One-sided health insurance contracts and genetic disorders
An important point made by the Delhi High Court in the United India Insurance versus Jai Parkash Tayal case is that the insurance contract is one sided
In February, Hon’ble Judge Pratibha Singh of the Delhi High Court, issued a judgement in the United India Insurance versus Jai Parkash Tayal case. The issue at stake was that Tayal’s claim for a heart condition was rejected on the grounds of being a genetic disorder. He had bought his health insurance in 2004 and had been paid claims twice, in 2004 and 2006, for the same heart condition. The third time a claim was made in 2011, the insurer rejected it because an exclusion for genetic conditions had been introduced in the contract in 2010, the 7th policy year.
The High Court ruled that the claim be paid, and the rationale has been elegantly outlined in a 47-page judgement. This is one of the finest orders I have read; it examines the matter from multiple perspectives, including international and domestic laws, constitutional principles, public law, nature of contract, disease aetiology and potential implications.
An important point made in the judgement is that the insurance contract is one sided. This one-sidedness comes about because insurance buyers have no ability to modify the agreement. They can reject the insurance, which is not realistic because other insurers have similar contracts, or just accept in totality.
The judgement argues, correctly, that given this one-sided nature, the contract terms must be fair, reasonable and constitutional. Even if the buyer has explicitly accepted the contract, the terms can be disputed if they are unfair.
The implications of this principle extend to many areas in the insurance purchase process. For example, the government has recently mandated that all insurance policies be linked to the Aadhaar. Claims will not be paid if this linkage is incomplete. This one-sided diktat has created stress because the process will not get done on time. In many cases, customers would not have submitted Aadhaar cards and, in others, the insurers would not have done the linkages properly in their systems. This is an example of a requirement, unilaterally introduced by one party, where the claimant has no choice but to comply.
Another significant point made in the judgement is that of the insurer unilaterally changing exclusions in the policy contract during annual renewals. When a health insurance is bought for the first time, customers study their options carefully. Subsequently, on renewal, the insurance is not reviewed again because the implicit assumption is that the insurance cover will remain unchanged over the years. That’s not the case though, because in the United Insurance versus Tayal case, a new exclusion was introduced 7 years after the initial policy was bought. And it was this new exclusion that resulted in the claim being rejected even though two claims of a similar nature had already been paid before.
I pulled out, at random, the policy wordings of a popular health insurance product in 2014 and compared that to its wordings today. There were seven new permanent exclusion clauses that had been added in the past 3 years. The new exclusions included select laser treatments, high intensity ultrasounds, cyberknife treatments, bio-absorbable stents, Parkinsons and Alzheimers even if aggravated by an accident, genetic disorders, stem cell surgeries, taking part in military exercises, aviation in professional or semi-professional capacities, oral chemotherapy, use of Remicade or Avastin unless in IPD and accidents due to hazardous activities. These hazardous activities included, amongst many others, trekking and martial arts. That puts an end to my children’s Krav Maga classes. Also, newly included was a list of hospitals from where claims would not be allowed. Not all changes were detrimental to policyholders. For example, the exclusion on internal congenital diseases was removed. However, modifying the contract on renewal creates uncertainty about what will be covered in the future. Buyers cannot easily shift to other insurers because of the effort and possible loss of continuity benefits.
The third matter that the judgement highlighted is the need for specificity in exclusions. The issue, they pointed out, in excluding genetic disorders is that these are ambiguous. In the case at hand, four expert witnesses had different interpretations on the degree to which the heart disorder was genetic. To the extent possible, sweeping, subjective exclusions should be removed. An example is the 'War' exclusion common across insurers. In some cases, there are over 12 synonyms used for war which include civil war, detentions, commotions, capture, restraint, arrests, detainment, hostilities and insurrections. Fortunately, resurrection has been left out.
The Delhi High Court judgement brings out some important issues that go beyond insurance. One of these is the right to privacy. If genetic tests are carried out to understand disease aetiology, then claimants are exposed to information leaks. A person with genes suggestive of serious illness could be denied insurance, jobs or marriage. The information does leak out as we have seen in motor insurance where your personal information is widely available.
It took 6 years for this case to be adjudicated. There aren’t any public numbers easily available but I estimate the number of insurance-specific litigations to be over 30,000. This could come down if exclusions are made more specific and remain unchanged on renewal.
It must not have been pleasant for the insurer to be at the receiving end of Justice Singh’s comments. At one point in the judgement, the hon’ble judge berates the insurer for refusing to honour a claim based on a broad understanding, and then adds the words (or misunderstanding) in italics to emphasise the mistake. That must have made Mr. Tayal smile.
Kapil Mehta is co-founder of SecureNow.in
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