I’ve had a health insurance policy for the past 15 years. Six months ago, I had to undergo an emergency medical procedure for which I was given a bill of Rs4 lakh. However, the insurance company offered to pay only Rs3 lakh because the policy terms had changed the previous year at the time of renewal. I was never told about it. Are these new terms binding on me or can I fight for full reimbursement?
The insurer cannot deny you full reimbursement for the following reasons: (a) If the terms of the policy were changed, it was obligatory on the part of the insurance company to make those changes known to you. In which case, you may have even taken the option of portability and moved to another insurer with better terms and conditions. Thus, the insurer violated your right to information and choice given under the Consumer Protection Act and has to take responsibility for it. (b) By not intimating you about the changed terms, the insurer also contravened the Insurance Regulatory and Development Authority’s (Protection of Policy Holders’ Interests) regulations that mandate the insurer or his agent to give the policy holder complete information about the policy, including the various terms and conditions. (c) Insurer’s action also goes against the fundamental principle of insurance law — the doctrine of good faith — that legally binds the contracting parties not to mislead or withhold information from one another.
When a policy is renewed, one assumes that the same terms and conditions continue. If the insurer made any changes, he should have informed you. Having failed to do that, he cannot now bind you to new terms that were never made known to you. You can seek redress either through the insurance ombudsman or the consumer court.
What case law can be of help?
There is an excellent judgment of the Supreme Court delivered on December 9, 2021, in Jacob Punnen Vs United India Insurance (Civil Appeal No. 6778 of 2013) in a matter similar to yours. Here, the complainants had a medical insurance policy, renewed annually, from 1982. In 2008, one of the insured had to undergo angioplasty for which a bill of around Rs3,82,000 was given by the hospital. However, the insurer paid only Rs2 lakh, saying that as per the renewed policy, only 70 per cent of the policy limit could be claimed for procedures and surgeries, subject to an overall limit of Rs2 lakh for any one surgery or procedure.
The District Consumer Disputes Redressal Commission held that the contract of insurance was a contract of utmost good faith and just as policy holders had an obligation to give all material information to the insurer, the insurer also had a duty to inform the policy holders of any change in the terms of the policy. Having failed to do so, the insurer cannot point to the new terms to deny the just claim of the insured. So, the insurer was asked to pay the full amount, besides Rs5,000 as compensation.
The consumer commissions at the state and national level, however, disagreed with this view, forcing the consumer to eventually seek the help of the highest court in the country. The Supreme Court upheld the order of the District Commission and set aside the orders of the State and the National Consumer Disputes Redressal Commission.
The SC pointed out that the insurer was clearly under duty to inform the policy holders of any change incorporated in the policy at the time of renewal. The insurer failed to do so and kept the policy holders in the dark about the changes. Thus, the duty to take the insured into confidence was breached and the insurer was liable for the consequences. The apex court also pointed out that failure to inform the policy holder of the limitations introduced in the renewed policy also constituted deficiency in the service rendered by the insurance company, as per the Consumer Protection Act. So, the consumer was entitled to full reimbursement. Besides restoring the order of the District Commission, the SC also awarded Rs50,000 as costs to the consumer.