For years, policyholders have complained that getting or renewing a medical policy is quite a pain. Insurers have often hiked rates without giving a reason, or denied a policy because there were claims. However, things could improve vastly from this June.
The Insurance Regulatory and Development Authority (Irda) has come out with a set of stringent guidelines that will ensure that customers do not have to go through unnecessary hassles while buying or renewing a policy. These measures would especially help senior citizens who often find themselves without a cover because of unaffordable premiums.
Here are some of the key benefits
Renewal: This is one of the biggest conflict areas between insurers and policyholders. Medical insurance policies are typically one-year policies and need to be renewed.
Policyholders need to ensure that they renew it on time, otherwise the cover could expire. In fact, a lot of them have found themselves in trouble after the insurance company refused to pay because of the expiry. And, many times, insurance companies hike the premiums of the policyholder without any reason, or even refuse to insure the person.
Under the new guidelines, the insurance company will not be able to deny a customer the renewal of a policy, unless there is a fraud or some manipulation. More importantly, there cannot be a denial of a cover just because the person has made a claim earlier. That is, if a person has a cover of Rs 3 lakh and he has made claims worth Rs 1.8 lakh during the year, then he cannot be refused cover due to this.
The only way the insurance company can refuse a cover is if it can prove that the policyholder had misrepresented facts while taking the policy. This implies that there is also an onus on the policyholder to furnish all the facts while buying the policy.
Increase in premium: Another big issue is that the policyholder never knows why his premium has been hiked. Sometimes, the hike is so much that one cannot afford it. These hikes can be extremely harmful, especially for senior citizens because they need the cover at their age.
At present, there are guidelines which cap the hike at 50-75 per cent for senior citizens. But the regulator has now gone ahead and asked insurers to give a reason for the hike as well.
In addition, details have to be disclosed upfront regarding the premium. This will make the process easier to understand for the individual policyholder because s/he will know why a particular step is being taken.
Sometimes, the insurance company forces the policyholder to shift to another policy under the guise of an upgradation or the discontinuation of a particular product. Now even this will not be possible without the permission of the regulator. This will definitely help policyholders because, sometimes, conditions in the new scheme can be unsuitable, or they impose premiums which are too high.
Time period: Another point relates to the time period for the renewal of the policy. Currently, insurance companies are rather strict about this entire issue because, even if there is a delay of a single day in terms of the payment of the premium, the benefits of the policy are no longer present.
There have been various cases where the claims have been rejected because the individual was late by a day or two in paying the premium. And this was considered as a break in the policy.
Now the insurance companies will have to provide a time period of 15 days for premium payments. This means that if the policy expires on, say, May 12, 2009, then there is time till May 27, 2009 for the policyholder to pay the premium.
This continuation of time period will benefit the individual in terms of getting all the claims counted for pre-existing diseases also. At present, if you delay the payment, then the policy is considered to be a fresh one and, accordingly, diseases that occurred, for instance, two years ago, are not covered. And this is in spite of having a medical insurance policy in the previous year.
Now payments made within 15 days will be considered as a continuation of the policy. However, if any claim arises during the 15-day period, the cover will be denied because the premium has not been paid.
All this additional information will definitely help policyholders to make informed decisions. For instance, if the existing cover is, for example, Rs 3 lakh and the insurer wants to hike it to Rs 4 lakh, information has to be given on why such a step is necessary.
On their part, policyholders would know that there could be an eventuality of raising the premium for specific reasons. Also, if there is any change in the policy structure, they will have to be told three months in advance.
All these important steps would make medical insurance much easier to get. Also, it puts the onus on insurers to be transparent instead of hiking the charges or denying renewals on an ad hoc basis.
The writer is a certified financial planner
