Several insurers are denying compensation to patients and/or their kin for their expenses on Covid-19 treatment, citing it is not under the purview of the insurance cover.
Insurers are contractually obligated to settle only those diseases included in the scope of coverage and Covid-19 is absent from most such lists. Survivors of those with fixed-benefit health policies covering critical illness typically bought before 2020 have been jolted by the development.
To make matters worse, many of these policies were sold by bank agents as bundled riders to mortgage loans—in the event of death due to disease or accident the debt is waived. However, denial by insurers mean families get caught in a debt trap.
Ramesh Chandra Jain of Ahmedabad had taken a Rs 20 lakh business loan in 2020 from HDFC Bank, which was insured by HDFC Ergo. Jain died of Covid in June 2020. When the family asked the insurer to settle Jain’s loan account, the company (HDFC Ergo) refused to do so citing the policy conditions that listed only critical illnesses like cancer, renal failure, major organ transplant, sclerosis, stroke, heart valve replacement and paralysis.
In a letter to the family of a mortgage insurance policyholder, HDFC Ergo had written: “As the said ailment (Covid-19 sepsis) is not covered under the critical illness enlisted under the terms of the policy, hence this claim is being repudiated in the light of the above.”
The family took the complaint to the Consumer Dispute Redressal Commission. The commission has now asked the company to deposit Rs 20 lakh loan amount and Rs 10,000 for mental agony and legal expenditure accrued by the complainant.
The commission asserted that COVID was a critical illness and the insurer was wrong in not considering it so.
Most health insurers in India have a list of 8–20 medical conditions listed as critical illness for their fixed-benefit policies. Insurers have been making claims processes stringent amid mounting loss ratios following the second wave.
Several injurers operating in health segments in India have reported losses in the June quarter for the first time in years. This has forced insurers to now protect their books.
The Insurance Regulatory and Development Authority of India (IRDAI) issued a circular in March 2020, asking all general and health insurers to “expeditiously handle” COVID hospitalisations. Experts feel the wording of the circular has left space for ambiguity, which is leading to the denials.