Delhi HC tells Irdai to clean up definitions of ‘exclusions’ in health insurance
Health insurance has moved one step closer to drafting more transparent contracts with clear definitions and scope of exclusions and this is a significant leap. According to the Delhi high court judgement the Insurance Regulatory and Development Authority of India (Irdai) needs to re-look at the exclusionary clauses in insurance contracts and ensure that insurers don’t reject claims on the basis of exclusions relating to genetic disorder.
The judgement was passed in favour of an insured whose claim was rejected on grounds that it was due to a genetic disorder and was not payable by the insurer. The insurance company in this case was United India Insurance Co. Ltd. You can read the entire order here
Insurers in health insurance policies typically have a ‘hereditary diseases’ exclusion where ailments acquired due to genetics are also excluded. So what this means is if a person with say a genetic disorder like Thalassemia tries to buy health insurance, the insurer can reject giving health insurance to the person on grounds of exclusion on genetic disorder, but what happens when a perfectly healthy person buys health insurance and many years later contracts cancer which can be seen as a genetic disorder. Can the insurer reject the claim then? This is where the judgement is very important as it recognises that insurers have a very broad based definition of genetic disorder which would lead enormous discretion at the hand of the insurer to reject the claim.
“The judgement is being studied but prima facie it’s significant if it prevents insurers from using the genetic disorder clause to refute claims in the future after the policyholder was insured and the policyholder had no prior knowledge of the genetic disorder,” Sanjay Datta, chief underwriting and claims, ICICI Lombard General Insurance Co. Ltd. The judgement enforces the much needed transparency that insurance contracts lack. The judgement correctly notes that manner in which these exclusions are worded are so broad that it would be easy to reject any medical claim under one of the clauses under this long list of exclusions.
For consumers, the judgement should bring cheer as it asks the regulator to ensure there is no ambiguity in the way exclusions are drafted and this is very important because the market practice still pushes health insurance as ‘no-medical’ and ‘quick issuance’ as the main attractions. The problem arises at the time of claim when the insurer underwrites the policy and the policyholder feels short changed precisely because of the long list of exclusions that insures the insurer from the insured. The judgement will bring more underwriting discipline among insurers and that’s good.
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