IRDAI has issued a clarification on norms for the settlement of claims under multiple health policies. The insurance regulator has clarified that the policyholders can approach another health insurer if the first insurer rejects their claim.
So far, policyholders were not able to approach another insurer if the first insurer rejected the claim.
This was due to principle of contribution, which said if two or more insurance companies insure the same risk (health insurance) then the compensation must be shared between them proportionately. For instance, if a policyholder buys two health insurance policies of Rs.5 lakh from Company A (sum insured Rs.3 lakh, 60% of total SI) and Company B (Sum insured Rs.2lakh, 40% of total SI), and if the claim of Rs.1lakh was made then both companies were required to contribute proportionately i.e. Company A Rs.60,000 (60% of Rs.1 lakh) and Company B Rs.40,000 (40% of Rs.1 lakh). In addition, if one company rejected the claim, policyholders were not allowed to approach other company.
In the new Insurance Law Amendment Act, IRDAI had done away with the principle of contribution. However, policyholders were confused about whether they could approach another insurer if one company rejected their claim.
In a circular, IRDAI has said, “It is clarified that the policyholder having multiple policies shall also have the right to prefer claims from other policy/policies for the amounts disallowed under the earlier chosen policy/policies, even if the sum insured is not exhausted then the insurer shall settle the claim subject to the terms and conditions of the other policy/policies so chosen.”
This has come into effect immediately.