Is your mediclaim policy up for renewal? Beware of changes

Is your mediclaim policy up for renewal? Beware of changes
Subject: Can an insurance company unilaterally change the terms and conditions of its policy?

Backdrop: It is quite common to find insurance companies surreptitiously changing the terms and conditions of its mediclaim policy at the time of renewal. This change results in a double blow to the consumer. Firstly, the insured loses his cumulative bonus and secondly, the claim amount is restricted for certain specified ailments such as hernia, cataract, etc.

Most often the insured does not even realise that the policy conditions have been changed because the insurance company does not draw the consumer’s attention to this fact. So, the renewed policy is filed by the consumer without noticing the change, assuming that the renewal is identical to the original policy.

This comes to light only when a claim is filed and a measly amount is sanctioned according to the revised policy. Is such a unilateral change in policy conditions permissible? Can the consumer fight against it?

Case Study:
In January 2006, Mrs Vinaya Patil took a mediclaim insurance policy of Rs 2 lakh from United India Insurance. It was renewed in 2007 on the same terms and conditions along with a cumulative bonus of 5% of the sum insured, amounting to Rs 10,000.

The policy was renewed once again in 2008, but this time the insurance company revised the terms and conditions, which Patil did not notice. During the tenure of this policy, she fell ill and had to be hospitalised.

She filed for a claim, but it was rejected under the revised policy. That is when Patil realised that the insurance company had unilaterally changed the terms and conditions without her knowledge or consent.

She challenged this by lodging a complaint before the Consumer Disputes Redressal Forum for Mumbai suburban district. While the complaint was pending, Patil made an application for interim relief.

Case Study:
The forum on January 30, 2009, passed an interim order directing the insurance company to retain the original terms in the renewed policy and for subsequent yearly renewals.

The forum also directed that the same method of awarding benefits (such as giving no claim bonus), as prevalent in 2006, be continued in policies renewed for the subsequent years.

Feeling aggrieved, the insurance company challenged this order by filing a revision petition before the Maharashtra State Commission.

The matter was argued by advocate A S Vidyarthi on behalf of the insurance company and advocate M G Barve representing the insured.

Case Study:
The state commission observed that giving permanent directions by an interim order amounted to deciding the matter finally which is not permissible.

As such, the interim relief ought to have been restricted to the current policy period of one year, particularly since the law requires a complaint to be decided within 90 days.

Permanent directions can be given only when the matter is fully heard and finally decided. With this modification, the state commission presided over by Mr Kashalkar and Mrs Lale, upheld the order of the District Forum granting interim relief to the consumer.

The Commission also directed the forum to take a decision on the matter within two months. According to the order of the Maharashtra State Commission dated 1.9.2009 in Revision Petition No 50 of 2009 in the case of United India Insurance Co Ltd v/s Mrs Vinaya Ashok Patil, the question of whether the interim relief should be extended permanently will be decided when the final order is passed by the district forum.

Impact:
Although the Supreme Court, in the case of Biman Krishna Bose v/s United India Insurance [III (2001) CPJ 10 (SC)], has already held that a policy has to be renewed on identical terms and conditions embodied in the original policy when it was first issued, insurance companies conveniently interpret the order to be applicable to that particular case.

Unless some forum or court holds it to be an unfair practice and gives general directions restraining the insurance company from adopting such malpractice, individual consumers will have to keep fighting for asserting their rights.

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