Insurers have to inform policy holders about change in terms

Insurance firms continue to reject claims in a high-handed and irresponsible manner

Insurance companies usually contend that mediclaim policies only cover allopathic treatment. They also surreptitiously change the policy terms and conditions at the time of renewal. This results in a double blow to the consumer – first, the insured loses his cumulative bonus, and second, the amount claim amount is restricted for certain specified ailments such as hernia, cataract, etc. Is this not legally permissible.

Ayurvedic treatment covered under mediclaim policy:

Mrs Vinaya Patil was admitted in Ashwini Ayurvedic Hospital at Borivali from May 3, 2007 to May 24, 2007, for which she was billed Rs 77,050. In addition, she had spent Rs 3,432 for medicines. She claimed these amounts under her mediclaim policy issued by United India Insurance, but the company rejected it, stating ayurvedic treatment was not covered under the policy.

Patil then filed a complaint before the Mumbai Suburban District Consumer Forum. The insurance company, relying on the opinion of its panel doctor, Dr. Kamat, attempted to change its stand by stating that the claim was repudiated since hospitalisation was not necessary. J L Deshpande, President of the Forum, rejected this contention and refused to go by Dr Kamat’s opinion as the reason for the claim rejection was different in the repudiation letter sent by the company, viz that the claim was rejected because ayurvedic treatment was not covered under the policy. The forum observed that on the contrary, Dr Ravindran, who had attended to the complainant, had opined that Patil had to be hospitalised for administration of treatment and bed rest.

Patil also produced evidence to show similar claims had been paid in the past to others by the insurance company, yet her claim was repudiated. The Forum held this conduct of the insurance company was arbitrary. The Forum also observed that clause 4.13 of the policy excluded only claims in respect of naturopathy treatment. There was no clause which excluded claims for ayurvedic treatment. On the contrary, the policy covered treatments given during hospitalisation, and similar claims had been paid to others by the insurance company.

Accordingly, the Forum directed the insurance company to pay the entire claim amount of Rs 84,491 along with nine per cent interest and Rs 5,000 as costs.

Whether the terms and conditions of a policy can be changed at the time of renewal:

In January 2006, Patil had taken a mediclaim insurance policy for Rs 2 lakh. It was renewed in 2007 on the same terms and conditions, along with a cumulative bonus of five per cent of the sum insured, amounting to Rs 10,000.

The policy was renewed once again in 2008, but this time the insurance company revised the terms and conditions, increased the premium, and discontinued the cumulative bonus However, this fact went unnoticed till Patil fell ill and had to lodge a claim for her treatment.

Patil challenged the change in the terms and conditions and claimed that the policy ought to be renewed on identical terms contracted when the insurance first came into existence. On the other hand, the insurance company claimed it was yearly contract and it had a right to change the policy conditions.

The forum, relying on the judgement of the Supreme Court, in the case of Biman Krishna Bose v/s United India Insurance [(2001) 6 SCC 477], held the terms and conditions of the policy could not be unilaterally changed at the time of renewal and that renewal would have to be on identical terms and conditions as embodied in the original policy when it was first issued.

Insurance companies continue to reject claims in a high-handed and irresponsible manner. It is time the forum holds this to be an unfair trade practice and gives general directions restraining the insurance company from adopting such malpractice. Till then individual consumers will have to keep fighting for asserting their rights.

The author is a consumer activist