| GOD PROPOSES, OMBUDSMAN
DISPOSES...
Gnanasundaram Krishnamurthy
When the mediclaim policy was first launched in 1986 by GIC,
it was viewed more as a social security scheme, and the Union
government had approved the policy terms and conditions. Following
liberalisation of insurance sector, many private insurers also
have now comeout with such policies, more or less on same terms
and conditions, approved by the IRDA. However, as per the thinking
of the companies, if there is adverse claim ratio, ie, if your
claim amount exceeds the premium you pay in a year, they can
cancel the policy or refuse renewal or charge excessive premium
or impose excess or exclude diseases on renewal! This means
that as long as a person is healthy you take premium from him
and if he becomes sick, cancel the policy or deny renewal or
impose your conditions. The Awards of even some of the Ombudsmen
were pronounced on the above lines.
In the case No. G 6117, though, the Insurance Ombudsman, Hyderabad
held that the insurer was not justified in cancelling the insurance
policy, he however, ruled that the insurer has to renew the
policy either by loading the premium or restricting the liability
for a particular disease in respect of which claims were already
preferred and settled!
Similarly in the case No. I.O.O./BBSR/1 2-101 the Insurance
Ombudsman, Bhubaneswar held that the insurer was justified in
turning down renewal on commercial consideration. In the case
No. IO/KCH/G1/13/NIC/1 1/2002-2003 the insurer refused renewal
as the claim ratio was 329.3 percent and the disease osteoarthritis
suffered by the insured was to result in unending liability
in future. The Insurance Ombudsman, Kochi, ruled that the policy
should be renewed after excluding osteoarthritis!
While, no doubt the mediclaim insurance policy stipulates that
the policy may be renewed by mutual consent and the company
may, at any time, cancel the policy by sending the insured 30
days’ notice, the import of the said condition has to be understood
with reference to the general object and the whole text of the
policy. The preamble of the policy prescribes that the company
undertakes to reimburse hospitalisation expenses for diseases
contracted during the period stated in the schedule or during
the period stated in the schedule or during the continuance
of the policy by renewal.
The policy also provides for cumulative bonus and health checkup
expenses for policies renewed continuously without break. The
policy has to be renewed on the date of expiry. Thus, as renewal
of the policy is also a term of the original policy, withholding
consent for renewal cannot be arbitrary. It is only for good
and sufficient reasons that an insurer can refuse to renew or
cancel the policy. The question, therefore, arises as to whether
adverse claim ratio is a good and sufficient reason for cancelling
the policy or refusing renewal.
In the same context, whether the other actions like loading
of premium, reducing the sum insured, excluding the disease
or imposing excess will be valid, if they are done due to adverse
claim ratio.
The Delhi High Court has, in the case of Mukul La/ Dugga/ Vs
United India Insurance Co Ltd. held that high claim ratio cannot
be the ground to turn down renewal and that mediclaim policies
are liable to be renewed on the same terms and conditions as
the old ones, without excluding diseases which the consumer
may have sought medical attention for, during the last period
of policy but, owever, left it open to insurance companies load
the premium to a limited extent if high payments are sought
by the consumer (IRDA, Journal February 2005, Page 44).
However, the Supreme Court had, in the case of Biman Krishna
Bose Vs United India Insurance Co. Ltd., earlier held that denying
renewal cannot be arbitrary and the original policy provides
for its renewal which is a repetition of the original policy.
Further it held that it may be that on renewal a new contract
comes into being but the said contract is on the same terms
and conditions as that of the original policy (CA No. 2,296
of 2000). It had also held that cancellation is reasonably possible
before the liability under the policy has commenced or the loss
has become inevitable. (General Asse Society Ltd. Vs Chandmull
Jam AIR 1966 SC 1644 (V53C32 7).
lnfact National Insurance Co. Ltd., decided in 2000 that where
a claim is not barred by pre existing condition or break in
renewal, no denial of renewal or loading of premium or imposing
of excess should be considered merely because the diagnosis
of an illness or disease leading to a claim could cause further
illnesses or diseases in future policy periods.
While Awards have been given by the writer on the lines of
judgments of Delhi High Court and Supreme Court, it is now understood
that the Ombudsmen have, of late, been refusing to entertain
complaints against non- renewal cancellation etc. of mediclaim
policies on the ground that it is the prerogative of insurance
companies to do so and that they do not fall under Ombudsmen’s
jurisdiction.
The Government notification defining the powers of the Ombudsman
provides for entertaining complaints in respect of premium paid
and premium payable. Keeping in mind the Supreme Court’s aforesaid
judgment in Biman Krishna Bose’s case, the Ombudsmen can certainly
entertain complaints under this provision, as the reference
to the premium does not limit it only to the ‘amount’ but should
extend to the ‘purpose’ also.
Denying renewal cancelling the policy imposing excessive premium,
excluding diseases etc. for adverse claim ratio on renewal negates
the terms of the original contract and goes against the above
verdicts of the High Court and the Supreme Court.
Excluding such complaints from Ombudsmen’s jurisdiction defeats
the very purpose of providing speedy justice to the aggrieved
customers and exposes them to the danger of losing valuable
health cover. It should not be that God proposes and man disposes.
The interests of the policy holders of mediclaim policy will
be well protected if the Central Government and IRDA issue suitable
direction to the Insurers and Ombudsmen, keeping in mind the
High Court’s and the Supreme Court’s judgments, the National
Insurance Co’s decision and the provisions of the policy as
above.
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