When Delhi resident Kriti Mehta (name changed) and her husband Girish ported their health insurance policy in 2020, the purpose was to save on premium outgo because the new insurer offered a cheaper policy. Little did they know, however, that the switch would prove to be costlier.
The couple had purchased a family floater policy from a standalone private health insurer in 2018. In 2020, Mehta underwent a hysterectomy.
“Two years later, they ported their policy to another insurance company to avail of cheaper premium rates on offer but did not disclose the procedure she underwent in 2020,” said Shilpa Arora, chief operating officer of Insurance Samadhan, a platform that helps aggrieved insurance policyholders escalate their complaints against insurers.
This year, Mehta developed complications due to the procedure and had to be admitted to hospital again. “The new insurer denied the claim, citing non-disclosure of hysterectomy,” she said.
Also read: Declare all pre-existing diseases or your health insurer will reject claims
This is not uncommon. According to the Mumbai Insurance Ombudsman office, denial of claims on grounds of suppression of pre-existing diseases was the topmost cause of claim rejection.
What is a pre-existing illness and why does it matter?
Any health condition, injury, ailment or disease diagnosed and treated up to 48 months before buying a new insurance policy is called a pre-existing disease.
Such illnesses are usually covered only after a waiting period ranging from one to four years, depending on the product and the insurer. Policy buyers must disclose all ailments or conditions they have ever been diagnosed with.
On the basis of their underwriting – risk assessment – policies, insurers will compute the premium and take a call on whether to issue the policy. Typically, those with diabetes (Type 1 and Type 2), hypertension, heart-related problems or other conditions have to pay a higher premium.
However, illnesses such as H1N1 influenza or appendicitis, which were treated and cured, will not attract additional premium.
Also read: Moneycontrol-SecureNow Health Insurance Ratings: Your guide to zeroing in on the right policy
What happens if information on pre-existing conditions is concealed at the time of buying a policy?
Any illness that has been concealed is very likely to be discovered when a policyholder is hospitalised as the doctors seek a patient’s complete medical history. Insurers can reject such claims and worse, cancel the policy on the grounds that important facts were suppressed at the time of buying the policy.
“The insurer’s response to the discovery of non-disclosure will depend on the product and underwriting guidelines. If the product’s underwriting guidelines are such that it is not to be offered to diabetics and the policyholder conceals diabetes at the time of purchase, then this would constitute material suppression and the claim will not be payable,” said Bhabatosh Mishra, director of underwriting, claims and products at Niva Bupa Health Insurance.
Can the insurer cancel a policy if the illness for one is hospitalised is not related to an undisclosed health condition?
Even if the disease for which one is being treated is not linked to the condition concealed, insurers can still cancel the policy, citing misrepresentation of health status. If the cover is a family floater policy, other family members, too, will have to pay the price because of the error.
Also read: How to use Moneycontrol-SecureNow Health Insurance Ratings
Do old ailments that are known to an existing insurer have to be disclosed to a new insurance company while porting a policy?
Porting refers to the process of a policyholder switching to another insurer while retaining continuity benefits such as waiting period credits. It is best to disclose all ailments, although the new insurer, too, is required to access claim history from the existing insurer.
“One of the biggest problems today is that policyholders do not share all their health information at the time of porting. Though insurers can exchange claim information, all medical records do not flow in,” said Mishra.
Non-disclosure can result in claim denial and policy cancellation. “Claim rejection on these grounds (non-disclosure of pre-existing illnesses) by the insurers that the policyholders port to is a very common issue. Many times, people who are porting are doing so because they are looking for cheaper policies. In order to keep premiums low, they often do not disclose illnesses they might have acquired during the course of the previous policy,” said Kapil Mehta, Co-founder of Securenow.in.
Insurers, intermediaries and policyholders are often in a hurry to get a deal done and less attention is paid to health disclosures.
“The pressure of meeting sales targets to earn commissions means that insurance companies’ agents do not educate policyholders about the importance of declaring existing ailments. Many times, policyholders leave the task of entering all health details to the intermediaries, who simply make a declaration of good health to avoid rejection of the application. A layperson assumes that they have to only share the details of the continuity benefits they are entitled for, not the health history. Insurers see this as concealment,” said consumer rights activist Jehangir Gai.
What about new conditions that develop during the policy term?
These have to be disclosed as well.
How can the Insurance Regulatory and Development Authority of India-mandated eight-year moratorium clause help?
Introduced in 2019, the moratorium clause is meant to provide relief to policyholders worried about claim settlement after years of paying premiums. “The whole idea is that after the moratorium period ends, concealment of pre-existing diseases cannot trigger claim rejection,” said Mishra.
The aim is to ensure that no health insurance policy is contestable after being in force for eight continuous years, except for proven fraud and permanent exclusions. “Fraud is very different from non-disclosure of lifestyle conditions such as cholesterol or mild hypertension. Failure to declare something more serious – such as renal failure, for instance – could be seen as fraud,” said Mehta.
Yet, some companies can interpret non-disclosure of ailments as fraud and reject claims. However, such denials can be escalated to the insurance ombudsman.
“We help consumers approach insurance ombudsman offices with their grievances around claim rejection on the grounds of suppression of material facts (illnesses). Our observation is that in the case of disputes where the eight-year moratorium period is over, or the insured’s disease is treated four years prior to policy purchase, our clients’ cases are stronger and have ended up on the winning side,” said Arora.
Gai recommends approaching consumer courts directly instead of insurance ombudsman offices.
If a policyholder missed declaring a health condition before buying a policy can she do so at the time of renewal?
If an illness has been concealed before buying a policy and there are concerns over claim rejection due to non-disclosure, one can look to make the disclosure as soon as possible, even after the policy is issued. There are chances, though, that the policy will be cancelled.
“But it is better to come clean and deal with the consequences rather than live with the fear of your claim being rejected in future and policy cancelled,” said Mehta.