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Why does your insurance claims get rejected? Check out these five bizarre clauses

An insurance policy is a cover against unforeseen emergencies, but some grounds for rejecting claims dilute the protection it provides

November 15, 2021 / 10:52 AM IST
PC-Shutterstock

PC-Shutterstock

In October, Moneycontrol carried a story on how HDFC ERGO General Insurance Company rejected a personal accident insurance claims. The policyholder had died riding a bike a year ago and his family members had made a claim. Why did HDFC ERGO rejected a claim? Because the rider, who was the policyholder, drove a bike of 346cc. His insurance policy had a condition that it would not pay the claim if the rider was found riding a bike with more than 150 cc engine. Though the company later paid the claim, the whole process wasn’t easy for the family.

This isn’t an isolated case as Moneycontrol found out. We went through some insurance policy brochures and found some bizarre reasons why your insurance company can reject your claim. Here are some of those.

Engaging in hazardous activities

Social media platforms were abuzz with the news of a claim being rejected on ‘bizarre’ grounds by private standalone health insurer ManipalCigna.

In this case, the policyholder, who was covered under the insurer’s personal accident policy, fell from a tree while plucking mangoes and injured himself. The insurer, in its letter to the policyholder, initially refused to pay the claim on the grounds that it was a stunt “which is potentially dangerous to the insured...whether he is trained or not is considered hazardous activity…and is not payable under the permanent exclusion clause.” The clause that the insurance company referred to states that hazardous sport/activity includes stunt activities of any kind. “This is an overzealous interpretation of the hazardous activity clause. If you have mango trees in your backyard, plucking the fruits is a routine activity,” says Hari Radhakrishnan, Regional Director, First Policy Insurance Brokers.

Close

Moneycontrol reached out to the insurance company which said that the claim was subsequently paid.

Riding a bike with an engine capacity of over 150cc

HDFC ERGO had a clause in the personal accident policy that specifically excluded bikes of over 150cc from the coverage.

“Insured was riding 346cc bike and as per policy terms and conditions, the claim is not payable under general exclusions clause 8 for bodily injury sustained whilst or as a result of riding or driving a motorcycle or motor scooter of over 150cc,” the claim rejection letter said. HDFC ERGO later clarified to Moneycontrol that the claim was eventually paid out and the clause removed from their policies.

However, Mahavir Chopra, Founder, Beshak.org is of the view that policyholders need to be vigilant. “Given that this product was discontinued only for new business in October 2020, it is unclear how many still hold outdated policies today. Customers holding an accident cover in any form should review their policy documents with their financial advisor and request for migration to a newer product at the time of renewal,” he says.

Lack of active line of treatment for fevers

Suppose you are down with high fever for over five days and your doctor recommends hospitalisation as he is unable to diagnose the cause despite blood tests for Dengue, Malaria and COVID-19. You recover after a three-day hospitalisation stay and file a claim with your insurer. There is a small chance that your insurer might reject it on the grounds that no active line of treatment was followed at the hospital.

“Some claims are not paid on the grounds that the fever could have been managed on an OPD basis, which is still reasonable. But there are fever claims that get rejected on the grounds that no active line of treatment was followed by the hospital. As a patient, how am I supposed to know whether the doctors followed an active line of treatment or not? This is a loophole that ought to be plugged,” says Anuj Jindal, Co-founder and CEO, Sureclaim, a claim servicing firm.

Partial claim payment citing unreasonable charges

The key bone of contention between hospitals and general insurance companies at the onset of the COVID-19 pandemic in India was that many insurance policies made partial payments to claims made.

Also read: Hospitals and insurers don’t see eye-to-eye on Covid-19 treatment costs

Insurers, through the General Insurance Council, came up with a rate chart on COVID-19 treatment charges. They insisted that claim payouts would be made either as per the rates fixed by the state governments or the GI rate chart. It created a controversy that hasn’t been fully resolved yet.

Be that as it may, the tariff served as a reference point, which is not the case with other ailments. “The clause is a hindrance, especially in case of reimbursement claims where the policyholder has opted for treatment at non-cashless network hospitals. How is the insurance customer – the policyholder – supposed to know what the reasonable charges are? Insurers should transparently put out rates for some common treatment procedures online,” he says.

In fact, Mumbai-based activist Gaurang Damani had filed a petition in the Bombay High Court in 2011, seeking framing of health insurance regulations. The petition also touched upon the customary and reasonable charges clause. He has written to the IRDAI again seeking removal of this clause from the current health insurance regulations.

Smaller payouts for ‘minor’ cancers

Critical illness covers such as cancer-specific policies are touted as one-stop solutions for life-threatening ailments. These are typically fixed benefit policies that pay out the cover amount upon diagnosis of the illness.

If your cancer is detected early on, that’s a relief. But there’s a flipside. Your cancer policy will not pay out the entire sum assured. This clause is stated upfront in many such policies. Most dedicated cancer policies hand out only 25 percent of the sum insured for early stage cancers, though premiums for the subsequent three years are waived off. That is, your cover will continue even if you do not pay the premiums during this period. Major cancer treatment procedures are eligible for the entire claim amount.
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
first published: Nov 8, 2021 10:30 am

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