The Supreme Court has ruled that public sector insurance companies cannot refuse to provide medical cover policies to those suffering from pre-existing diseases and said such an action was arbitrary, illegal and unconstitutional.
A bench of Justices S B Sinha and V S Sirpurkar also asked the Insurance Regulatory Development Authority to frame suitable guidelines to ensure that insurance companies, both from public sector and private sector, do not indulge in the unethical practice of denying medical insurance facility to the public.
The Supreme Court said that public sector insurance companies, in particular, cannot indulge in such unhealthy practice as they are 'State' within the meaning of Article 12 of the Constitution and were expected to be fair and reasonable in their dealings with the public.
"Only because the insured had started suffering from a disease, the same would not mean that the said disease shall be excluded. If the insured had made some claim in each year, the insurance company should not refuse to renew insurance policies only for that reason," the bench said in its judgement.
The Supreme Court passed the observation while dismissing a batch of petitions filed by public sector insurance companies against the Delhi and Gujarat high court directions that they had no right to deny medical insurance facility to those suffering from pre-existing diseases or diseases contracted during the subsistence of a policy.
According to the Supreme Court, when a policy is cancelled the conditions governing the contract of insurance have to be fulfilled.
Reasons must be assigned when an exclusion clause is resorted to and the terms thereof must be given effect to, the court said.
The insurance companies had come in appeal before the Supreme Court in connection with three cases in which they had refused to provide medical insurance policies on the ground that the insured persons were suffering from pre-existing diseases.
In one instance, a customer had obtained a medical insurance policy from the United India Insurance Company Limited in April, 1995 and renewed annually upon payment of the requisite amount of premium.
After over three years namely, he suffered a coronary disease and was admitted in the Escorts Heart Institute and Research Centre where he underwent 'angioplasty.' A claim made by him was paid by the insurance company.
From January 2001 to April 2002, he underwent surgeries and got medical treatment on several occasions. While the insurance company paid the claim for most procedures he underwent, it refused to pay the claim for a by-pass surgery he underwent in April 2002.
On April 3, 2003, he approached the insurance company for renewal of the policy from April 6 and issued a cheque towards payment of the premium. But the insurance company allegedly refused to renew the policy on the ground of its 'high claim ratio.'