Insurers can't escape compensation by apologising

Here is the case of an insurance company which attempts devious tactics to avoid being held liable when an illegal repudiation is challenged in a consumer complaint.

Jimmy Bharucha was insured under a Parivar Mediclaim Policy of National Insurance Company. The policy, for a sum insured of Rs 2 lakh, incepted on February 27, 2007. It was renewed with every year without break.

In the fifth year of the health insurance policy, that is, between February 27, 2011 and February 26, 2012, Bharucha developed certain symptoms (in May-June 2011), later diagnosed as coronary heart disease. In August 2011, he underwent an angioplasty at Hinduja Hospital. The total expenses came to Rs 2.25 lakh.

Since the expenses exceeded the sum insured, Bharucha restricted his claim to the sum insured of Rs 2 lakh. Heritage Health TPA (third party administrator), which processed the claim, rejected it on the ground that the medical history disclosed hypertension and diabetes for the previous 10 years. So it was not payable during the fourth year of the policy. Though Bharucha pointed out that the policy was in its fifth year and the claim was payable, no heed was paid to his representation.

Bharucha filed a consumer complaint before the South Mumbai District Forum, alleging deficiency in service and unfair trade practice. While the TPA did not bother to contest the complaint, the insurance company admitted the claim had been wrongly repudiated. But it added a twist by alleging the claim file had been returned to Bharucha, and so it was unable to process the claim but could not produce any evidence to support this statement.

Later, during arguments, the insurance company added another twist by stating the maximum amount payable was 50 per cent of the sum insured. So, the insurer was willing to settle the claim by paying Rs 1 lakh.

S G Chabukswar, delivering the judgement on behalf of the bench along with Presiding Officer S M Ratnakar rejected this contention. The Forum noted 50 per cent of the sum insured was applicable only to claims arising during the inception year of the policy. Since the claim had arisen in the fifth policy period, the Forum ruled the 50 per cent clause was not applicable. The claim could extend to the entire sum insured.

The Forum accordingly held the claim amount would be payable to the extent of the sum insured, and directed the insurance company to pay Bharucha Rs 2 lakh, along with nine per cent interest from the date of repudiation.

The Forum observed that merely an apology from the insurance company would not absolve it of its liability to compensate the consumer. It awarded Rs 10,000 as compensation for physical and mental harassment. Another Rs 3,000 was awarded towards costs.

It is time the grievance cells of the insurance companies realise they have to play a meaningful role. They should function effectively by looking into consumer grievances, rather than act in a mechanical fashion without application of mind. This would save the insurance company from the liability to pay compensation and avoid harassment to the consumer.

The author is a consumer activist