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9 ways in which IRDA has improved your Health Insurance Policy


You know the cost of medical treatment is rising very sharply. You do realize a prolonged hospitalization or an expensive surgery can seriously dent your finances. 

Despite knowing this, if you haven’t bought a health insurance plan, you must have some pretty solid reasons.

Let me take a guess. Your reason is:

#1 I am healthy and don’t need one. That’s wishful thinking.

#2. I have from my employer. OK. Think about what happens when you quit your current job or retire.

#3 The premium is too high. I can’t afford. How will you afford expensive treatment?

#4 I am not sure if the insurer will pay the claim when the time comes. 

#5 I won’t get cashless settlement. If I don’t get cashless treatment, it defeats the purpose.

#6 When I get older, the insurer company will not renew my policy.

Well, no one except you can do much about (1), (2), and (3). However, for the last 3 reasons, IRDA has made some positive announcements that might trigger a rethink on your part. IRDA recently released a Master Circular for Health Insurance business. In the circular, it has put down a few things insurers can or can’t do in black and white. 

In this post, let’s pick up some of those changes and try to understand how these changes impact policyholders.  

#1 Your Health Insurance claim cannot be rejected after 5 years

Reproducing an excerpt from the master circular.

What does this mean?

For a treatment expense that is covered under your insurance plan, the insurance company cannot reject your claim on grounds of non-disclosure/misrepresentation if you have completed 5 years in the insurance plan.

So, if you have completed 5 years in the plan, the insurance company cannot say that it won’t pay the claim because you didn’t (or it feels that you didn’t) disclose health condition properly at the time of purchase.

Now the regulatory view is: The insurer had enough time to find out about non-disclosures. If the insurer failed, it must pay up quietly. That’s an extremely customer friendly move.

A reason why many people don’t buy insurance is that they don’t trust insurers to pay up when they actually make a claim. The insurance companies have also not covered themselves in glory on this front. There are umpteen examples of claims getting rejected on frivolous grounds. You can always contest the decision of the insurer, but this is one battle where the dice is loaded against you. Escalations to the ombudsman/IRDA don’t really help and fighting in courts is both time-consuming and financially exhausting.

Now, here is an interesting second order effect of this rule. Buying a health insurance plan at an early age has always been more rewarding. Even more now. Once you have completed 5 years in the plan, the odds of claim rejection go down drastically.

However, that does not mean the insurance company has to settle your entire hospital bills if you have completed 5 years in the plan.

Your insurance claim can still be declined (despite completing 5 years in the plan) if your insurance claim pertains to a treatment/hospitalization that your health insurance plan does not cover.  For instance, if your insurance plan does not cover dental surgery/cosmetic surgery/fertility treatment, it will not pay the claim even if you have been in the plan for 20 years.

Additionally, even for an accepted/admitted claim, there are certain non-admissible expenses. Common examples are consumables, food, diapers etc. The insurance company won’t pay for such expenses either.


The claim cannot be rejected except for “established fraud”. Does non-disclosure of medical information to buy a health plan at a lower cost constitute a “fraud”?  I don’t know the definition of fraud. Does this provide an opening to the insurers? IRDA always does. I know IRDA has specifically the keywords “misrepresentation” and “non-disclosure” while mentioning that the claim cannot be rejected after 5 years. However, the insurers, with their legal strength, can tie you up in knots with their interpretation.

That’s why it is important that you make all medical disclosures at the time of purchasing insurance. Let the insurer decide if the disclosure is material or not. Do not bank on this “5-year” as an excuse for 2 reasons.

  1. You may need medical treatment before completion of 5 years.
  2. The insurer can play this “fraud” angle even after completion of 5 years.

Note: If you enhance your health insurance coverage, the moratorium for the enhanced portion would be considered from the date of enhancement. So, you bought a cover of Rs 5 lacs in 2021 and enhanced coverage to 15 lacs in 2024. The moratorium period of 5 years will get over for the initial Rs 5 lacs in 2026 and for enhancement of Rs 10 lacs in 2029.

