Insurers will be forced to accept even apparently fraudulent claims if a proposal put forward by the National Law Commission finds its way through.

The commission has also suggested replacing the present system of insurer-appointed ombudsman with grievance redressal authorities.

According to the proposal, any claim made on a life policy that has been in effect for a period of at least three years will have to be accepted by the insurance companies.

The National Law Commission is undertaking a mammoth exercise of merging the provisions of the Insurance Regulatory and Development Act with the Insurance Act, 1938, to avoid multiplicity of legislations.

The insurance industry is peeved by what some perceive as sweeping changes that could well result in companies being forced to accept fraudulent claims.

The commission's suggestion to constitute the GRAs has equally not been received well as the industry will have to foot a much larger bill if the suggestion is accepted by the government.

Following suggestions received from the industry and interested parties, the Law Commission, together with the Federation of Indian Chambers of Commerce and Industry (FICCI), is holding a one-day workshop on August 25 to discuss the consultation paper on the revision of the Insurance Act, 1938, and the IRD Act 1999.

"Why should we pay for the new legal system to address customer grievances which could well cost ten times more than what it costs today under the ombudsmen system?" questioned a senior official of a leading private insurance company.

The present ombudsmen system costs the 24 insurance players roughly Rs 7-8 crore (Rs 70-80 million). The proposed new system -- which will require lawyers, judges and an appellate authority on the payrolls -- will cost about Rs 60-70 crore (Rs 600-700 million), he added.