Avoid partial payout: Buy health insurance cover with fewer sub-limits

At a recent Confederation of Indian Industry (CII) summit, Satyajit Tripathi, member (distribution), Insurance Regulatory and Development Authority of India (Irdai), highlighted that grievances in general insurance, especially health insurance, mainly revolve around claim payments. In many cases, he said the claim amount paid is significantly lower than expected, or claims are outrightly rejected.

Key reasons for reduced payouts

Policies have several exclusions and limitations. “If the policyholder does not take these into account at the time of purchase, it can result in a lesser claim settlement amount and an unpleasant claims experience,” says Parthanil Ghosh, director and chief business officer (CBO), HDFC ERGO General Insurance.

Many issues arise due to how health insurance is sold and bought. “Customers frequently sign without reading the terms and conditions, resulting in a poor understanding of coverage, and eventually leading to partial payouts,” says Amit Chhabra, chief business officer, general insurance, Policybazaar.

Sub-limits and caps: Some policies impose sub-limits on room rent, surgeries, and treatments. Older policies, for instance, offered room rent coverage for a fixed amount or up to 1 per cent of the sum insured. “If a policyholder opts for a higher-cost room than allowed, the insurer may make a lower claim payout,” says Ghosh.

Staying in a higher-category room can lead to a proportionately lower payout on the entire bill.

Copayment and deductible: Many policies, especially for senior citizens, include copayments. “If the copayment is 20 per cent, the insurer will pay 80 per cent of the bill, and the insured must cover 20 per cent out of his pocket,” says Chhabra.

For policies with a deductible, such as Rs 1 lakh, the insured must pay bills up to this amount. The insurer covers only bills above that threshold.

Exclusions: Certain conditions or treatments, such as cosmetic procedures, are not covered by policies. “A claim for these exclusions will not be paid,” says Ghosh.

Consumables: Items like PPE (personal protection equipment) kits, gloves, and masks used during treatment are often excluded. Consumables can account for 7-10 per cent of the total bill. “Traditionally, many policies did not cover consumables,” says Chhabra.

Non-customary expenses: Insurers may classify some expenses as unreasonable or non-customary and refuse to cover them.

“Non-medical expenses, such as extra meals for visitors or cosmetic items, are also not covered. The insurer will not cover these costs,” says Kapil Mehta, co-founder, SecureNow Insurance Broker.

How to avoid this issue?

When buying a policy, it is essential to read and understand the document carefully. “Understand the policy’s inclusions and exclusions,” says Ghosh.

Chhabra, too, suggests making informed choices. “If you can afford it, opt for policies without copayments or deductibles,” he says.

Ghosh also recommends buying comprehensive health coverage to reduce out-of-pocket costs.

Many insurers now offer the consumables rider, which Mehta advises purchasing. “It’s also wise to get treated at the insurer’s network hospitals. Deductions tend to be lower as the insurer trusts them,” he adds.

Finally, if you feel unfairly treated, you can complain to the insurance ombudsman or switch to another provider. 

What causes claim rejection?

· Fraudulent claims, say, for an injury that didn’t arise or was caused intentionally

· Claim made within the waiting period for pre-existing disease (PED); or for slow-growing conditions like arthritis, cataract, etc. that have a specified waiting period

· Claim registered or supporting documents submitted after the deadline

· Accident under the influence of alcohol or drugs; damage caused by policyholder’s negligence

· Claim for something beyond coverage, such as dental treatment (in a policy that doesn’t cover it)

What can you do?

· Declare PEDs honestly

· Buy a policy with shorter waiting periods for PEDs

· Go with an insurer having a higher claims settlement ratio

· Avoid blacklisted hospitals