IRDA tells insurers to honour the spirit of contract, reject claims only on 'valid grounds'

Dear Viewers,

You land up in a hospital on a medical emergency. The treatment costs a bomb. Your only solace is your medical insurance policy, which you have kept alive for 10 years - that too, without even making a claim - by paying annual premiums without fail. You file a claim to get the reimbursement of the hospitalisation expenses. However, to your horror, the insurance company rejects the claim, citing technical reason. You feel you are watching Michael Moor's Sicko all over again, this time as a victim of an evil health insurance company.

Such Kafkaesque scenario is not unheard of in the health insurance sector. Consumer activist Jehangir Gai narrates such an incident where a policyholder's hospitalisation claim was rejected because the insurer was intimated after the stipulated deadline. The fact that the policyholder was not in a position to intimate within the timeframe as he was hospitalised on an emergency and remained indisposed for a while failed to convince the insurance firm.

Explains Gai: "Sometimes, a person is admitted to hospital in an emergency (such as in the case of sudden appendicitis or heart attack) and his priority then is not to trace the policy document and intimate the insurance company. If a person forgets to inform the insurance company within the prescribed period (maximum seven days), then the claim is rejected even if it is submitted in time, within 30 days of discharge."

Then, there are cases where the claim-settlement process is stalled on the grounds that the original documents like discharge card, pathological test reports, X-rays, etc, were not submitted. "The original bills have to be submitted but not the documents, as these are required for subsequent follow-up treatment. There is no condition in a policy that requires the original reports to be handed over; just the copies would suffice. Yet, claims are rejected for non-submission of the original reports," he says.

Regulator steps in ::

In fact, so commonplace are cases of policyholders being dissatisfied with the insurers' claim-approval record that the Insurance Regulatory and Development Authority (Irda) has had to issue a circular to life as well as health insurance companies asking them to refrain from repudiating genuine claims on the grounds that they are time-barred.

"Insurers' decision to reject a claim shall be based on sound logic and valid grounds. It may be noted that such limitation clause does not work in isolation and is not absolute. One needs to see the merits and good spirit of the clause, without compromising on bad claims. Rejection of claims purely on technical grounds in a mechanical fashion will result in policyholders losing confidence in the insurance industry, giving rise to excessive litigation," the note warns.

----- EDITOR