Jehangir B. Gai
Consumers who have had continuous coverage under a mediclaim policy are suddenly given a rude shock by insurers that their old policy is being discontinued, and they could opt for the new one that is being introduced.
Forcing out policyholders
The insurance regulator, IRDAI (Insurance Regulatory and Development Authority of India), had issued guidelines on the migration and portability of health insurance policies on January 1, 2020. These are subject to the regulations of 2016. Even these guidelines do not allow the insurer to discontinue a regular product and compel the insured to migrate to another policy.
The regulations and the circular permit portability and migration to a different company or to a different product, but the decision to do so vests with the consumer and not with the insurer. So, insurance companies cannot compel the insured to migrate and opt for a different policy.
Court rules clear
The law on the subject is clear and well-settled by the Apex Court. A mediclaim policy is renewable, so long as the insured pays the premium, and the insurer has no right to arbitrarily refuse renewal. In the Biman Krishna Bose v/s United India Insurance Co. Ltd. [III (2001) CPJ 10 (SC)] case, the Supreme Court has held that the renewal of an insurance policy means repetition of the original policy. So, it would be extended for a further period on identical terms as the previous policy. In short, the old policy would stand revived and would continue for a further period of one year.
In the United India Insurance Co. Ltd. v/s Manubhai Dharmasinhbhai Gajera & Ors. [II (2008) CPJ 43 (SC)] case, the Supreme Court has held that unless there is misrepresentation, fraud or non‑disclosure of material facts by the insured, the insurer is bound to renew the policy with continuation of the existing benefits.
Even if IRDA grants permission for the withdrawal of a product, with or without giving notice to the insured, what would be its implications? Since the terms of the policy provide for renewal of the coverage till such time as the insured pays the premium, withdrawal of the policy constitutes a breach of contract, resulting in deficiency in service. It also constitutes an unfair trade practice since it would be opposed to consumer interest. Significantly, while the World Health Organization (WHO) considers healthcare to be a welfare measure, the conditions and infrastructure in government and municipal hospitals is abysmal and cannot cater to the needs of citizens. So, the mediclaim policy was introduced as a welfare measure in an attempt to make healthcare somewhat affordable. If permission is granted for withdrawal of a product and the insured is compelled to opt for a substitute with altered terms and conditions and higher premium, it could be challenged as being opposed to public policy.
To conclude, the discontinuation of a mediclaim policy, which is a regular product, is neither fair nor legal. Yet, it is rampantly prevalent, not merely because of the miserable failure of the IRDA in regulating this practice, but the tacit support which the regulator gives to errant insurers at the cost of the hapless consumers.(The writer is a consumer activist and has won the Govt. of India's National Youth Award for Consumer Protection)