Major Changes to Health Insurance Policies from 1st October, 2020

The current COVID-19 pandemic has made the entire world sit up and realise that medical exigencies are unpredictable and can cause a financial upheaval that is tough to handle. In today’s time, the cost of healthcare in the country has risen significantly thanks to the ever-growing demand for medical services.

Having a health insurance or Mediclaim comes handy in times of medical emergencies. Many individuals often have to use funds from their savings in case of a medical emergency, which not only impacts their financial health but also jeopardises personal goals such as education and marriage.

With the rising cost of medical expenses, access to good medical facility and hospitalisation costs can be financially strenuous. Therefore, getting a health insurance cover for yourself and your family can provide the added protection you need in times like these. Apart from the obvious benefit of having the financial confidence to take care of your loved ones, a health insurance plan is extremely useful when it comes to beating medical treatment inflation.

Role of IRDA in insurance

Regulation of insurance in India is carried on by The Insurance Regulatory and Development Authority of India (IRDA). The role of IRDA is to protect the interest of and secure fair treatment to policyholders, to bring about speedy and orderly growth of the insurance industry and to ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery.

To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players, IRDA issues various Circulars, Notifications, Guidelines etc.

IRDA on 11th June, 2020, issued the guidelines on Standardization of general terms and clauses in Health Insurance Policy Contracts. These guidelines will be applicable to all the health insurers who are providing indemnity-based health insurance [excluding Personal Accident (PA) and Domestic / Overseas Travel] products for individuals and groups on or after 1st October, 2020. The main objective of the guidelines is to standardize some of the general clauses that are commonly incorporated in the health insurance policy contracts of indemnity-based health products.

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IRDA has provided the below mentioned Standard General Terms and Clauses:

Situations where policy will be considered void

• The policy shall be void and all premium paid shall be forfeited to the Company in the event of misrepresentation, misdescription or non-disclosure of any material fact by the policyholder.
• “Material facts” shall mean all relevant information sought by the company in the proposal form and other connected documents to enable it to take informed decision in the context of underwriting the risk.

Guidelines for Settlement of a Claim

• A health insurance claim is a request that a health insurance policyholder submits to the Insurance Company in order to obtain the services that are covered in their health insurance policy. 
• The Company shall settle or reject a claim, within 30 days from the date of receipt of last necessary document.
• In the case of delay in the payment of a claim, the Company shall be liable to pay interest to the policyholder from the date of receipt of last necessary document to the date of payment of claim at 2% above the bank rate (rate fixed by the RBI at the beginning of the financial year in which claim has fallen due).
• However, where the circumstances of a claim warrant an investigation in the opinion of the Company, it shall initiate and complete such investigation at the earliest, not later than 30 days from the date of receipt of last necessary document.
• In such cases, the Company shall settle or reject the claim within 45 days from the date of receipt of last necessary document.
• In case of delay beyond 45 days, the Company shall be liable to pay interest to the policyholder at 2% above the bank rate from the date of receipt of last necessary document to the date of payment of claim.

Guidelines on Multiple Policies

• In case of multiple policies taken by an insured person from one or more insurers to indemnify treatment costs, the insured person shall have the right to require a settlement of his/her claim in terms of any of his/her policies.
• In such cases the insurer chosen by the insured person shall be obliged to settle the claim as long as the claim is within the limits of and according to the terms of the chosen policy.
• Insured person having multiple policies shall also have the right to prefer claims under this policy for the amounts disallowed under any other policy / policies even if the sum insured is not exhausted.
• Then the insurer shall independently settle the claim subject to the terms and conditions of this policy.
• If the amount to be claimed exceeds the sum insured under a single policy, the insured person shall have the right to choose insurer from whom he/she wants to claim the balance amount.
• Where an insured person has policies from more than one insurer to cover the same risk on indemnity basis, the insured person shall only be indemnified the treatment costs in accordance with the terms and conditions of the chosen policy.

Guidelines on Fraud in a Health Insurance Policy

• If any claim made by the insured person, is fraudulent, or if any false statement, or declaration is made or used in support thereof, or if any fraudulent means or devices are used by the insured person or anyone acting on his/her behalf to obtain any benefit under this policy, all benefits under this policy and the premium paid shall be forfeited.
• Any amount already paid against claims made under this policy but which are found fraudulent later shall be repaid by all recipient(s)/policyholder(s), who has made that particular claim, who shall be jointly and severally liable for such repayment to the insurer.
• “Fraud” means any of the following acts committed by the insured person or by his agent or the hospital/doctor/any other party acting on behalf of the insured person, with intent to deceive the insurer or to induce the insurer to issue an insurance policy:
• the suggestion, as a fact of that which is not true and which the insured person does not believe to be true
• the active concealment of a fact by the insured person having knowledge of the fact
• any other act fitted to deceive and
• any such act or omission as the law specially declares to be fraudulent
• The Company shall not repudiate the claim and / or forfeit the policy benefits on the ground of Fraud, if the insured person / beneficiary can prove that the misstatement was true to the best of his knowledge and there was no deliberate intention to suppress the fact or that such misstatement of or suppression of material fact are within the knowledge of the insurer.

Guidelines on Cancellation of Policy

• The policyholder may cancel the policy by giving 15 days written notice and in such an event, the Company shall refund premium for the unexpired policy period.
• No refunds of premium shall be made in respect of Cancellation where, any claim has been admitted or has been lodged or any benefit has been availed by the insured person under the policy.
• The Company may cancel the policy at any time on grounds of misrepresentation non-disclosure of material facts, fraud by the insured person by giving 15 days written notice.
• There would be no refund of premium on cancellation on grounds of misrepresentation, non-disclosure of material facts or fraud.

