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It's a common practice by insurance companies to change policy conditions at the time of policy renewal. Such changes, surreptitiously made without the knowledge or consent of the insured, are illegal and unjustified. The insured would have the right to insist that the claim be settled according to the terms and conditions in the original contract of the insurance when the policy was first taken.
Veermani Aiyar was covered under a mediclaim policy issued by New India Assurance. The policy was taken several years ago, and was renewed without any break. The sum insured was Rs 5 lakh, with a bonus of Rs 2 lakh, totalling Rs 7 lakh.
During the tenure of the policy for 2009-2010, Aiyar had to undergo cataract surgeries in both eyes. The total cost came to Rs 90,638. He lodged a claim with Health India, the third-party administrator (TPA) appointed by the insurance company to process the claim. Though the sum insured was sufficient to cover the amount claimed, the TPA sanctioned only Rs 48,000, calculated at an ad-hoc amount of Rs 24,000 per eye.
The claim payment advice mischievously stated that acceptance of the cheque of Rs 48,000 would automatically imply that the amount has been received in full and final settlement. So, Aiyar refused to sign the discharge voucher, and instead sent a letter protesting against the shortfall in payment. He deposited the cheque without prejudice to the right to recover the balance amount of Rs 42,638. The TPA replied that the claim had been correctly sanctioned in accordance with an internal circular issued by the insurance company pegging the limit for cataract surgeries at Rs 24,000 per eye. Aiyar wrote back that an internal circular would not be binding and could not be used to his disadvantage. He demanded the claim be processed and settled according to the policy conditions. As there was no response, Aiyar filed a complaint before the South Mumbai Consumer Forum.
The insurance company contested the case, arguing Aiyar should not have deposited the cheque if he wished to dispute the claim amount. After encashing the cheque, Aiyar would not be entitled to file a complaint questioning the quantum of the settlement, the insurer said. The Forum overruled these objections, observing that Aiyar had not signed the discharge voucher but had recorded a protest that the cheque was being accepted without prejudice to recover the balance amount. The Forum also indicted the company for an unfair trade practice in settling the claim on the basis of an internal circular that did not form part of the contract of insurance
The Forum observed the policy was taken in 1996 and renewed without any break. It relied on a Supreme Court decision, which had laid down that a renewal of an insurance policy means repetition of the original policy. When renewed, the policy is extended on identical terms from its expiration date. So, the Forum concluded the policy terms and condition cannot be unilaterally varied by the insurance company at the time of renewal. It held that any changes in the renewed policy without the consent of the insured cannot be enforced. The Forum concluded the claim would have to be settled in accordance with the policy conditions prevailing in the original contract of insurance issued in 1996.
As a last-ditch effort, the insurance company alleged Aiyar had not submitted all the documents pertaining to the claim. The Forum refused to believe this, as the claims form showed that all the documents had been submitted while lodging the claim, and, thereafter, the claim had been processed.
Accordingly, by its order dated December 31, 2015, delivered by member S G Chabukswar for the Bench, along with S M Ratnakar, the Forum held that the complaint was maintainable. It ordered the insurance company to pay the balance claim of Rs 42,638, along with interest at nine per cent per annum from February 17, 2011, till payment. Aiyar was also awarded Rs 3,000 as compensation for mental torture and Rs 2,000 for litigation cost.
When a contract of insurance is renewed, such renewal only extends the policy period. The renewal has to be on identical terms and conditions and cannot be unilaterally changed by the insurance company.
The author is a consumer activist
