How not disclosing pre-existing ailments can affect your claim, policy renewal

IRDAI's new health insurance rules: Advantage policyholders, but ensure complete disclosure of all health conditions

Pre-existing diseases top the list of common causes of disputes between policyholders and health insurance companies.

Almost 25 percent of claims are rejected on the grounds of non-disclosure of lifestyle ailments such as diabetes and hypertension, as per a study conducted by online insurance aggregator Policybazaar.com in 2023. It also tops the list of health insurance complaints filed with the Mumbai insurance ombudsman office.

Given its impact on claim settlements, it is imperative to understand how insurance companies treat pre-existing diseases and their potential impact on claim disbursal.

What are pre-existing diseases?

In simple terms, these are ailments or conditions that were contracted before buying a policy. Insurers do not pay for the treatment of such diseases until a stipulated period has passed. This is because insurance, by principle, is meant to cover unforeseen risks – cover cannot be extended to known illnesses immediately.

Until March 31, 2024, as per the Insurance Regulatory and Development Authority of India’s definition, pre-existing diseases were conditions or ailments for which the policyholder had received treatment or diagnosis from a physician up to 48 months prior to the policy purchase. Now, this timeframe has come down to 36 months.

At your end, it is crucial to answer all questions asked in the proposal form truthfully to minimise chances of a future dispute. Make sure that you adopt this approach even while porting your policy to another insurer – do not assume that you needn’t make all disclosures because the new insurer will have access to your past claim track record with the older insurer.

Also read: New health insurance claims rule: Shorter wait for pre-existing illnesses, no disputes after five years of policy coverage

How will new rules affect pre-existing disease waiting periods?

More importantly, the regulator has also reduced the maximum waiting period - after which your declared illnesses become eligible for claims – that will apply to pre-existing diseases. Before April 1, 2024, health insurance policies came with waiting periods for pre-existing diseases of up to four years. Now, the maximum waiting period has been shortened to three years.

To be sure, several health insurers already offer plans with waiting periods of one to two years. The shorter the waiting period, the sooner will the policyholder be able to make claims for treatment of their existing diseases.

What are the consequences of not declaring pre-existing illnesses at the time of buying the policy?

If you conceal your illness while buying the policy and happen to file a claim later, it is likely that the insurer will discover this fact and reject the claim, or worse, cancel the policy. This is because you will have to disclose your complete health history to the treating doctor, which will then form part of your hospitalisation paperwork that will be shared with the insurer for claim settlement.

Do note that the insurer can reject any hospitalisation claim citing non-disclosure of crucial information, even if your treatment is not related to the undisclosed pre-existing ailment. This is applicable to major illnesses or conditions. Not declaring minor, non-recurring health scares such as fractures or appendicitis will not invite such strong action from the insurers.

Also read: Missed declaring your health condition while buying an insurance policy? Here’s what you can do

Will policyholders have to forever live under the fear of pre-existing disease claim rejection even if they have made honest disclosures?

No - thanks to the concept called moratorium period. If you have paid your premiums continuously for five years, your insurer will not be able to reject claims citing failure to disclose your health status. Until March 31, this period was eight years.

“After completion of 60 continuous months of coverage (including portability and migration) in health insurance policy, no policy and claim shall be contestable by the insurer on grounds of non-disclosure, misrepresentation, except on grounds of established fraud. This period of 60 continuous months is called as moratorium period,” the IRDAI has said.

It cannot be ruled out that in some cases in the future, insurers might argue that deliberately concealing information around a major health condition itself constitutes fraud. However, for one, the onus of proving that the policyholder deliberately concealed these details with the intention to dupe rests with the insurer.

Even if you were to face such claim rejections after five years of paying premiums, your case is likely to be stronger than the insurer’s when you file your grievance with the insurance ombudsman office.