Scanning insurance rights

Last Updated: Tue, Apr 28, 2009 06:23 hrs

By Narayan Krishnamurthy

An insurance policy is a legal document that binds the seller to deliver on the offerings stated in it. However, most buyers have found themselves at the wrong end of the stick because the product received by them has varied considerably from what is promised.

In case of health insurance policies, much of the disgruntlement and many disputes have risen from lack of transparency in the claim settlement process or during the renewal of the policy.

IRDA Guidelines

Health Insurance

Health insurance policy to be renewable except on grounds of fraud or misrepresentation.

Insurer not to compel insured to shift to another product except when the product is upgraded or discontinued.

General Insurance

Pricing of group insurance and guaranteed policies to be monitored as some rates offered to corporate clients are not enough to cover stamp duty payable on policies.

Life insurers to give details of payments to intermediaries.

Companies to cover exclusions at extra cost.

Now, the Insurance Regulatory and Development Authority (IRDA) is trying to rectify some of these wrongs. In a March 31 directive, it states: "A health insurance policy shall be ordinarily renewable except on grounds such as fraud, moral hazard or misinterpretation and upon renewal being sought by the insured, shall not be rejected on arbitrary grounds." This has given some teeth to the consumer, who was being taken for a ride.

The timing of this directive is important, considering that the regulator has been talking of such a move for some time and insurers have been taking it easy. Insurers make substantial changes in the policy document to the detriment of the consumer on renewal.

They are also not clear about the premiums charged at various age slabs and are not transparent on the increase in premium on renewal.

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"After seeing the recommendations of various committees and working groups, renewals shall not be denied on the ground that the insured had made a claim in the previous or earlier years," says J. Hari Narayan, chairman, IRDA.

The regulator has also asked insurers to disclose upfront the details about the terms and conditions. This directive will come into force for all policies issued or renewed after 1 June, though the definition of pre-existing disease and when it will be covered is yet to be finalised.

Insurance companies have been known to cite fine print while refusing claims related to pre-existing diseases or complications arising from such diseases. They say that the policy doesn't cover claims for pre-existing diseases, a fact that is almost never highlighted at the time of selling the policy.

Several insurers have also been known to deny claims on the grounds that it was raised earlier or for adding a substantial load (additional premium on grounds of a claim) when the policy comes up for renewal.

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Irda had tried to seek a consensus on the pre-existing disease issue through the General Insurance Council (of which every general insurance firm is a member) to arrive at a definition. If this had happened, it would have compelled the insurers to cover all such diseases in the fifth continuous year of a policy with the same company, if a claim had not been raised during those five years.