surveyor had nonetheless gone ahead and quantified the loss, and the State Commission, treating that quantification as effectively deciding the matter, directed payment. The NCDRC set that order aside, holding that damage of this kind fell outside the policy’s coverage.

Meghana illustrates that quantification of loss and determination of policy liability are separate exercises. The NCDRC treated quantification by the surveyor as a procedural step that had to be undertaken even though the claim was ultimately found to fall outside the policy’s coverage — the Commission did not excuse the assessment stage simply because it went on to hold the loss uncovered. Quantification therefore does not itself establish liability, but neither is it a step an insurer or surveyor may skip merely because coverage is disputed. Meghana does not stand for the broader proposition that every insurer must quantify every loss in every conceivable case irrespective of the circumstances; it shows, on its own facts, that assessment and coverage were treated as distinct enquiries, with quantification required regardless of how the coverage question was eventually resolved. Read this way, the case supports a useful point for present purposes: where an insurer does rely on a surveyor’s figure as part of a partial settlement, it should be able to say what that figure represents, which items it covers, and how the policy terms were then applied to arrive at the final number.

• United India Insurance Co. Ltd. v. M/s Park Leather Industries Ltd.

United India Insurance Co. Ltd. v. M/s Park Leather Industries Ltd., 2025 INSC 455, decided by the Supreme Court on 7 April 2025, arose from an NCDRC order directing the insurer to pay for loss caused by the collapse of the claimant’s factory shed. The Supreme Court set aside that order and remitted the matter, finding that the Commission had not independently applied its mind to the quantification of the claim, and had instead proceeded on the mistaken impression that the insurer had failed to dispute the surveyor’s assessment produced by the claimant.

The principle the Court applied cuts both ways. A figure cannot simply be accepted because the other side hasn’t visibly rebutted it — the adjudicating body has to look at the underlying material itself. Extended to the claim-settlement stage, the same logic supports the argument made here by analogy, not as direct authority: an insurer should not expect a policyholder to accept an unexplained number any more than a consumer commission should accept an unexplained one. Park Leather is not authority for the specific proposition that every settlement letter must carry a calculation sheet — it says nothing about the contents of settlement letters at all. Its value is by analogy, as support for the broader idea that a claim figure needs an intelligible basis rather than a bare assertion.

Co-Payments, Deductions and the Role of TPAs

A co-payment is not unlawful merely because it reduces what the insurer pays. Where a policy clearly requires the policyholder to bear a stated percentage of an otherwise admissible claim, the insurer is generally entitled to apply that clause. Problems arise when the co-payment isn’t clearly disclosed, is applied to the wrong base figure, or is invoked without any visible contractual authority for doing so — and the same is true of depreciation, underinsurance, salvage and deductibles more generally. Each of these can be a legitimate part of a claim assessment; each also needs to be tied to a specific policy term and the actual facts of the claim, not applied as a generic label.

Third-party administrators complicate this further, because their role raises a question of authority rather than merely of calculation. IRDAI’s regulatory framework recognises a TPA as an entity engaged by an insurer to perform specified health-service functions, and a TPA can legitimately collect documents, coordinate medical scrutiny or otherwise assist with processing within that framework and its agreement with the insurer. What that involvement does not, without more, establish is that every deduction or coverage determination appearing in a claim assessment was independently authorised by the insurer — the actual scope of a given TPA’s authority has to be read off the applicable policy, the regulatory framework and the specific insurer-TPA arrangement, rather than assumed one way or the other.

Neelam Vohra v. National Insurance Co. is a useful illustration of this concern, though it is a district consumer forum decision on its own particular facts rather than a rule binding on every insurer-TPA relationship, and reported figures for the claimed and paid amounts vary slightly between sources — in the region of ₹5.4 lakh claimed against roughly ₹2.2 lakh paid. The dispute centred on the role played by the TPA in reducing the claim, and the forum was critical of reliance on an unsigned comparison of hospital rates to justify the reduction, treating the insurer rather than the TPA as responsible for the final claim decision on the facts before it. The case should be read narrowly: it does not establish, as a general national rule, that a TPA can never take part in claim assessment or can never influence a coverage decision. What it supports is the more limited proposition that a TPA’s administrative involvement does not, on its own, prove it had the authority to make a final decision or impose a deduction the insurer never explained or approved.