Guidelines on migrating the policy by the policyholder to other products

• The insured person will have the option to migrate the policy to other health insurance products/plans offered by the company by applying for migration of the policy at least 30 days before the policy renewal date.
• If such person is presently covered and has been continuously covered without any lapses under any health insurance product/plan offered by the company, the insured person will get the accrued continuity benefits in waiting periods.

Guidelines on porting the policy by the policyholder to other insurers

• The insured person will have the option to port (transfer) the policy to other insurers by applying to such insurer to port the entire policy along with all the members of the family, if any, at least 45 days before, but not earlier than 60 days from the policy renewal date.
• If such person is presently covered and has been continuously covered without any lapses under any health insurance policy with an Indian General/Health insurer, the proposed insured person will get the accrued continuity benefits in waiting periods.

Guidelines of Renewal of Policy

• The policy shall ordinarily be renewable except on grounds of fraud, misrepresentation by the insured person.
• The Company shall attempt to give notice for renewal. However, the Company is not under obligation to give any notice for renewal.
• Renewal shall not be denied on the ground that the insured person had made a claim or claims in the preceding policy years.
• Request for renewal along with requisite premium shall be received by the Company before the end of the policy period.
• At the end of the policy period, the policy shall terminate and can be renewed within the Grace Period specified by the insurer as per product design to maintain continuity of benefits without break in policy.
• Coverage is not available during the grace period.
• No loading shall apply on renewals based on individual claims experience.

Guidelines of Withdrawal of Policy

• In the likelihood of this product being withdrawn in future, the Company will intimate the insured person about the same 90 days prior to expiry of the policy.
• Insured Person will have the option to migrate to similar health insurance product available with the Company at the time of renewal with all the accrued continuity benefits such as cumulative bonus, waiver of waiting period as per IRDAI guidelines, provided the policy has been maintained without a break.

Guidelines on Moratorium Period

• After completion of 8 continuous years under the policy no look back is to be applied. This period of 8 years is called as moratorium period.
• The moratorium would be applicable for the sums insured of the first policy and subsequently completion of 8 continuous years would be applicable from date of enhancement of sums insured only on the enhanced limits.
• After the expiry of Moratorium Period no health insurance claim shall be contestable except for proven fraud and permanent exclusions specified in the policy contract.
• The policies would however be subject to all limits, sub limits, co-payments, deductibles as per the policy contract.

Guidelines on Payment of Premium in Instalments

If the insured person has opted for Payment of Premium on an instalment basis i.e. Half Yearly, Quarterly or Monthly, as mentioned in the policy Schedule/Certificate of Insurance, the following Conditions shall apply

• Grace Period (specified by Insurer as per product design) would be given to pay the instalment premium due for the policy.
• During such grace period, coverage will not be available from the due date of instalment premium till the date of receipt of premium by Company.
• The insured person will get the accrued continuity benefit in respect of the “Waiting Periods”, “Specific Waiting Periods” in the event of payment of premium within the stipulated grace Period.
• No interest will be charged If the instalment premium is not paid on due date.
• In case of instalment premium due not received within the grace period, the policy will get cancelled.
• In the event of a claim, all subsequent premium instalments shall immediately become due and payable.
• The company has the right to recover and deduct all the pending installments from the claim amount due under the policy.

Guidelines on Freelook Period

• By law, insurers are required to give you a window, or what’s also called the ‘free-look period’, to review your policy and if you are dissatisfied, return it and get your money back.
• The Free Look Period shall be applicable on new individual health insurance policies and not on renewals or at the time of porting/migrating the policy.
• The insured person shall be allowed free look period of 15 days from date of receipt of the policy document to review the terms and conditions of the policy, and to return the same if not acceptable.
• If the insured has not made any claim during the Free Look Period, the insured shall be entitled to:
• a refund of the premium paid less any expenses incurred by the Company on medical examination of the insured person and the stamp duty charges or
• where the risk has already commenced and the option of return of the policy is exercised by the insured person, a deduction towards the proportionate risk premium for period of cover or
• Where only a part of the insurance coverage has commenced, such proportionate premium commensurate with the insurance coverage during such period

Revised definition of Pre-Existing Disease

In Master Circular on Standardization of Health Insurance Products – Corrigendum, Reference was drawn to the Master Circular on Standardization of Health Insurance Products issued vide ref no. IRDAI/HLT/REG/CIR/193/07/2020 dated 22.07.2020.

The definition of “Pre-Existing Disease” at Clause 33 of Chapter I under Section 1 of this Master Circular was rectified. Pre-existing Disease means any condition, ailment, injury or disease:

• That is/are diagnosed by a physician within 48 months prior to the effective date of the policy issued by the insurer or its reinstatement or
• For which medical advice or treatment was recommended by, or received from, a physician within 48 months prior to the effective date of the policy issued by the insurer or its reinstatement.

All existing health insurance products that are not in compliance with this definition shall not be offered and promoted from 1^st October, 2020 onwards

The Company, with prior approval of IRDAI, may revise or modify the terms of the policy including the premium rates. The insured person shall be notified 3 months before the changes are affected. Also, any payment to the policyholder, insured person or his/ her nominees or his/ her legal representative or assignee or to the Hospital, as the case may be, for any benefit under the policy shall be a valid discharge towards payment of claim by the Company to the extent of that amount for the particular claim.

These changes kicked in the health insurance sector from 1st October, 2020 to help consumers in buying insurance, in a way making it easier to understand the terms and conditions. With the increase in the number of health insurance products in the market, it was desired that the industry adopts a uniform approach while incorporating exclusions in the health insurance products and this is why these guidelines were incorporated.

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