Irda tells insurers to honour the spirit of the contract, reject claims only on 'valid grounds'
PREETI KULKARNI
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.
It advises companies not to repudiate claims unless they are convinced that they wouldn’t have been admissible even if reported within the specified time frame. In addition, now, insurers may have to incorporate a clause in the policy document stating that the delay could be accommodated if it is proved to be “for reasons beyond the control of the insured”. “Irda is reinforcing the philosophy that the contract has to be honoured in spirit. Even now, many companies refrain from rejecting claims on technical grounds. Even the ones that do so have to face litigation and usually the courts rule in favour of the claimant. Such cases can be prevented now that insurers have been asked to incorporate the clause,” says Gaurav Garg, CEO, Tata-AIG General Insurance.
This comes close on the heels of the Bombay HC’s directive to the Irda to outline norms for claim settlement. The Irda, responding to the directive, had said it would formulate the guidelines soon. The latest circular, however, is more in the nature of an advisory note rather than diktats insisting on compliance by insurers. Still, insurance companies may not find it very easy to reject claims on such technical grounds anymore.
Gai feels the circular may not improve the current situation much, but, at the same time, could be of help. “The clarification that in case of delay in filing the claim, it should not be rejected outright but an explanation should be sought to consider the reason for the delay, and the delay should be condoned if a valid reason is given, is welcomed. This will assist other courts to rule in favour of the consumer.” So, the next time your insurer seems reluctant to entertain a delayed claim, you can fall back on this new norm for succour. But, what would constitute such ‘unavoidable’ circumstances? “For example, family members of the insured may be unaware of the policy’s existence or the insured may have travelled immediately after making the claim. Similarly, the claim could have been made out of a remote location or due to a period of mourning after death of the insured, the family may have been unable to submit the documents on time,” says Damien Marmion, CEO, Max Bupa.
WHAT POLICYHOLDERS SHOULD DO
While you may now have recourse if your submission or intimation is delayed due to unavoidable circumstances, it is best to follow the procedure mentioned in your policy docket to ensure a hassle-free claim process.
LIFE INSURANCE:
“Usually, life insurance claims are rejected only if there is blatant fraud or suppression of material facts. It could be an illness so serious that it has the capacity to affect the insured’s longevity and had the company been aware, life cover may not have been extended,” says Kamalji Sahay, CEO, Star-Union Dai-ichi Life Insurance. With life insurance, the time frame for making a claim is longer than with health insurance, but the emotional strings attached to it complicate matters, at times. “There could be a delay in making the claim as the nominee may not be aware of the existence of a life insurance policy. He/she may realise much later, after three-four years have elapsed. Now, the Supreme Court has ruled that a claim becomes time-barred three years after the insured’s death. So, insurance companies can, technically, repudiate such claims. However, circumstances need to be taken into account. In India, typically, policyholders hesitate to discuss such issues openly and, hence, family members may remain unaware of such policies for a long time. These issues are factored in while processing death benefit claims and are usually paid out,” says Sahay.
Ideally, however, you should keep your family members informed about the purchase of such covers and also where they are kept – be it in the house or bank lockers. If the insurance company asks for documents like police or hospital reports, ensure that you submit them on time. “If it is getting delayed, the nominees can always enlist the support of the life insurer,” he says.
HEALTH INSURANCE:
If you are
availing of the cashless facility, it is the hospital’s duty to complete the process and forward the preauthorisation form to the insurer on your behalf. However, simultaneously, you would do well to touch base with your insurer – through the call centre or the TPA (thirdparty administrator) directly. “This will eliminate delay in sanctioning the request due to any delay on the part of the hospital,” says Shreeraj Deshpande, head, health insurance, Future Generali. If it is a planned surgery or hospitalisation, you can submit the pre-authorisation form even before the procedure commences.
In case of reimbursement claims, the deadline for submitting the claim along with bills is 14-30 days, depending on the insurer and the policy. Also, keep an eye on the time frame for intimating the insurer – you can submit the required documents later, but the company could insist on being informed about the hospitalisation within seven days.
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