Health insurance claim rejection: Insurers may turn more cautious

Onus may now shift to them to justify rejection after Irdai's circular

The Insurance Regulatory and Development Authority of India (Irdai), through a circular dated March 19, 2021, has urged insurers not to repudiate health insurance claims based on ‘presumptions and conjecture’. It has also stated that any communication regarding claim repudiation must be sent by the insurer, and the message should cite the specific policy condition under which the claim is being denied.

Don’t reject based on assumptions

While evaluating claims, insurers do make inferences based on the evidence available to them, as these examples demonstrate.

Suppose a person is hospitalised for 24 hours. He is not offered any form of treatment but is only kept under observation. The insurer could deny the patient’s claim, saying hospitalisation was not necessary.  

Here is another example. Suppose a person suffering from high blood pressure (BP) is issued a policy wherein high BP and all conditions arising from it are excluded from coverage for four years. After two years, the patient suffers a heart attack. It may be difficult to ascertain whether the heart attack occurred due to high BP or some other reason.

According to Amit Chhabra, head-health business, PolicyBazaar, “The human body is complex and it is not possible to state why a particular disease occurred. So, assumptions are made.”

Insurers say it is a tightrope walk for them, too.

Says S Prakash, managing director, Star Health and Allied Insurance: “Insurers have a responsibility to keep out fraudulent claims. If they fail to do so, premiums will rise and genuine customers will suffer.”

Justification of rejection

After this circular, insurers may become more careful in their evaluations.

“We expect insurers to turn more cautious since they know the regulator is watching closely,” says Kapil Mehta, co-founder and managing director, SecureNow Insurance Broker.

At present, when a claim is rejected, it becomes the customer’s responsibility to produce evidence demonstrating the claim is genuine. Mehta says after this circular, the onus may shift to insurers to justify their rejection.

Some sources say the underlying message from the regulator is that if insurers err, they should do so more on the side of paying out claims rather than rejecting them.

Cite specific clause

At present, letters from insurers informing customers about a rejection vary in specificity. Some are specific, others vague.

In the case of the latter, the first letter may just say the claim is being rejected for non-compliance with policy terms and conditions. The customer is left wondering which policy condition he failed to comply with. It is only when customers, or their intermediaries, follow up that the insurer sends a second letter citing the specific clause responsible for rejection.

“In future, expect insurers to state in their very first letter the specific clause under which they are rejecting the claim,” says Mehta.

Understand policy features

While purchasing the policy, declare all pre-existing conditions — past surgeries, high BP, medicines being taken, etc — as failure to declare is a common ground for rejection.

Many customers do not understand their policies well — the exclusions, sub-limits, co-payment clause, etc. They must take great pains to do so, either at the time of policy purchase, or before getting admitted into a hospital, by calling up the insurer’s call centre, to avoid disappointment.

Ensure that in his notes, the doctor states the exact period for which you have had a condition. “If he does not, the insurer could claim you didn’t declare the condition at the time of purchase,” says Mehta.  

Finally, make sure the discharge summary clearly states why hospitalisation was necessary.