Mr. Alok Verma’s father was diagnosed with a severe case of dengue and was admitted to the “Apex Care Hospital” in the city of Nagpur. Mr. Verma had diligently paid premiums for a health insurance policy from “EverSafe General Insurance” for his parents for the last five years. The policy had a sum insured of ₹10 lakhs for each parent and included an add-on to cover pre-existing conditions. Confident in his coverage, he chose Apex Care Hospital, a network hospital. On the first day of admission, EverSafe Insurance sent an email confirming pre-authorization for the claim. However, after an eight-day hospital stay and a bill amounting to approximately ₹6.5 lakhs, Mr. Verma received a shocking email on the seventh day. The insurance company had rejected the claim, citing a “pre-existing illness,” despite the specific add-on he had purchased. Forced to pay the entire bill out of pocket, Mr. Verma was left traumatized and sought legal guidance on how to proceed against the insurance company, having preserved all email correspondence as proof.

Advice in such cases

Dealing with an arbitrary rejection from an insurance company can be distressing. Here is a structured approach to address the situation:

• Gather all documentation, including the policy, premium receipts, hospital bills, medical records, and all communications with the insurer.
• Carefully review the terms and conditions of your insurance policy, paying close attention to the clauses on pre-existing diseases and the add-on cover you purchased.
• Send a formal, written complaint to the Grievance Redressal Officer (GRO) of the insurance company. If their response is unsatisfactory or you don’t hear back within 15 days, you can escalate the matter.
• Approach the Insurance Ombudsman, a quasi-judicial body that resolves disputes between policyholders and insurance companies.
• File a complaint in the appropriate Consumer Dispute Redressal Commission for ‘deficiency in service’.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

Several laws and regulations protect the rights of a policyholder in India. The primary legal frameworks applicable here are:

• The Consumer Protection Act, 2019: This is the most potent tool for policyholders. An unjust rejection of a claim is considered a “deficiency in service” under this Act. You can file a complaint in the consumer commission seeking the claim amount, along with compensation for financial loss and mental agony.
• The Insurance Act, 1938 and IRDAI (Protection of Policyholders’ Interests) Regulations, 2017: These regulations set the rules for insurance companies. Section 45 of the Insurance Act states that a policy cannot be called into question on grounds of misstatement after three years. The IRDAI regulations mandate fair and transparent claim settlement processes.
• The Indian Contract Act, 1872: An insurance policy is a contract of ‘utmost good faith’. If the insurer violates the terms of this contract arbitrarily, it can be legally challenged.
• Bharatiya Nyaya Sanhita (BNS), 2023: While insurance disputes are primarily civil, if there is evidence of deliberate fraud or cheating on the part of the insurance company (e.g., inducing the policyholder with false promises), a criminal complaint could be filed under relevant sections like Section 318 of the BNS (Cheating). However, proving criminal intent is difficult, and the consumer forum is the more direct route.

If you are the complainant

If you find yourself in Mr. Verma’s position, here are the steps to take as the complainant:

• Organize all your documents chronologically. Create a timeline of events from policy purchase to claim rejection.
• First, formally communicate your grievance to the insurance company’s designated grievance cell. Use email or registered post for a paper trail.
• If the insurer does not resolve the issue, file a complaint with the Insurance Ombudsman of your region. This process is free of cost.
• Simultaneously or alternatively, you can proceed to file a case in the consumer court.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

As the victim of an unfair trade practice by an insurance company, focus on building a strong case:

• Preserve every piece of evidence. The initial claim approval email followed by a rejection is a very strong piece of evidence in your favour.
• Keep meticulous records of all expenses incurred due to the claim rejection, including the hospital bill you paid.
• Document the mental harassment and financial strain this has caused. This will be crucial when claiming compensation.
• Do not engage in verbal arguments with insurance representatives. Keep all communication in writing.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

The police generally do not get involved in matters of insurance claim rejections. This is because such disputes are considered civil in nature, stemming from a contractual disagreement. The police will direct you to approach the appropriate civil forum, which is the consumer commission or the courts. They would only register a First Information Report (FIR) if you can provide concrete evidence of a criminal offense like forgery of documents by the insurance company, criminal breach of trust, or a widespread, organized racket of cheating, which is rare and difficult to prove in individual claim rejection cases.

FAQs people normally have

• Can an insurer reject a claim after issuing a pre-authorization?
  While pre-authorization is not a final guarantee, an insurer cannot reject the claim arbitrarily after issuing it. They must provide a valid and substantial reason that was not apparent during the pre-authorization stage. A rejection on grounds that should have been clear initially (like a pre-existing condition in a long-held policy) is weak and can be challenged effectively.
• What is the time limit to file a consumer complaint?
  A complaint must be filed with the Consumer Commission within two years from the date the cause of action arose. In this case, it would be two years from the date the insurance company sent the final rejection email.
• Should I go to the Ombudsman or the Consumer Court first?
  You can choose either path. The Ombudsman is often a faster and less formal process. However, the orders of the Consumer Commission are legally binding and have a more robust appeal structure. You cannot pursue both remedies simultaneously for the same grievance.

What evidence is required?

To build a strong case against the insurance company, you will need the following evidence:

• The original health insurance policy document.
• Proof of all premium payments made over the years.
• The hospital’s admission advice, discharge summary, and final bill.
• All medical reports, lab tests, and prescriptions related to the treatment.
• All email and written correspondence with the insurance company and their Third-Party Administrator (TPA), especially the pre-authorization approval and the final rejection letter.
• A copy of the proposal form you filled out when purchasing the policy, if available.

How long will the investigation take?

The timeline for resolution can vary:

• Insurance Ombudsman: The process is designed to be swift, with a typical resolution period of one to three months.
• Consumer Commission: The duration can be longer. A case in the District Commission may take anywhere from 6 months to over 2 years to reach a final decision, depending on the complexity of the case and the caseload of the commission.

Advocate Sudhir Rao, Supreme Court of India