Diseases contracted after health policy purchase should be covered, suggests Irdai panel

Chronic diseases like Alzheimer's, Parkinson's, AIDs/HIV infection and Morbid obesity should be covered under medical cover if a person contracts such ailments after buying a health insurance policy, according to recommendations of a panel set up by Irdai.

The working group has also suggested a list of 17 diseases, including chronic kidney disease, Hepatitis B, Alzheimer's, epilepsy and HIV & AIDS, which could be excluded from health insurance polices.

Insurance Regulatory and Development Authority of India (Irdai) had set up a working group for standardisation of exclusions in health insurance contracts in July this year.

The panel has submitted its report containing host of recommendations to the regulator.

"The Working Group recommends that all health conditions acquired after policy inception, other than those that are not covered under the policy contract (such as Infertility and Maternity) should be covered under the policy and cannot be permanently excluded.

"Thus, exclusion of diseases contracted after taking the health insurance policy such as for Alzheimer's disease, Parkinson's disease, AIDs/HIV infection, Morbid obesity, etc, cannot be permitted," said the report placed on the Irdai's website.

It has initially recommended a "list of 17 conditions" for which insurers can incorporate permanent exclusions if they are pre-existing at the time of underwriting.

"It is suggested a standard format of consent letter to be given by the proposer may be specified," the report said.

The panel also noted that non-declaration/ misrepresentation of material facts is a major concern in health insurance contracts.

There may be cases where major ailments are detected as pre-existing during 4th or 5th renewal when a person is admitted for some other ailment.

"As a practice insurer may generally invoke the cancellation clause for non-disclosure/ misrepresentation," said the panel.

In such cases, if the non-disclosed condition is from the list of the permanent exclusions, the insurer can take a consent from the insured person and permanently exclude the condition and continue with the policy.

If the non-disclosed condition is other than from the list of permanent exclusions, then the insurer can incorporate additional waiting period for the maximum period of 4 years from the date of detection.

During the waiting period, claims are not admissible.

The group further recommended a moratorium period of 8 years of continuous renewals, after which the claim shall not be questioned based on non-disclosures or misrepresentations at the time of taking the policy.

"This would mean the policy would be incontestable in terms of application of any exclusions except for proven fraud as well as permanent exclusions specified in a policy contract," the report said.

Another recommendation is that the exclusions applied by insurers for alcohol and substance abuse must be reviewed and standardised.

"This exclusion shall be modified to exclude only treatments for alcoholism and drug or substance abuse unless associated with mental illness," it has suggested.

As per the report, the working group felt that with advancement in technologies as well as covers, the policies are moving from hospitalisation insurance policies to comprehensive coverage, including outpatient.

Hence, to enhance transparency and increase the understanding to the policyholders, it is suggested that insurers start adopting an explanation of benefits (EOB) in their collaterals as well as policy schedule / wordings which would be easily understandable by the customers.

There are about 27 General Insurance Companies, 24 Life Insurance companies and seven Standalone Health Insurance companies in India. Health insurance is mainly transacted by the General Insurance and the Health Insurance companies while Life Insurers transact long term benefit policies.

Out of the total health insurance business in India, around 58 per cent is controlled by the public-sector companies, 21 per cent by the private general insurance firms and the rest by the standalone health insurance companies.