• Posted by CERC India
  • Posted in

Insurance cos can’t unilaterally change policy terms

At times, consumers are misled by insurance companies who contend that the terms and conditions of a mediclaim policy can be changed at the time of renewal. A consumer has the right to insist that the renewal be on the original terms and conditions and no clause be added or removed without his knowledge and consent.

Insurance companies are notorious for not settling claims or partially settling them taking recourse to a variety of reasons. Very commonly, they reject a claim saying that the insured had a pre-existing disease which he did not declare at the time of taking the policy. At others, they say the insurance policy terms have changed and so certain deductions have been made before sanctioning the claim. Needless to say, the hapless consumer is neither told about the changes made, nor is his consent taken.

In a recent ruling, the South Mumbai Consumer Forum, has held that if the insurer unilaterally changes the terms this could be disputed by the insured and the claim would have to be settled on the basis of the original conditions in the policy.

Soli A. Modi, an octogenarian residing in Mumbai, had a mediclaim policy for Rs. 1 lakh issued by New India Assurance. He had held the policy for many years and renewed it without a break accumulating a cumulative bonus of Rs. 50,000, taking the total coverage to Rs. 1.5 lakh. In March 2012, he was operated for hernia and the total expenses came to Rs. 1,83,219. Accordingly, he submitted a claim through the TPA. The insurance company sanctioned only Rs. 62,814, stating that the terms and conditions of the policy had been changed.

The verdict

In an order dated 28 August 2014, the Forum observed that the renewed policy contained revised terms and conditions and the changes had been made without taking Modi’s consent. Under the revised policy, sub-limits were imposed for room charges and other medical expenses, which did not exist earlier.

The Forum referred to a Supreme Court judgement where it had been laid down that the renewal of a policy merely extends the policy period on the same terms and conditions. In the judgement, the apex court said: “It may be that on renewal, a new contract comes into being, but the said contract is on the same terms and conditions as of the original policy.”

Accordingly, the Forum directed the insurance company to renew the policy on the same terms and conditions as where there in the original policy. It also told the insurance company to pay the remaining amount of Rs. 87,186, along with 9% interest. In addition, compensation of Rs. 8,000 and costs of Rs. 3,000 were awarded to Modi.

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