Three situations are worth keeping distinct. A policy-authorised co-payment is ordinarily enforceable if it is clearly disclosed and correctly calculated. An insurer-applied deduction needs to be tied to the policy clause, the claim facts and the underlying assessment record. A TPA-imposed deduction is vulnerable precisely where the TPA’s authority isn’t demonstrated and the insurer hasn’t independently reviewed or approved the outcome. The point of the distinction is to keep the argument narrow — the target here is unexplained decision-making dressed up as routine administrative processing, not the use of TPAs as such, and certainly not a claim that a stated sum insured automatically entitles a policyholder to payment of that full amount regardless of coverage terms, sub-limits, exclusions or admissibility conditions.

What a Proper Settlement Statement Should Contain

Wherever a claim is paid in part, reduced or rejected in part, the insurer should ideally issue a settlement statement containing:

1. The amount originally claimed.

2. The gross loss, or the amount treated as admissible on assessment.

3. The items accepted and the items excluded.

4. The specific policy clause supporting each exclusion.

5. The rate and method of depreciation applied.

6. The underinsurance calculation, where relevant, and the sum insured used for it.

7. The amount and contractual basis of the deductible.

8. The percentage and contractual basis of any co-payment.

9. The valuation and treatment of salvage, if applicable.

10. The reports and documents the assessment relied upon.

11. The identity and role of whoever carried out the assessment — surveyor, TPA or in-house claims officer.

12. Confirmation of the insurer’s own approval of the final figure.

13. The arithmetic connecting all of the above to the net amount paid.

A policyholder may request the underlying assessment material, subject to applicable confidentiality, privacy, privilege and third-party information restrictions — this does not mean every internal claim document becomes automatically disclosable, only that a policyholder should not be left with no way to test the insurer’s figures at all. None of this is an argument that every settlement should automatically be reopened. It is an argument that the policyholder should have enough information to identify what the actual dispute is — a coverage question, a valuation question, a disputed deduction, or simply an arithmetic error — rather than being left to guess.

Remedies and the Grievance Route

Where a settlement letter announces a reduced figure without explaining it, a policyholder can reasonably ask for the full itemised calculation, the specific policy clause behind each deduction, the surveyor or assessor’s report, the documents relied upon, and confirmation of a TPA’s authority where one was involved. Before raising any of this, it helps to preserve the policy documents, the CIS, the claim form, invoices, medical records or survey reports, the settlement letter itself, and all related correspondence — and to frame the request as a set of precise questions rather than a general complaint that the settlement feels unfair.

If the insurer does not respond adequately, the practical route runs through the insurer’s own internal grievance mechanism first, then, where applicable, the Insurance Ombudsman, and separately the IRDAI’s Bima Bharosa portal, which allows policyholders to register complaints with insurers and escalate them to IRDAI’s grievance cells where necessary. It bears emphasis that Bima Bharosa is a grievance-registration and escalation mechanism, not an adjudicatory forum in the manner of a court or consumer commission — it does not itself decide the underlying claim dispute. Where none of these routes resolve the matter, recourse to the appropriate Consumer Commission, or a civil court depending on the facts and jurisdiction, remains available.

It is also worth being precise about what kind of wrong an unexplained settlement represents, since these are distinct legal concepts rather than interchangeable labels. A deduction contrary to the policy’s own terms is, at bottom, a breach of contract. A failure to process or explain a claim fairly may amount to a deficiency in service under consumer law, depending on the facts. A characterisation of the decision as arbitrary sits more naturally where some public-law element is present, and does not automatically apply to every private dispute between an insurer and a policyholder. Procedural unfairness, in turn, depends on whatever regulatory or contractual framework governs the specific claim. Depending on which of these best fits the facts, the available relief can extend to reconsideration by the insurer, reopening of the claim where an incorrect clause or calculation was used, interest on any amount wrongfully delayed, and compensation for deficiency in service.

