Don't Miss The Fine Print!

How often have you renewed your health insurance policy without taking the time to check the policy details for updates? Be sure of what you are signing up for to ensure that the cover still suits your needs, advises Jay Sampat.

Key Points:

• The IRDA has barred companies from rejecting renewals except on grounds of fraud, moral hazard or misrepresentation. Significantly, renewals cannot be denied simply because the policyholder had made a claim in the previous year.
• Companies are prohibited from arbitrarily altering the terms of a policy. Insurers are also required to intimate all policyholders of any revisions at least three months prior to the policy renewals, besides seeking the IRDA’s approval for the changes.

Recently, my father’s close friend was flabbergasted when he received a renewal notice from his health insurance company of 30 years. The insurer had earlier approved a cataract surgery claim of approximately Rs 40000, but when it was time for the payout, it imposed a sub-limit of Rs 20000. The company cited a market survey conducted by its third party administrator (TPA) to justify this downward revision. Certain other terms and conditions of the old policy too were modified. My 70 year-old neighbour too faced a similar predicament in 2009, when she started undergoing treatment for liver cirrhosis. The lady had a health cover of Rs 2 lakh since 2005. However, after releasing the entire claimed amount for the first two years, the insurer started deducting 25 per cent from the approved amount from the third year onwards citing the co-payment clause in the policy. Simultaneously, the premium was also tripled, and for an insured sum of Rs 200000, the company charged close to Rs 70000 as premium. This was in addition to the co-payment.

These experiences of policyholders highlight the unpleasant practices followed by insurance companies at the time of claims and renewals. This is against the Insurance Regulatory and Development Authority’s (IRDA) rule book that prohibits companies from arbitrarily altering the terms of a policy. Companies are also required to intimate all policyholders of any revisions at least three months prior to the policy renewals, besides seeking the IRDA’s approval for the changes. The ground reality, though, is that these strictures are often not followed.

After receiving several such complaints, especially from senior citizens, IRDA has barred companies from rejecting renewals except on grounds of fraud, moral hazard or misrepresentation. Significantly, renewals cannot be denied simply because a claim had been made in the previous year. Subsequent to IRDA’s ruling, it is not easy for companies to revise their terms at will. Hence, if companies feel the need to change those clauses that are unfavourable to them, their new strategy is to launch new products and attempt to get the existing policyholders to sign on.

Thus, it is critical to read the fine print carefully to ascertain whether you are buying the same product or a completely different one. As per the IRDA’s directives, insurers cannot force you to switch to another product. While the insurer can change the premium amount if there is a change in the age slab of the customer, no other changes can be made in the policy conditions.

Policyholders can also oppose any exclusion that did not form part of the policy at inception but was introduced at the time of renewal. Typically at renewal, insurers seek to introduce co-payment clauses, sub-limits for certain diseases or on room rents and doctors’ fees into the contract. Some also exclude ailments if there was a related claim. All such changes that are imposed subsequently or are not in accordance with the original terms and conditions of the policy are illegal. However, insurance companies usually ignore any opposition, and the insured is compelled to assert his/her rights by filing a consumer complaint and obtaining the appropriate orders. If your insurer has adopted such an approach, you can write to the insurance ombudsman or approach the Consumer Court.

Another major cause of concern for most policyholders is the hike in premium following a huge claim. This is a tactic followed by various insurance companies to discourage policy renewal. Known as claim loading, this practice is widespread though several voices have termed it unfair. However, you may not be able to appeal the hike if these terms and conditions are listed in your original contract. Of course, expenses do go up due to medical inflation, advancing age or resetting of the premium for an entire group/portfolio by the insurer. In case of most insurers’, the premium slabs are prescribed for different age groups, increasing progressively, say Rs 4000 for the age band of 30-35 years, Rs 7000 for the 36-40 category, etc. So, in this case, when a 35 year-old policyholder turns 36, his/her premium will jump by Rs 3000 and this cannot be termed as loading. Therefore, the key is to determine the cause of premium revision, which again, the insurer is duty-bound to divulge at the time of renewal.

Pouring over the fine print of health insurance plans while renewing one’s policy is no one’s idea of fun. However, it is in your own interest to spend some quality time researching the same before you renew, rather than suffering a nasty financial headache later. The quality of the health plan that you choose often depends on your needs and on how much financial risk you can bear. One size doesn’t fit all. Whether you are choosing from group health plans offered by your employer or shopping for individual health insurance coverage, you need to assess your needs first.