To remove this ambiguity and to set the balance right, the Insurance Regulatory and Development Authority of India (Irdai) has changed the definition of pre-existing diseases twice—through notifications issued in September 2019, and on 10 February.
Until the first change, they were defined as ailments for which the insured person had “signs" or “symptoms" and had sought medical advice or treatment 48 months before the policy was issued. “As the definition was broad, there were cases where insurers inferred it differently, leading to disputes," said Nikhil Apte, chief product officer, Royal Sundaram General Insurance Co. Ltd. The subsequent changes have narrowed the definition, giving more clarity. We take you through the changes in the definition of pre-existing diseases.
The problem earlier
The broader definition led to disputes in certain cases.
Take the case of an insured person who had a liver-related disease a few months before taking the policy but did not know about it. According to Apte, fatigue is the most common symptom for a liver disease. The patient may have sought treatment for fatigue before taking the policy and the doctor may not have related the symptom to a liver-related problem. However, after taking the policy, the liver-related disorder was finally diagnosed because his condition worsened. Claims for such treatment, typically, led to disputes. An insurer could say that the patients had the signs and symptoms of the disease, and medical treatment was also sought for it, though in reality, the doctor never diagnosed the illness then. Consequently, it could lead to rejection of the claim.
Similar treatment was meted out in cases where the insured person was not aware of an ailment he had.
Experts said this broader definition gave insurers a lot of leeway. “If an insurance company could prove that the policyholder had ‘signs’ and ‘symptoms’ of an illness before taking the policy, it would be considered as pre-existing disease," said Mahavir Chopra, director, health, life and travel insurance, Coverfox.com, an online insurance marketplace.
In fact, insurers were within their rights to exercise this up to four years from issuing a policy, and pre-existing diseases were covered only after this period.
A lot of these problems also surfaced in policies that are sold without any medical tests as they are also subject to stricter scrutiny. According to experts, more than half of health insurance policies are sold without medical tests, especially those sold through the banking channel.
The first modification
Irdai first redefined pre-existing diseases in September 2019, as part of a standardization exercise for the health insurance industry. It gave insurers time until 1 October 2020 to implement the changes.
The regulator brought in two separate clauses to define a pre-existing disease. One, where the patient was diagnosed with an ailment for which medical advice or treatment was recommended 48 months prior to policy issuance. Two, where the patient had signs or symptoms of a disease within three months of taking the policy, and was diagnosed later.
The second clause was inserted primarily for diseases related to the heart, hypertension and diabetes, where there could be signs and symptoms but the patient was not aware or delayed medical consultation. “This was inserted as the regulator wanted to put some onus on the policyholders to disclose all information correctly and clearly, failing which, there could be consequences," said Apte.
However, some experts said that the second clause retained the original ambiguity. Insurers could have contended that there were signs and symptoms that the policyholder had not disclosed. For example, a common symptom of diabetes is increased thirst,but that may happen even to those who do not have diabetes.
The latest changes
The regulator has now deleted the second clause. Now, a pre-existing disease is any condition “that is/are diagnosed by a physician within 48 months prior to the effective date of the policy issued by the insurer or its reinstatement, or for which medical advice or treatment was recommended by, or received from, a physician within 48 months prior to the effective date of the policy issued by the insurer or its reinstatement."
“The change takes away problems that policyholders could have faced due to existing regulations. If an illness falls under the definition of pre-existing disease, the insurer could reject the claim, hike premium, or even terminate the policy," said Amit Chhabra, head, health insurance, Policybazaar.com, an online insurance marketplace.
The regulator has also relaxed the norms for treatment at hospitals that insurance companies have blacklisted.
Earlier, insurers rejected claims made at a hospital they had blacklisted, unless a person was admitted after an accident that was life- threatening. Now policyholders can get treatment not just after accidents but in any life threatening situation at such hospitals. “Insurers will admit such claims only until the stage when a patient’s condition stabilizes. Expenses after that will not be reimbursed," said Chopra. In most cases, stabilization would mean when an insured is moved out of, say, the intensive care unit (ICU) to a regular room. Chopra added that whether the situation was life- threatening or not would depend on the doctor’s diagnosis.
Irdai has tried and plugged most loopholes that left room for ambiguities in how pre-existing diseases are defined. However, as a policyholder, you need to be careful as well. Ensure that you fill out the correct details to the best of your knowledge and don’t rely on the agent completely. Do not hide pre-existing diseases even if the agent tells you to. Non-disclosure can easily lead to termination of a policy.
“Insurers construct the forms in such a way that they ask for all the relevant details from the patient. For example, we even ask the patients whether they’ve consulted a doctor for any disease in the past 12 months. If they say yes, we ask for details. Depending on the information, we ask patients to undergo medical tests for further investigations," said Apte.
Also, remember that most health insurance policies come with a cooling period of one month. During this time, only accident-related claims are accepted.