No medical test sought? Claims may be rejected

Insurers keep a simple questionnaire to attract more buyers and, later, reject claims based on disclosures

Kapil Mehta, managing director of SecureNow Insurance Brokers, does not favour online term products that don’t require medical tests. This increases the possibility of repudiation, he says. Typically, online term plans don’t require medical check-ups up to a particular sum assured, typically Rs 45-50 lakh and up to 40-45 years of age. For higher sums assured, insurers issue policies after medical declarations.

For online plans, the drop-out rate for policy buyers increases if there are too many questions. Therefore, insurers ask generic questions such as whether one has consulted a doctor in the past five years. Mehta says if these questions are made specific — such as why did you consult a doctor in the past five years — an insurer can ascertain if a policyholder requires a medical policy. Most individual buyers are likely to say this simplifies policy-buying. “In most such cases, underwriting actually happens at the claims stage; the insurer discovers disclosure problems and rejects claims,” Mehta says.

An expert says a leading private insurer re-launched its online term plan after simplifying the questions, after seeing a high drop-out rate.

Insurers agree the claims rejection rate for policies without medical tests is high. “In many cases, such policies are bought after an individual has been diagnosed with a disease,” says Rajeev Kumar, chief and appointed actuary at Bharti AXA Life Insurance. Insurers have the right to completely reject such claims. But if they feel on knowing the disclosure, they would have charged a higher premium, they deduct the premium accordingly and pay the insured’s kin. Insurers say claims for life policies are only rejected if they take place during the first two policy years.

Kumar says, “At the time of applying, customers should declare their medical conditions and any additional insurance coverage they own at that time. This makes it easy for insurers to evaluate the claim, which will lead to higher claim acceptance. Mostly, insurers reject claims if they feel if a particular fact was known, they would not have issued the policy.”

To avoid medical tests, some might try to buy two sub-Rs 50 lakh policies. But if both policies are from the same insurer, this might not be allowed. Or, it might lead to rejection at the time of claims. Claim rejection due to non-disclosures is higher in case of offline policies, as medical tests aren’t stressed on when intermediaries (corporate agents) are involved. Mehta, therefore, advises avoiding “immediate issue policies”. One can undergo a medical test and provide the documents even if the insurer does not ask for it.

Deepak Yohannan of MyInsuranceClub.com, however, says, “If insurers haven’t asked certain questions, it means they are willing to take that risk. And, medical tests are very basic.”