Why can your insurance claim get rejected & how to avoid it?

Deepak Yohannan, CEO, MIC Insurance Web Aggregator, says the document that needs to be read is something called the ‘policy wording’. The brochure is the summary of the policy wording, but policy wording is actually where the devil lies, where the details are very clearly mentioned. It is often a 15- to 20-page document, and can be a bit difficult for a normal person to go through, but I would strongly recommend that you spend some time understanding the policy wording. Things are very clearly mentioned there.

Forget about cashless, I want to understand from you the general reasons a claim could be rejected.
Deepak Yohannan: Rejection is one and of course, many disputes also arise in the sense that you thought you would get something, but this is not what I was expecting. So, I will delve into the major points that are usually the points of conflict. One is there are room rent cappings, especially on the lower sum assured plans. So, things like plans that have Rs 4-5-lakh cover will usually have a room rent capping. Now, suppose your eligibility is for a Rs 3000 or a Rs 5000 room, but if you go and take a room that costs let us say Rs 5000, Rs 6000 or Rs 7000 because you thought the plan was covering it and you have to pay just Rs 1000-2000 extra. So, you go in for a room which is more expensive than what is categorised in your plan. But as a result, all the other expenses also proportionally get reduced.

So, if you have taken Rs 5,000 room instead of a Rs 3,000 room, that is a percentage extra from what you are eligible for. As a result, all other medical expenses that are now being charged to you will not be covered completely by the plan and the same proportional reduction will happen. Now that comes as a major surprise to the policyholder because they were not aware of this. They thought that they would have to pay only Rs 2,000 extra for the room rent, but all the other expenses came, that became a bit of a surprise and led to disputes with the insurance company, so that is one major thing, lack of awareness and not really understanding the policy and very frankly it is not very well explained also at the time of purchase.

Exactly, you are right. I was just coming on that only because people are not aware of it and also if we include this in policy documents not everyone ends up reading it well. So, when you are referring to a condition that involves having your room rent capped, where exactly in the policy documents, in the kind of wordings can you understand that?
Deepak Yohannan: The room rent capping is very well publicized and it is written very clearly. The proportional reduction is what is a hidden piece and very frankly it is a result of hospitals having different charges for different rooms for the same treatment. So, if you are taking a lower-charged room, you will be charged lower for the same treatment within the same hospital. It is a result of that. But having said that, as we speak I do not recollect the clause under which the proportional charging is being happening. So, maybe, I can get back to you on that.

The next criteria or the reason for a dispute could be a waiting period for specific illnesses, that people are not aware of and also a change in policy benefits which people kind of fail to keep track of when they are renewing their policies also.
Deepak Yohannan: People are usually aware of the fact that if you have a pre-existing condition there is a waiting period. So, they assume that they have been continuing for two years so now all illnesses are covered. But the policy might have a criteria which says let us say slip disc is not covered for four years. So, the pre-existing might get covered after two years, but a slipped disc as a condition will not get covered for four years so that again comes as a very big surprise because it was not a condition they had when they purchased the plan and all of a sudden they have to be treated for that condition and then this condition comes that you cannot be covered because there is a four-year waiting period for specific illness. So, this again is fairly well mentioned.

linking back to your last question, I think the document that needs to be read is something called the policy wording. The brochure is the summary of the policy wording, but policy wording is actually where the devil lies, where the details are very clearly mentioned. It is often a 15- to 20-page document, and can be a bit difficult for a normal person to go through, but I would strongly recommend that you spend some time understanding the policy wording. Things are very clearly mentioned there.

Let us move on to the other reason that you have also highlighted that is overcharging by the hospital. What do you actually mean by that?
Deepak Yohannan: This is nothing that the consumer can do about. Today the treatment costs are not monitored or regulated in hospitals. They can charge literally whatever they want. So, it becomes very difficult for a consumer to do anything about it. I mean the hospital might randomly put let us say treatment of thyroid or let us say a particular surgery that was conducted. They can charge anything for it. But the insurance company will go by a reasonable expense for that category of hospitals. So, that could come as a bit of a surprise because the customer has not done anything about it.

The way to handle it is to go to a network hospital of the insurance company. In case you have gone to a network hospital, the rates are pretty much decided between the insurance company or the TPA and the hospital, and the same rates are charged which are pretty much pre-approved by the insurance company, so that would be one way to get over this problem. But the insurance companies do not control the pricing and unfortunately, the pricing that is being charged by the hospitals are not regulated, so that is where the customers get stuck.

So, there is no one common way of handling these disputes or different steps are depending on the kind of dispute or the rejection that we are talking about?
Deepak Yohannan: There is no standard approach. If you have just gone through the recent changes that have happened, there is a portal called Bima Bharosa which the regulator has put up. It is a digital platform. Earlier it was IGMS, but now it is Bima Bharosa where again there is supposed to be a time-bound redressal. It is very early days yet, but hopefully, it should pick up and make things much easier for the consumer.

What happens if you did not have an illness while you were buying a health insurance policy, but then you have developed something when you were covered under it? How important it is for you to disclose it and later on how can you also go about with your premium or talk to the insurance policy, what kind of conditions do you think will be covered? Is there anything around it that a policyholder needs to be aware of?
Deepak Yohannan: There are two things. One, when you are purchasing the policy, a lot of people try to get a lower premium or somehow they think it is a minor thing and I will not mention it in a very early stage and purchase the policy. But at a later point in time when they are making a claim and the insurance company discovers that you already had this ailment though it was in an early stage, they reject the claim saying it may be unrelated but you did not declare all the facts for us to be making a very intelligent underwriting decision on your case.

So, it might be a completely unrelated treatment that you are having right now, but because you did not disclose certain facts, the insurance company can reject the claim. Second, at the time of making the purchase, you did not have this illness and later on, you have been diagnosed with certain conditions, it is then also better to declare at the time of renewal that I have been treated for this particular condition and you put it on record that is the safest way to do it because no insurance company can refuse to renew you because you have been diagnosed with something after you purchase a policy.

All health insurance policies have a life-long renewal clause which the regulator has mandated. They cannot be rejected and your pricing cannot go up purely because you have a condition right now. So, certain benefits are inbuilt and benefits that the customer can take.