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News & Views

Monday, May 7, 2012

Why it's important to scan your health policy

[Source : The Economic Times]

Sushil Jain, 75, has a major grouse against his health insurer of almost two decades. "I've made only one claim so far, in February 1999, for the surgery of my lower spine," he says. "I have been in perfect health since then. In fact, I have not been to a doctor in the past 15 years. Yet, at the time of renewal, the company insists on treating this as a preexisting illness and has turned down my request to increase the value of insurance cover," he adds.

Another policyholder, Mumbai-based DP Jambusaria, is peeved with his insurer for introducing new exclusions in his policy at the time of renewal. "They have limited the amount payable for a cataract surgery to Rs 24,000," he says.

Jain and Jambusaria are not alone. The widespread discontent among policyholders has been underscored by the series of consumer court verdicts against health insurers. "The most common disputes relate to preexisting diseases, suppression of facts, and insistence of the insurance company to lodge a claim within 7-30 days of discharge," says consumer activist Jehangir Gai.

Such complaints are so common that the Insurance Regulatory and Development Authority ( Irda) had to issue an advisory last year, asking insurers to refrain from repudiating claims on flimsy grounds. The regulator has also directed industry lobbies, CII and Ficci, to work on guidelines that are aimed at simplifying policy terms and conditions. However, buyers too need to understand these while buying or renewing policies to avoid nasty surprises later on.

Pre-existing illnesses

"The confusion over pre-existing diseases and time-bound exclusions can be attributed to misleading promises by the adviser during the pre-sale process or failure on the part of buyers to understand the policy's terms," says SS Gopalarathnam, MD of Chola MS. Pre-existing diseases are the ailments for which you may have undergone treatment up to 48 months before buying the policy. Insurers are not under any obligation to honour such claims until a prespecified period is over. Some insurers, however, use this clause as a tool to deny claims. "If you have diabetes or hypertension, claims for other illnesses are rejected on the pretext that they have risen as a complication in these problems," says Gai.

So, it will serve you well to go through the list of pre-existing diseases and the duration for which they are not covered.


You also need to study the exclusions while buying the policy. These include the treatment procedures and ancillary expenses that the insurer will not pay for. For instance, claims related to pregnancy, dental treatment, outpatient department expenses and cost of external aids like pacemakers and wheelchairs, are not entertained in many policies.


Sub-limits refer to the ceiling on room rent, surgeon's fee, operation theatre charges, etc, within the overall cover amount. "You need to be wary of policies that have sublimits on charges, such as doctor's fee and daycare procedure expense. Also, keep an eye on the limits for various treatments, wherein the amount you can claim for a particular surgery is capped," says Divya Gandhi, head, general insurance and principal officer Emkay Insurance Brokers.

Now, however, some private insurers have eliminated these internal ceilings completely. "If a policy's cover is Rs 5 lakh and the claim amounts to Rs 3 lakh, policyholders tend to assume that the entire claim will be disbursed. However, due to restrictions on, say, room rent, the admissible claim could work out to only Rs 1.5 lakh. This can lead to disputes, so we have done away with the sub-limits," explains Gaurav Garg, MD and CEO, Tata-AIG General Insurance.

Suppression of facts

Often, claims are rejected on the ground that expenses were related to a pre-existing condition that was not disclosed at the time of issuing the policy. "Minor and common ailments, which are completely curable, need not be disclosed while buying a policy. Yet, insurance companies reject claims stating that these were not revealed while applying for the policy," adds Gai.

To avoid rejection on this ground, make sure that you list out all your medical problems while filling up the form.

Claim loading

While insurers have the right to revise their premium rates every year, this cannot be done arbitrarily. Insurance companies have to follow the claim loading structure mentioned in the policy document. So, ensure that your policy clearly spells out this framework before you buy it.


Health insurers have never been enthusiastic about renewing policies of senior citizens or those with a history of making huge claims. However, they are bound by regulations to renew policies irrespective of the claims made. In fact, all products that are yet to be launched will have to offer lifelong renewability. "A policyholder must not permit the insurer to unilaterally change the terms and conditions without his consent. Renewal of policy cannot be considered a fresh contract; it's an extension of the original contract for another year. So the policy has to be renewed on identical terms and conditions," says Gai.

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