It is worth being precise about the limits of this argument more generally. The position taken here is not that an unexplained settlement is automatically void or non-est — that would need stronger authority than currently exists. The more defensible submission is that a settlement offering no meaningful explanation can, depending on the facts, amount to one or more of the wrongs described above, because it denies the policyholder any real opportunity to test how the insurer actually applied the contract.

Conclusion

Insurers are not obliged to pay every claim in full, and the law does not pretend otherwise. But once an insurer decides to pay less than what was claimed, the decision stops being purely commercial and becomes one the policyholder is entitled to understand. The 2024 Regulations build much of the disclosure architecture for this — plain-language prospectuses, simple policy wording, the Customer Information Sheet, and fair, informative claims processing — even though they do not, in their present text, name or mandate a document called a calculation sheet. The case law, read carefully rather than overstated, reinforces the same idea from the adjudicatory side: quantification and coverage are distinct questions, and figures — whichever party puts them forward — cannot be accepted mechanically.

This article accordingly proposes, as a matter of regulatory best practice and possible future reform rather than as a description of existing law, that every partial settlement should be accompanied by an itemised statement showing exactly how the insurer got from the amount claimed to the amount paid. Until that becomes standard practice, “standard deductions” will remain a phrase that explains nothing.

Frequently Asked Questions

1)Is a partial insurance settlement automatically illegal?

No. An insurer may pay less than the amount claimed where the policy permits exclusions, depreciation, deductibles, co-payments, underinsurance or similar adjustments. The question is whether the reduction is contractually authorised, factually supported, and properly explained — not whether it exists at all.

2)Does IRDAI require insurers to issue a “calculation sheet”?

Not expressly. The 2024 Regulations require clear pre-sale disclosure, simple policy language, a Customer Information Sheet, and fair, informative claims processing under Regulations 9, 11, 12, 22 and 23. None of these provisions, in their own text, names or mandates a document called a calculation sheet. An itemised settlement statement is best presented as a practical safeguard flowing from these obligations, and as a proposed reform, not as an existing statutory requirement.

3)What is the strongest legal argument available?

Not that the policyholder is automatically entitled to the full amount claimed. It is that the insurer should be able to show a traceable connection between the policy, the facts, the assessment, and the final payment. Where that connection is missing, the appropriate response is reconsideration, disclosure of the assessment record, or a claim for deficiency in service — not an assumption that the settlement is void.

References

Statutes and Regulations

• Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations, 2024, notified 20 March 2024, Gazette of India, 22 March 2024 (Regulations 9, 11, 12, 22 and 23).
• Consumer Protection Act, 2019.

Case Law

• National Insurance Co. Ltd. v. Meghana (Bio-Tech) Tissue Culture Nursery, First Appeal No. 39 of 2018, NCDRC, decided 8 April 2024.
• United India Insurance Co. Ltd. v. M/s Park Leather Industries Ltd., 2025 INSC 455, Supreme Court of India, decided 7 April 2025. (Note: a civil appeal number for this matter has been reported by secondary sources but has not been independently verified in this research and is deliberately omitted; confirm from a primary source such as the Supreme Court’s case-status portal or a subscription database before using it in citation.)
• Neelam Vohra v. National Insurance Co., District Consumer Disputes Redressal Forum — a case number, forum and date have been reported by secondary sources but have not been independently verified in this research; reported claim and settlement figures also vary slightly across secondary sources (approximately ₹5.4 lakh claimed against approximately ₹2.2 lakh paid). Confirm all particulars from a primary source before citation.

Regulatory and Grievance Resources

• IRDAI Bima Bharosa grievance portal — for registering complaints against insurers and, where necessary, escalating them to IRDAI’s grievance cells.
• Insurance Ombudsman Rules, 2017 (as amended) — governing the Insurance Ombudsman mechanism referenced in the Remedies section above.