The possible loss must be financially serious to the Insured. An Insurance company could not afford the paperwork involved in handling numerous small claims of a few Rupees each. The excess represents small losses that the Insured has to absorb. For example, in commercial vehicle policy, first Rs 1500 has to be born by the claimant. There must be a large number of similar cases subject to the same peril.
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The prompt settlement of a valid claim is an important function of an insurance organization. In fact, the efficiency of the organization is tested whenever a claim arises, by the time that is taken by the insurers to finalize it. On receiving of notice of loss, the relevant policy particulars are checked to see if the insurance is in force. The claim form is thereafter issued to the insured. The claim is allotted a number and necessary entries are made in the claims register.