Ref: ER/Press/‘03/insurance.54/sam/DG

Insurance Companies Directed to Renew Mediclaim
Policies on Existing Terms and Conditions

A Division Bench of the Gujarat High Court comprising Hon’ble Mr. Justice R.K. Abichandani and Hon’ble Mr. Justice D.A. Mehta, in its landmark judgment, running into seventy-one pages, affecting lakhs of consumers in India, directed the insurance companies to renew the Mediclaim policies on existing terms and conditions as a matter of course.

The decision of the bench is pursuant to Letters Patent Appeal and Special Civil Application filed by Consumer Education and Research Society (CERS), Ahmedabad, and a number of consumers, against the United India Insurance Co. Ltd., New India Assurance Co. Ltd. and National Insurance Co. Ltd., all of which are Government companies.

Before one deals with the judgment of the High Court, it is necessary for Indian consumers and others to know the unconscionable manner in which insurance companies deal with Mediclaim policyholders.

Two extreme examples before the High Court are cited : in one case a person was having a Mediclaim policy since 1990, and there was no claim in the earlier years. The first claim of kidney failure arose during 2002 where the policyholder required dialysis 4 times a month.

Here, firstly, the insurance company said that the policy will be renewed by loading of 300% premium. When the insured paid the premium, he was informed that the policy could be renewed, subject only to the exclusion of five major diseases.

In another case, the policyholder himself is a consulting physician and neurologist. He had been having a Mediclaim policy for himself and his family members since 1990 and there were no claims till recently. The doctor began to suffer from hypogamaglobulinemia during 1999 which required him to be hospitalised a couple of times a year.

Initially, the insurance company refused to renew the policy. Later they agreed to renew on the condition that the disease septicemia and hypogamaglobulinemia shall be excluded, premium would be raised by 100 per cent and there would be 5% excess for each and every claim.

This can happen only in India.

The Hon’ble High Court expressed its discomfort at the contention of the insurance companies that they were doing business and not charities as philanthropic organisations. The Hon’ble Court, resenting the said contention, observed that the terms of renewal were binding and “did not need to appeal to any philanthropical instincts of the insurer companies.” It added, “Indeed, for those who are oblivious of their constitutional, legal and contractual duties, philanthropy would be an alien concept.”

After considering all the aspects and carefully examining various decisions relied upon by the petitioner and the respondents and also the practice in foreign countries, the Hon’ble High Court concluded as under

1) Insured has an option and right to get renewal of the Mediclaim insurance by payment of renewal premium in time.

2) Insurance company is bound to renew the policy without excluding any disease already covered under the existing policy which may have been contracted during the period of the policy in force.

3) In case the insured seeks to raise the sum insured at the time of renewal, it has to be done on the same conditions, but exclusions can be different so far as the increased sum insured is concerned.

4) Renewal of a Mediclaim insurance policy cannot be refused, despite timely payment of renewal premium on the ground that continuance of the cover would become more onerous or burdensome for the insurer due to the insured contracting a covered disease during the period of the existing policy.

5) Renewal can be refused only on the ground like misrepresentation, fraud or non- disclosure of material facts that existed at the inception of the contract.

6) The government insurance companies continue to be ‘State’ within the meaning of Article 12 of the Constitution of India notwithstanding the entry of private companies in the field of insurance, ending their monopoly by virtue of insertion of Section 24A in the Act of 1972, and they cannot arbitrarily cancel or refuse to renew an existing Mediclaim policy.

Date : 24 December 2003
Place : Ahmedabad

Pritee Shah
Editor
INSIGHT — The Consumer Magazine

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CONSUMER EDUCATION AND RESEARCH SOCIETY
“Suraksha Sankool”, Thaltej, Sarkhej-Gandhinagar Highway,
Ahmedabad- 380 054 (INDIA)
Phone: 079-7489945-46 Fax: 079-7489947
E-mail: cerc@wilnetonline.net
Web Site: http://www.cercindia.org
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