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Non Life Insurance - Honesty is best policy while declaring diseases for cover

02 Apr 2012

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Did you know that withholding information about even common medical conditions such as high blood pressure or diabetes could lead to claim rejection by your health insurer as per the law? A large number of claims rejected by the insurance companies are due to withholding crucial information about pre-existing diseases by the customers. A pre-existing disease can be defined as any condition, ailment, injury or related condition for which policyholder had signs or symptoms, and/or were diagnosed, and/or received medical advice/treatment, within 48 months before taking the policy.

It is a common practice for agents to fill insurance proposal forms, and withholding information which can lead to rejection of the insurance proposal. While the agent is only concerned with his commission, you must ensure that you give out correct data for insurance company to work on. The most commonly diagnosed pre-existing medical condition is high blood pressure or hypertension. Insurers attribute major heart-related issues and brain stroke or paralysis to this condition.

In order to process a claim, insurance companies depend on medical reports to ascertain whether the medical condition is recent or pre-existing. Insurance companies cannot reject a claim merely by stating that the disease for which claim is being registered is a pre-existing one“The rejection must be based on strong medical evidence and present treatment records like blood test, urine report, MRI report, two-dimensional (2-D) Echo, ECG report that actually prove so.If the insurers reject the claim without strong basis to do so, a policyholder can approach the customer grievance cell,” said D Rama, assistant vice-president, product cell of Star Health and Allied Insurance. In addition, a policyholder should make sure that they read and understand the proposal form completely before signing. “Earlier it was a common practice by agents to fill the proposal form on behalf of the customer, but that has reduced now, and insurers also cross check the details with the customer. In case, a customer has undergone any treatment or had an accident, it is always important for him to declare that beforehand. The documents related to the treatment should also be shared,” said TA Ramalingam, head of underwriting at Bajaj Allianz General Insurance.

So, what are the options for those suffering from an ailment and want health insurance cover? As per the guidelines of the insurance regulator, the Insurance Regulatory and Development Authority (Irda), the insurance companies should cover pre-existing ailments once the waiting period is over. In this period, there should be no hospitalisation on account of the declared ailment. Most ailments are covered after waiting period of two years. However, waiting period differs from disease to disease. Customers should check with their insurance company to know details. “Standardisation of definition of pre-existing disease and limit of waiting period were very important and was done by the regulator a few years ago. As per guidelines, pre-existing diseases should be covered within four years of the first occurrence of the disease. Waiting period may vary from insurer to insurer, and it is important as well from a product differentiation point of view. Portability has further simplified the concept of pre-existing disease,” said Shreeraj Deshpande, head of health insurance at Future Generali India Insurance.

Decision to provide coverage for any pre-existing disease depends on the insurance underwriters and may vary from case to case. Supposing, two individuals, one with hernia or cataract and other who has undergone cancer treatment, approach an insurer. Depending on the underwriter’s analysis of medical treatment documents, the insurer might or might not be inclined to cover the individuals. Medical reports, degree of illness and patient’s present medical condition plays a critical role in underwriting decision. Insurance company might ask the customer to go for further medical tests as well. “It is only since mid-2000s that insurance companies have started covering pre-existing diseases.

Now, insurers generally start covering pre-existing diseases after a specified time period, which is informed to them at the time of sale. In the retail segment, depending on the underwriting practices of an insurer, they have the option of covering pre-existing disease after certain time or make it a permanent exclusion. Very rarely insurers charge a loading and then provide coverage,” said Arun Mehrotra, head of retail underwriting and product development at Iffco-Tokio General Insurance. Another important factor that policyholder should keep in mind is that in order to get coverage for pre-existing diseases, the policy should be renewed every year.

In case, policy had any break in between, then it will not cover the pre-existing disease. As per prevailing norms, if a customer renews his policy within 15 days of the grace period, the continuity benefits including cover for pre-existing diseases are provided. If he fails to renew within grace period, the old policy is cancelled and new policy is issued. However, in group insurance policies, it is a common practice to cover pre-existing diseases on payment of extra premium.
Since it is not viable to collect and analyse medical history of each and every member to be included in group insurance policy, insurers underwrite the extra risk by charging extra premium. These policies are generally bought by small and medium organisations, NGOs, government and semi-government organisations. In global context, insurers cover pre-existing disease in retail segment as well. The premium charged by them to cover pre-existing disease though, is significantly higher than what they charge a regular policyholder.