The Insurance Regulatory and Development Authority of India (IRDAI) has released guidelines for the standardisation of terms and clauses in health insurance, and it says that after a moratorium of 8 years, no health insurance claim can be contested. What it means is that if you have been paying your premiums for 8 years or more then, from April 1, 2021, onwards, your health insurer will have to pay all your claims but under the limits mentioned in your policy.
This decision will have a positive impact on policyholders who will no longer have to wait for the insurer to approve their claims, if they have been paying their premiums for eight years or more. The same principle would apply to life policy claims as well wherein no life policy claim can be contested once a third-year term period is over. There would, however, be two exceptions to the provision. The first exception includes the exclusions mentioned in the policy agreement and the second exception is proven fraud. It means that if you are not trying to defraud your insurer or trying to claim benefits on the excluded items of your policy, then your insurer will have to settle your claim without contesting it.
According to IRDAI, the existing health policies that are, so far, not in compliance with the guidelines would have to be modified during renewal and it would be in effect from April 1, 2021, onwards. Furthermore, if the insurer chooses to increase the premium prices due to these guidelines or any other constraint then they will have to inform the policyholder three months in advance.
Furthermore, in case you wish to increase the sum insured in your policy then the 8-year period will apply to that as well. For example, if you bought a policy with SI of 5 Lakh in 2019, and you increased your coverage to Rs. 10 Lakh in 2022. The 8 year moratorium for coverage of 5 lakh and 10 lakh would finish in 2027 and 2030 respectively. So, after 2027, the insurer would have to settle claims without contesting only upto the limit of 5 lakh. And the policyholder can claim settlement of 10 lakh without contest only after 2030.
Speaking of claims settlements, according to the IRDAI guidelines, an insurer has to settle or reject a claim within 30 days from the date of receipt of the last necessary document. In case the insurer demands an investigation, then the entire claim settlement and investigation would have to be completed within 45 days from the date of receipt of the last necessary document. The insurer would be penalised if there is a delay in claim settlement. The insurer would have to pay an interest rate of 2% above the bank rate (the rate at which banks borrow money from RBI) in case of delay for the entire duration since the receipt of the last necessary document.
It is a great initiative by the IRDAI and may bring relief to thousands of customers but there could still be numerous ways or exclusions that an insurer may build into the policy agreement and the policyholder should be very thorough in understanding the stipulations before purchasing the product.
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