Case 1(Health Insurance): Mr. Policy Holder met with an accident and admitted to hospital for treatment. After he got discharged from the hospital he claimed the hospital expenses from his insurer. To his surprise he received a letter from the TPA of insurer mentioning policyholder is suffering from hypertension and asked to submit the papers related to the treatment he is taking for hypertension.
Case 2 (Life Insurance): Policyholder died within 2 years of taking the life insurance policy and the nominee claimed the death benefits in the policy taken on the name of diseased. After some time instead of claim amount claimant receive the rejection of claim letter from the insurer mentioning that “policyholder did not disclose the policy taken last year(before the policy in which benefit is claimed) of SA Rs. 500000 from same insurer and same agent in the proposal forms at the time of taking the new policy”
You might have come across such case and might have thought that insurer is not willing to pay the claim amount and deliberately repudiating the claim or unnecessary calling the requirement to settle the claim.
But, do you know that amongst the various principles on which insurance business work, one of them is “Principle of Utmost Good Faith”.
Utmost good faith is a common law principle (sometimes called Uberrimae Fidei). The principle means that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance. A person must, therefore, always be honest and accurate in the information they give to the insurance company. The insurance company also has a responsibility to act in good faith in all its dealings with the insured.
An insurer has every right to question the life assured or claimant up to a specific period of time (Sec 45 of Insurance Act 45) if it can prove that information not disclosed was material and would have changed the underwriting decision of the insurer.
In the case 1, the policyholder has hypertension and it was disclosed while he was under treatment for the accident, but he did not mention it in the proposal form while taking the policy, if disclosed insurer would have declined the proposal or would have charged an extra premium due to higher morbidity. If he did not know or did not had hypertension before he must produce the proper treatment papers to TPA showing the dates after taking the policy and medication prescribed by the doctor.
In the Case 2, policyholder did not disclose the policy taken from the same insurer and thus clearly affected the underwriting of the insurers. Underwriting is totally depending upon the age and sum assured proposed in the recent proposal and taken within two years of the recent proposal with the same insurer. If policy holder had disclosed the previous policy, the insurer would have called for medical examinations before accepting the proposal and the underwriting decision might have changed.
In both the cases, carelessness or ignorance led to the call for additional information in the first case and delay of the decision and in second case rejection of the claim.
You must know that any question asked in proposal form is important and are material facts for the insurer (that is why those questions are included in the proposal form). Insurance is a legal contract and both insurer and life assured are bound to disclose correct information to one another, if not the contract will become void. Whether policy issued after a medical examination or not you must answer all the questions with “Utmost Good Faith” so that your nominee or loved ones do not have to face any problem while making claim in case of any unforeseen circumstances.
Life Insurance Corporation of India regularly adds more services to its online portal, which are…
Life Insurance Corporation of India has decided to launch a new children's plan, Amritbaal (Plan…
LIC of India has launched a new ULIP plan named Index Plus, Plan No. 873.…
LIC has announced to launch of a new pension product with the name of LIC's…
आधार का उपयोग करके बैंकिंग सुविधा को नियोजित करने के लिए आधार सक्षम भुगतान प्रणाली…
Life Insurance Corporation of India has decided to launch a new insurance plan named Jeevan…
This website uses cookies.
View Comments
Mr. Pavan Good morning.
I am a subscribed reader of Insurance Blog also propogate the information that are published depending on the need. Also archieve selected Articles posted for my timely future reference.
In order to up-hold the credentials of your portal I am prompted to write my opinion.
Plz have a re-look on the text in Case - 1 of post "Don’t do these mistakes while filling your insurance proposal form". There is a sentence - In the case 1, the policyholder has hypertension and it was disclosed while he was under treatment for the accident, but he did not mention it in the proposal form while taking the policy, if disclosed insurer would have declined the proposal or would have charged an extra premium due to higher morbidity.
As per my knowledge acquired so far in a span of 2 years, I have not heard of "EXTRA PREMIUM" clause in Health Insurance Plans of Insurers in India. It shall be termed as "the underwriter will decide whether to treat the existing / one event health issue declaration as PRE-EXISTING DISEASE (PED)which is generally treated as exclusion for 48 months by all insurers.
However request to have re-check on the above content.
But I seriously expect a reply from you as I have desire to correct myself if my perception in practice is wrong.
Regards
Mbl # 94807 52537