In a move that will benefit health insurance customers, IRDA has said that companies can not cancel insurance policies in the medium term. The move, sources say, is in response to complaints from policyholders of health insurance contracts that were terminated before the end of a year due to higher claims.
In a circular to all companies on this week, the Insurance Regulatory and Development Authority said not political, either fresh or renewal can be sold with a clause contrary to the rules of cancellation. The rules allow cancellation if there is fraud, misrepresentation or nondisclosure of a material fact of the insured.
However, the industry says it would be unusual not to have a cancellation clause. "Historically and internationally has been the practice of having a facility of cancellation available to both the insurer and the insured after giving sufficient notice to use other arrangements," says G Srinivasan, President, General Insurance Public Sector and head of U.S. Insurance Company in India. He said the termination clause was important in cases where the cover was based on reinsurance support from reinsurers also include a similar clause.
Pavanjit Singh Dhingra care insurance brokers said the cancellation of insurance policies due to adverse claims violated the trust policyholders. In the past there have been cases in which the offer to increase its topline, insurance companies, have acquired a group of practices is very low. However, after burning their fingers high claims have not used the escape clause.
"It is incumbent on insurers to do their homework and purchase appropriate and bear the risk of the contract. What is the purpose of insurance if the insurer can move away from risk, at its discretion? Sometimes insurance companies have been ruthless in underwriting policies and cancellation or attempted to renegotiate the terms of the insurance period which is totally unfair, and we welcome this action to protect policyholders, "said Dhingra.
