Insurers rejecting claims after branding them as ‘unreasonable’ a key cause of heartburn | Simply Save

The Insurance Regulatory and Development Authority of India (IRDAI) has taken two major decisions on October 26 and October 30 that will help customers understand their insurance policies better.

To listen to the podcast, click above. To read the podcast conversation, scroll down.

To start with, it announced the setting up of a committee to give recommendations on simplifying policy wordings in insurance contracts.

Insurance regulator IRDAI has also made it mandatory for insurance companies to issue, along with the policy being sold, a customer information sheet (CIS) spelling out the policy’s key features and clauses. The revised, updated CIS will include details such as sum insured, waiting periods, sub-limits, exclusions, procedure for filing claims and complaints, among other things. Insurance companies will have to adhere to this diktat from January 1, 2024.

Also read: IRDAI proposal: Key health insurance features and clauses in a single, easy-to-decode document

To discuss why simplifying policy wordings is critical and how this move will help policyholders understand benefits and restrictions better, thus ensuring less heartburn, Moneycontrol spoke to Shilpa Arora, Chief Operating Officer, InsuranceSamadhan, a firm engaged in assisting insurance customers resolve their complaints against insurance companies.

Here are the key points that she made during the discussion:

-An insurance contract comes with a bundle of complex jargon. The fine print in the policy documents is difficult to read and understand.

-As a result, policyholders are often not clear about terms and clauses such as co-pay, room rent capping, waiting period, exclusions, network hospitals, pre-existing diseases, sub-limits on claim amount payable in the case of robotic surgeries and modern treatment methods and so on.

-Due to complexities in policy wordings, many simply end up trusting the agents and signing documents without reading, leading to disputes later.

-The IRDAI’s initiative seems to be in the nature of a ‘Buyer beware’ awareness campaign. The objective is to ensure the policyholder is aware of the kind of policy she is signing up for.

Also read: Top five common insurance complaints in India and how to resolve them

-Even as experts, we find it difficult to decode some policy clauses. For example, one of the most common causes of claim rejection is the ‘reasonable and customary charges’ clause. There is no clear explanation on the implications of this clause. The ‘reasonable’ charges for surgeries or any other treatment varies as per the area, hospital and diseases.

-Insurance companies take calls on the basis of data gathered by them – policyholders have no way of ascertaining whether charges being levied by hospitals are reasonable or not.

-There is no clear definition. IRDAI should ask insurers to state upfront the payment they will release in the case of, say, heart surgeries, upfront. So, if a policyholder lives in Delhi, what is her entitlement?

-This will ensure that even the policyholder is aware of the financial limits she is bound by while undergoing treatment.

-Then, there is the proportionate deduction clause, which is linked to room rent capping. Now, people understand room rent sub-limits. However, what they do not understand is that due to the proportionate deduction clause, several expenses are linked to the room rent. The payable claim is, therefore, reduced proportionately.

-To communicate in a simple manner, insurers ought not to include such clauses only in the fine print. They should be explained through videos, cartoons and other easy-to-grasp media before selling the product.

-The industry should also focus on regional languages to communicate complex terms and clauses to lay persons.

-Insurance is a boring subject. Insurers should explain policyholders’ rights, benefits and exclusions in innovative ways. They can, for instance, send explanatory videos over Whatsapp.

-If you are buying a new policy, you must ensure that you understand waiting periods for pre-existing diseases, treatment procedures that will not be paid for, room rent capping, co-pay importance of network hospitals to ensure cashless processing of claims and so on.