The cost of poor service in Health Insurance

What happens when a legitimate claim is rejected by an insurance company?

The insurance company ends up paying more than the original cost of the claim.

At least that is what usually happens when a Court or Consumer Forum is involved.

The policy:

This particular case is about Mr. N. Singh of Punjab who has a health insurance policy valid from 9 June 2022 to 8 June 2023 which covers both himself and his spouse Mrs. B. Kaur for a sum insured of Rs. 5 lakhs for which he paid a premium of nearly Rs. 21,789.

The product under which they were covered is “Family Health Optima Insurance” plan.

The claim:

When Mrs. B. Kaur fell ill and was hospitalized in September 2022, the hospital sent a cashless request for Rs. 90,000 to the insurance company. This was rejected on the grounds that the diagnosis for AFI gastritis should be treated on OPD basis and no hospitalization was required.

Following a clarification that this case was an emergency, a new cashless request was raised for an amount of Rs. 1,03,166 which was again refused by the insurance company. The Insured Mr. N. Singh was then asked to pay Rs. 83,165 in cash.

The case:

Mr. Singh filed a consumer complaint with the District Consumer Disputes Redressal Commission (DCDRC) alleging that such rejection amounted to a deficiency in service and unfair trade practice.

The insurance company defended its decision stating that at the time of initiating the cashless request, the documents submitted by the hospital did not in any manner show any such medical condition and circumstances which necessitated OPD admission and that the hospitalization and IPD treatment were not warranted. Further adding that certain documents were not submitted.

Having heard both sides, the Commission decided that the act of the insurance company amounts to a deficiency in service and unfair trade practice. The insured is not required to repeatedly approach the insurer to process the claim. The Commission further observed that:

“It is generally seen that insurance companies at the time of inception of policy receive hefty premiums from the consumers, but try to repudiate their genuine claims on one or the other ground.”

The ruling:

The insurance company was then directed to pay Rs. 83,165 to the insured with an interest of 9% p.a. from the date of claim (28 September 2022), and also Rs. 15,000 as compensation for causing mental agony and harassment, as well as reimburse the insured with Rs. 10,000 as costs of litigation.

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