Health insurance claims indisputable after 8Y: not a new IRDAI rule!

image of a health care worker holding hands up signifying protection for whole family just as IRDAI wants to standardize health insurance policy wordings

Published: June 14, 2020 at 9:06 pm

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Many media reports are doing the rounds that IRDAI has issued a new rule in a circular on 11th June 2020 that health insurers cannot question (unless there is fraud) a claim made after holding a policy for eight continuous years. This is not a new development. We also explain what this means.

IDRAI first published Guidelines on Standardization in Health Insurance in July 2016. An amendment was made in Sep 2019 introducing a moratorium period. According to this, “After completion of eight continuous years under the policy no look back to be applied. This period of eight years is called a moratorium period. The moratorium would be applicable for the sums insured of the first policy and subsequent completion of 8 continuous years would be applicable from the date of enhancement of sums insured only on the enhanced limits. After the expiry of the Moratorium Period, no health insurance policy shall be contestable except for proven fraud and permanent exclusions specified in the policy contract. The policies would, however, be subject to all limits, sub-limits, co-payments, deductibles as per the policy. The moratorium period is applicable for health insurance policies issued by General and Health Insurers”.

In the June 2020 circular, the wording is,  “After completion of eight continuous years under the policy no look back to be applied. This period of eight years is called a moratorium period. The moratorium would be applicable for the sums insured of the first policy and subsequent completion of 8 continuous years would be applicable from the date of enhancement of sums insured only on the enhanced limits. After the expiry of the Moratorium Period, no health insurance claim shall be contestable except for proven fraud and permanent exclusions specified in the policy contract. The policies would, however, be subject to all limits, sub-limits, co-payments, deductibles as per the policy contract.” Therefore wrt to the moratorium clause, there is no change.

What does Moratorium Period mean in a health insurance policy?

This means after eight years, insurers cannot dig up past medical records (look back) to contest claims unless they can prove fraud or point to a permanent exclusion made in the issued policy.

Suppose the cover in the first year was Rs. 5 lakhs and from the second year on it was enhanced by Rs one lakh. The moratorium would apply to Rs. 5 lakh from the ninth year onwards and for the additional on lakh from the tenth year onwards.

Does this rule really help buyers? This does not mean one can hide material facts while applying for the policy. Material fact according to the regulator is:

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all relevant information sought by the company in the proposal form and other connected documents to enable it to make an informed decision in the context of underwriting the risk

To give Deepak Mendiratta’s example: A patient suffering from knee pain for years never took any treatment or medicine for it. Buys a policy, does not disclose this, get hospitalised, tell the doctor about the knee pain history.

This is recorded,  the insurer spots it and denies the claim. The eight-year moratorium will not help then! Watch: How to select a health insurance policy in 2020: A Webinar by Deepak

If we have disclosed all material facts while applying and there is evidence to disprove this, then and only then the insurance claim is incontestable!

Forgot to mention something? Try this: What to do if you forgot to include important info while buying insurance

Want to buy a health cover? Download a Health Insurance Policy Comparison Spreadsheet

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