‘Material change’ clause won’t alter health insurance coverage, says ICICI Lombard

ICICI Lombard General Insurance has said that the ‘material change’ clause in its two popular plans will not change the terms of coverage or the premium amount if the insured develops a new disease after the issuance of policy.

The clarification follows concerns raised in social media platforms that ICICI’s ‘Elevate’ and ‘Health AdvantEdge’ policies and several other health insurance plans could reject claims citing this clause if the insured is diagnosed with a new disease within months of the issuance of the new policy.

“Due to the material change clause, a policyholder’s premium or coverage will NOT be altered if they develop a new disease or condition after policy issuance,” ICICI Lombard said in its update to policyholders. “Some unscrupulous entities and individuals have been referencing it with inaccurate interpretation. We therefore wanted to provide you with complete clarity on this matter,” it said.

No change in renewal process or medical tests

“No fresh underwriting or medical tests are required at renewal unless there is an increase in the sum insured, addition of new members (and) addition of optional covers,” the insurer said. “At ICICI Lombard, no claim has ever been rejected due to the material change clause,” it claimed.

“Some of these posts have led to misinterpretation and it’s important that our valued partners like you and customers have complete clarity on this matter,” the insurer said. The policy wordings of several top health insurers now includes a material change clause that suggested a modification in terms or pricing if a new illness develops after buying the insurance.

Regulatory stance and industry context

“The insured person shall notify the company in writing of any material change in the risk in relation to the declaration made in the proposal form or medical examination report at each renewal and the company may, adjust the scope of cover and/or premium, if necessary, accordingly,” the policy wordings in several popular plans of leading insurers said.

This raised concerns as it went against the concept of buying health insurance early to cover unknown risks and ailments. Health insurers typically do not cover pre-existing diseases (PED) for up to 36 months from the date of purchase of the policy. But they cannot deny coverage for ailments that are not present/detected at the time of buying the policy.

The Insurance Regulatory Development Authority of India (IRDAI) has mandated lifelong renewal of health insurance policies, except in cases of fraud or misrepresentation by the insured. IRDAI’s regulations do not allow insurers to increase premiums or alter terms based on the insured’s ‘material change’ in health during renewal. Insurers also cannot do fresh underwriting at the time of renewal, except when the policyholder opts for an increase in the sum insured.

New ‘Day 1 coverage’ plans gain traction

Incidentally, several insurers have now come up with plans that offer coverage for PED from ‘Day 1’ for common ailments such as diabetes, asthma and hypertension. They charge significantly higher premiums for such plans. While ‘Day 1 coverage’ has brought relief, especially for senior citizens, there have been complaints about the ‘material change’ clause in several health insurance policies.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.