#2 Cashless Claim settlement

The purpose of buying health insurance gets defeated (to an extent) if you do not receive cashless treatment at the hospital.

After all, you must arrange for the funds for the treatment. You bought health insurance in the first place so that you don’t have to scramble for money for any hospitalization, especially a medical emergency.

Denial of cashless treatment defeats the very purpose. Yes, you can file for reimbursement and hope you get the money back but that’s clearly not what you signed up for. Reimbursement process is also a lot more cumbersome.

Some positive developments on this front.

Copying an excerpt.

The insurers must “strive” to provide cashless claim settlement. The regulator has further advised keeping settlements through reimbursements at bare minimum and only for exceptional cases. This is a guidance, and the insurers must do this on best efforts basis. Hope this nudge works and policyholders face lesser issues in cashless settlements.

Insurers must decide on Cashless authorization within 1 hour.  This is mandatory. Say “Yes” or “No” but do this within 1 hour.


In my limited experience, the cashless facility can be declined in 2 cases.

  1. The insurer does not have an arrangement for cashless claim with the hospital. OR
  2. The hospital simply declines to provide cashless treatment through a particular insurer. This may be because of their poor experience in recovering dues from the insurer.

The nudge from the IRDA works for (1) but IRDA does not have any control over hospitals. Here, the respective insurers and the insurance industry bodies need to work with hospitals (or their representative bodies) to iron out any issues.

IRDA, the insurance regulator, is aware of (2) and has further required the insurers to take the following steps.

Useful information to be displayed on the website so that the policyholders can take more informed decisions.

And the Para (IV) of Chapter 2 referred to be in the above image.

Clearly, IRDA is asking industry to have extensive tie-ups such that the policyholders can claim cashless facility at as many hospitals as possible.

This is a step in the right direction.

#3 Migration and Porting of Insurance Policies

Migration is when you move from Policy X to Policy Y with the same insurer.

Porting is when you move from Policy X from the current insurer to Policy Y from the new insurer.

I don’t see much change compared to the existing regulations.

In the past, I have faced issues in porting (migrating) the no-claim bonus amount to the new policy. Have had to fight for it (even though the regulations clearly allowed). It is good that credit for No-claim bonus has been clearly mentioned in the master circular.

Further, it mentions credit for Moratorium period served too.  For both shifting within the same insurer or moving to a new insurer. As I understand, this part was not specified explicitly earlier. Brings a lot of clarity. Takes away a lot of concerns while migrating/porting your health insurance policy.

#4 Some improvements in Grievance Redressal Process

If your claim has been rejected by the insurer (or not fully paid), then you can raise a complaint with the insurer. Insurers have a defined Grievance Redressal Process about how you can escalate your concerns.

However, if you believe the insurer has failed to address your concerns, you can approach the Insurance Ombudsman.

Even when the Insurance Ombudsman rules in the favour of the policyholder, the insurers tend to drag their feet in paying up.  

Now, the IRDA has added a few teeth to the regulation. Once the Insurance Ombudsman has ruled in favour of the claimant, the insurer must compensate the policyholder at the time of Rs 5,000 per day for every day of delay beyond 30 days.

Note that the insurers can still go to courts (to challenge the decision of the ombudsman), but this penalty is certainly a pro-customer move. Will at least dissuade insurers from unnecessary delays in open-and-shut cases.

#5 Quicker discharge from the hospital

A taxi meter keeps running while you wait for the green light at the traffic signal and stops only when you reach your destination.

Similarly, the hospital’s meter keeps running until you get the final discharge. The problem: You must settle the bill in full before the discharge. However, since the insurer is paying for you, the delay in approval by the insurer can delay the discharge from the hospital. Not only do you have to wait for no fault of yours, but there may also be some financial hit too.

As the hospital meter keeps running, your insurance utilization may go up. If you have to share costs with the insurer, your out-of-pocket expenses also go up.

Relief on this front too.

