Its business as usual even after two months of the IRDA circular which asked insurers to not reject claims on technical grounds. With no warning or penalty for specific insurers, will the IRDA circular be taken seriously? 

Two months ago the Insurance Regulatory and Development Authority (IRDA) issued a circular to life and non-life companies asking them not to reject claims on technical grounds like a delay in filing. Some insurers including United India Insurance were rejecting claims mechanically based on delay in hospitalisation intimation and claims filing. Claims continue to get rejected even after IRDA circular.

For starters, there is no warning or penalty for insurance company to reject claims mechanically on grounds of late filing. The IRDA circular is not an ‘order’ directing any particular insurance company to strictly adhere to the claims rejection on technical grounds. By not naming the errant insurers, the companies can feign ignorance of the snag happening under their nose.

According to industry sources, “The end result is that there is no directive given by insurers like United India to its regional/division offices or third-party administrators (TPA) to take necessary remedial action. There is no change at the ground level which makes the IRDA circular completely ineffective.”
Another source confirms that there is no relaxation on the strict deadlines and condone requests will be rejected in most cases.

United India has strict deadline of hospitalisation intimation within 24 hours and claims submission with seven days of hospital discharge. Minor delay results in claims rejection and condone request is usually refused. Moneylife has examples of some claims rejection even when the strict deadlines were met. Moneylife has done cover story (3 November 2011) on ‘Insurance Claim Rejected’

Interestingly, United India is the only government-owned general insurer which has shown profits and has aggressive plans for business growth. The company’s CMD was quoted saying they have premium target of Rs8,000 crore this year at 25% growth rate in business. They plan to bring down underwriting losses—premium less claims outgo—to Rs900 crore from last year’s figure of Rs1,760 crore. He adds, “Better underwriting, proper pricing of group policies, tightening of claims procedures in respect of health insurance and audit of claims settling agents resulted in reduction in health claims outgo.” The ‘tightening of claims procedure’ surely includes claims mechanically rejected on flimsy grounds of any minor delay (or no delay in some cases) in hospitalisation intimation or claims submission. It did not matter that the company happily collected premiums from same customer for decades.

According to one Moneylife reader, “United India has instructed its offices to send soft data, to the TPAs, of health insurance renewals once a month only, usually on the last day of the month. As a result when an insured is admitted to a hospital a week or two after his policy has been renewed and he contacts the TPA, he is told that as per their records his policy has not been renewed and therefore they are unable to register his claim even though he had called them within the mandatory 24-hour deadline! As a result he is also denied cashless facility and has to go in for reimbursement which again will be denied on the grounds that the claim was not reported within 24 hours!”

He adds, “Another ploy being perpetrated on the policy holders is the raising of queries pertaining to the claim by the TPA wherein it is stated that if the insured does not respond within 15 days the file will be closed. This communication in most cases is not posted to the policy holder whereas a copy of the same is kept in the insured claim file. In cases where it has been despatched the letter usually arrives just a day or two before the deadline giving the insured no chance to reply in time. Once the file has been closed, only a letter from the regional manager will be accepted to reopen the file. The branch (division) mangers have no say on this issue! But if an insured has the tenacity to fight his claim will no doubt be settled. United India is fully aware that a lot of policy holders will not go that far and will simply bemoan their fate and this is United India's way of trying to keep claim ratios within tolerable limits! Policyholders are warned!”

There is no initiative from IRDA to monitor the ground reality of mechanical claims rejection. Will IRDA get the statistics on claims rejection and reasons given by insured for delay? Will it do an analysis on how many requests to condone delay were approved and rejected? Does IRDA intend that insurer follow its advice from the date of circular? What about the claims which are already rejected and condone requested? What about claims which are already rejected, condone rejected and cases closed? The mechanical rejection has been going for long time and the relief has to be applicable for past cases, too. Will IRDA review such cases and give justice?

IRDA needs to check if the insurance company and TPA have a 24X7 system in place to receive intimation and give confirmation number. They should insist on such system being 24X7 customer care and not force the insured to send fax or email within 24 hours of hospitalization. Fax and email for hospitalisation intimation are disputed as being not received or not legible. It is a perfect excuse for claims rejection.

Also read, IRDA asks insurers not to reject health insurance on a routine basis, but don’t pin much hope on this directive