HC raps insurance firms over Mediclaim renewal

A division bench of the Gujarat High Court comprising justices R K Abichandani and D A Mehta in a landmark judgment with wider ramification for consumers has directed the insurance companies to renew Mediclaim policies on existing terms and conditions as a matter of course.

The decision of the bench came pursuant to letters patent appeal and special civil application filed by Consumer Education and Research Society (CERS), Ahmedabad, and a number of consumers against the government-owned United India Insurance Co, New India Assurance Co and National Insurance Co.

Of late, the insurance companies have been dealing with Mediclaim policyholders in an unconscionable manner. Two extreme examples cited before the high court will suffice.

In one case a person was having a Mediclaim policy since 1990 and there was no claim in the earlier years. The first claim for a case of kidney failure arose during 2002 and the policyholder required dialysis four times a month.

The insurance company first said that the policy will be renewed only after hiking the premium by 300 per cent. When the insured person paid the premium, he was informed that the policy could be renewed, subject only to the exclusion of five major diseases.

In another case, the policyholder, a consulting physician and neurologist, has been having a Mediclaim policy for himself and his family members since 1990 and there were no claims till recently.

The doctor began to suffer from hypogamaglobulinemia during 1999 which required him to be hospitalised a couple of times a year.

Initially, the insurance company refused to renew the policy. Later they agreed to renew on the condition that the disease septicemia and hypogamaglobulinemia be excluded, premium be raised by 100 per cent and there would be 5 per cent excess charge for each and every claim.

The high court expressed its discomfort at the contention of the insurance companies that they were doing business and not charities as philanthropic organisations.

The court, resenting the said contention, observed that the terms of renewal were binding and "did not need to appeal to any philanthropical instincts of the insurer companies."

It added, "Indeed, for those who are oblivious of their constitutional, legal and contractual duties, philanthropy would be an alien concept."

After considering all the aspects and carefully examining various decisions relied upon by the petitioner and the respondents and also the practice followed in foreign countries, the high court concluded that insured has an option and right to get renewal of the Mediclaim insurance by payment of renewal premium in time, and insurance company is bound to renew the policy without excluding any disease already covered under the existing policy which may have been contracted during the period of the policy in force.

The court also opined that in case the insured seeks to raise the sum insured at the time of renewal, it has to be done on the same conditions, but exclusions can be different so far as the increased sum insured is concerned and renewal of a Mediclaim insurance policy cannot be refused, despite timely payment of renewal premium on the ground that continuance of the cover would become more onerous or burdensome for the insurer due to the insured contracting a covered disease during the period of the existing policy.