Going ahead, the insurers must grant final authorization within 3 hours of the receipt of discharge approval request. For any delay beyond 3 hours, the insurer must bear the additional expenses. Not from your insurance cover, but from the shareholder’s fund.

#6 Claiming from multiple policies

You may have bought multiple health insurance policies. How to manage claims across multiple policies?

Not your headache.

You select the insurance policy to claim from.  And that insurer will settle the claim.

In case the cover is less than the admissible claim amount (hospital bill), the primary insurer shall seek details of other insurance policies and must co-ordinate with the other insurers to settle the claim.

As I understand, this co-ordination among insurers will work only for reimbursement cases (and not for cashless cases).

Indemnity and Benefit based policies

Indemnity policies are policies where the insurer indemnifies you for the cost of treatment. The insurers do this by way of cashless treatment or by way of claim reimbursement. The crux is that the insurer does not pay more than the cost of treatment. Health insurance policies are a classic example. Even if you have multiple health insurance policies, the total payout across the insurance companies won’t exceed the cost of the treatment. Essentially, you can’t be paid more than the cost you incurred.

In benefit based policies, the insurer pays a fixed sum on occurrence of an insured event. If you have bought a critical illness insurance plan, the insurer company will pay you a fixed amount if you get diagnosed with a critical illness, say cancer. This payout has no relation to the cost of treatment. You may even choose not to take any treatment. Still the insurer must pay. Moreover, if you bought a critical illness plan of Rs 20 lacs from 3 insurers, each insurer must pay you Rs 20 lacs. A total of Rs 60 lacs.

#7 Proper reason for claim rejection

The insurers can be quite high-handed while dismissing your claims.

Going forward, the insurer will have to provide a detailed rationale for rejecting a claim.

Plus, a claim can only be rejected by a 3-member group. Hopefully, this will bring some sanity and transparency.

#8 Health Insurance for everyone

IRDA master circular says that insurers should offer coverage for customers of all ages or any kind of health condition.

Until now, the insurers could simply decline applications of people at higher risk of treatment, say with existing health conditions.

As I understand, with this change, the insurers must make an offer. Not sure if and how this will work. The insurers can simply work around this with extremely high premiums for risky cases. This will automatically discourage people from buying health insurance.

#9 Renewal of Health Insurance and Grace Period

  1. The insurer must allow policyholder to renew the policy, expect in cases of non-representation/non-disclosure/established fraud OR if the product is withdrawn.
  2. In case the product is withdrawn, the insurer must offer a suitable product to the policyholder. The insurers have a trick up their sleeves in this case. I have written about this in detail here. What if the “suitable” product comes with a sharp hike in premium?
  3. An insurer cannot deny renewal because you made a claim in the previous year(s). This rule existed earlier too.
  4. Taking forward from pt. 3, the insurer cannot do fresh underwriting unless there is an increase in Sum Assured. Even there, the underwriting is for the enhanced portion (and not for the existing cover).
  5. Grace period of 30 days if the renewal frequency is quarterly, semi-annual, or annual. 15 days for monthly payment. Coverage will be available during the grace period too.
  6. If the policy is renewed with the grace period, all the credits with respect to Sum insured, no claim bonus, waiting period for pre-existing illness, specific waiting periods and moratorium shall be retained.

There is an interesting point here. While the insurer cannot reject your claim on grounds on non-disclosure/misrepresentation, it can still deny renewal of your policy on these grounds.

So, you might get lucky with claim settlement (despite insurer finding about your non-disclosure). However, the insurer will decline to renew your policy if it can prove non-disclosure.

Once that happens, not many insurers will be willing to take you on board. Why?

Because you have had a medical procedure done recently. Makes you a high-risk case. To dissuade you, they can simply ask for a very high premium. Do note porting is not your right and the new insurer does fresh underwriting.

That’s it from me. I would suggest you go through the health insurance master circular. There are other changes too that might interest you.

Additional Read

  1. IRDA Master Circular on Health Insurance dated May 29, 2024
  2. Annexure to the Master Circular

Featured Image: Unsplash

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