How uniform exclusion norms in health policies will reduce claim disputes

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Over the years, the number of players offering health insurance has risen, and so has the variety in their product offerings. The diseases and conditions covered by their policies also vary. Customers find this confusing. The Insurance Regulatory and Development Authority of India (IRDAI) hence formed a multi-disciplinary working committee to study exclusions in health policies. This committee has now submitted its recommendations. These, if implemented, will make the coverage offered by health policies more uniform and make it easier for customers to understand which conditions they are covered for. It will also make it difficult for insurers to reject claims unless they have concrete reasons for doing so.

Exclusions tightly defined: Earlier, there was no single list of permanent exclusions and each insurer followed its own list. The working committee has provided a list of 17 permanent exclusions. It has also defined each of them in detailed and specific terms. “In future insurers will not have the flexibility to either enhance the list of exclusions or define them differently from what has been prescribed by the working committee,” says Arvind Laddha, deputy chief executive officer, JLT Independent Insurance Brokers.

Take the instance of morbid obesity. The committee has provided a set of conditions. The person must be 18 years or older, treatment should be based on clinical protocols, under the advice of a doctor, and so on. “Only if these conditions are not met can a condition be excluded. Earlier, the approach was that very broadly defined conditions were excluded,” says Laddha.

The detailed definition of exclusions will give insurers the confidence to even issue policies to people suffering from those diseases (in the list of 17), as they will not have to cover them anytime in future. “Customers will also benefit. Just because a person has one disease, he will not be excluded from coverage in other areas,” says Kapil Mehta, co-founder and managing director, Secure Now Insurance Broker.

Definition of pre-existing disease altered: Earlier, the definition of pre-existing disease (PED) included the words “signs or symptoms”.  This caused many disputes. Suppose that a person suffered from breathlessness, bought a policy, and later had bigger issues. Based on the words “signs and symptoms”, he could be denied coverage. “In the revised definition, these words have been dropped. This is a material change as most claim rejections happen on the basis of the PED clause,” says Mehta.

The eight-year clause: The current rule is that if a person did not declare a PED at the time of buying his policy, the insurer reserves the right to deny the claim and cancel the policy. The committee recommends that when a PED is discovered, the insurer may continue the policy. “If a PED is discovered within eight years, the insurer can impose a waiting period, load the policy, or ask the customer to co-pay. Thus, the insurer can hold on the customer if it believes that the latter had made a genuine mistake,” says Vaidyanathan Ramani, head-product and innovation,

The committee has recommended that in case of customers who have renewed the policy eight times, insurers should not question the claim on the basis of non-disclosure or misrepresentation. “The policy will become incontestable in terms of application of exclusions, except for proven fraud and permanent exclusions specified in the contract,” says Rakesh Goyal, director, Probus Insurance Brokers.

Not all non-disclosures are mala fide. Sometimes they are also the result of lack of understanding or ignorance. “Through this provision, the committee has tried to protect customers who have been with a policy for a long tenure,” says Puneet Sahni, head-product development, SBI General Insurance.

Technology committee to be set up: Health policies are intended to cover only treatments based on accepted standards and methods. However, a number of new and advanced methods of treatment are now being widely used, such as cyber knife, stem cell, oral chemotherapy, peritoneal dialysis, and so on. These methods usually get excluded at present. The committee has reviewed them and given its view on whether they should be covered. For instance, it has said that oral chemotherapy should be. More importantly, it has recommended the setting up of a permanent health technology advancement committee to regularly review new treatment protocols and decide whether they should be covered. “This will ensure that health policies keep pace with advancements in treatment,” says Laddha.

List of non-payables revised: At present, there is a large list of non-payable items that insurers do not pay for. These could be small consumables, such as razors used prior to surgery. Hospital admission fee is also often omitted from coverage. “The committee has revised the list of consumables and mapped them to certain procedures where they will henceforth be payable,” says Sahni.

Costs may rise: If these recommendations are implemented, the cost of health insurance could rise due to the widening of coverage. "Pricing has two components. One is medical inflation due to which prices increase at regular intervals. The other is when more diseases are included, thereby expanding coverage. In the initial stage, as a company, we should be able to absorb any impact on premium, but it will depend on experience.” Other experts say that competition in the health insurance segment may prevent costs from rising too much.

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