Want to avoid insurance claim rejection?

Then don't just sign the form and expect the insurance agent to do the rest. That can prove costly, says Mukesh Kumar, Executive Director, HDFC ERGO General Insurance Company

With ever-rising costs of medical treatments and hospitalisation, health insurance plan is no more an option; it is a necessity. Yet, it's often seen that enough care is not taken at the time of taking a health insurance. Insurance claims, at times, get rejected because policyholders fail to provide all necessary information upfront -- sometimes intentionally, and most of the times, out of ignorance.

The business of insurance is based on the doctrine of utmost good faith, which requires that the applicant discloses all relevant information upfront, at the time of taking insurance. This means if you are applying for health insurance, you are required to correctly disclose all your lifestyle and occupation-related information and any health-related problems you or your family members may have had to the best of your knowledge. (In the same token, even the insurance agent selling the coverage must disclose all the critical information you need to know about your contract and its terms.)

The seeds of a potential rejection could be sown at the time of filing the insurance application form. Apart from understanding the product, its span of coverage and inclusions/exclusions, it is essential that you fill the application form yourself, and don't get your insurance agent do the job. Just signing the form and expecting the insurance agent to do the rest can prove costly. Remember, when you sign on the dotted line, you are declaring that you have understood all policy features and its terms and conditions.

It is advised that customers should not try to improve chances of getting insurance policy; instead they should focus on ensuring that there are no surprises at the time of claim. The best way to ensure that is to provide correct information at the time of taking the policy. The declarations in the application form are the basis on which the insurance companies underwrite policies, i.e., assess the risk and calculate the premium to cover that risk. When you file for a claim, the insurer checks the authenticity of these declarations. Furnishing incorrect information or suppression of facts can be a cause of rejection.

The insurance contract is valid only if the information disclosed in the insurance contract by both parties is correct. If a party fails to adhere to the principle of Utmost Good Faith, the outcome of the claim may be jeopardised.

Here are some crucial nuggets of information that MUST be disclosed in the proposal form for avoiding surprises at the time of claims.

Personal health

It is important that the insurer knows everything possible about the current state of your health. A policyholder's claim could be rejected if hospitalisation is due to a pre-existing condition that was not disclosed at the time of taking insurance.

If an applicant is suffering from a known chronic or terminal health condition, then her/his application will be certainly rejected as insurance protects policyholder against an unknown risk; not a known one.

Medical history

One's medical history gives insights into the possibilities of the applicant developing medical condition in the future. The applicant's medical history is carefully scrutinised to assess the long-term costs of financing health care. If an applicant has a history of illness, it must be disclosed upfront. While disclosing correct medical history means higher premium, there will not be any surprises at the time of claims.

Family history

The underwriters not only need to know about the applicant's individual medical history, they need to know about their family's medical history as well. A critical illness of an immediate family member/s could make an insurance company wary. This is because some illnesses can be hereditary. They consider such cases carefully and include this point during the risk assessment process.

However, all family histories need not have a negative impact. Only certain types, especially genetic, are viewed as risky. So are cases where both parents are suffering from the same disease/disorder, and therefore, there is high probability that it can also affect the applicant's health.

Smoking/Tobacco habit

All insurance application forms will need to know if you are or have been smoking. Logically, addictive substances such as tobacco and alcohol impact health adversely. So, if you are a tobacco user, insurers must know. The premium depends on the frequency, the type of consumption, the quantity consumed as well as the period for which you have been addicted.

Depending on the underwriter's assessment, the insurance company can take a call on whether to extend the cover to such applicant and at what premium. You may not be at part with a non-smoker even if you've quit smoking years ago. Effects of smoking take some years to go away even after you quit smoking. You must disclose all the details to the insurer, whose assessment will be based on factors like duration for which you were addicted and the effect the habit has had on you.

Occupations

Occupational risk is a key measure to evaluate wellness and risk of accident. People in sedentary jobs or those who are exposed to chemicals due to their occupations are more prone to cardiovascular diseases. So, the nature of work is important for risk assessment. The premium also depends on the occupational details. The basic premium is calculated considering normal risk.

Any increased risk is covered by additional premium. There is additional premium for individuals in hazardous occupations or those who have riskier hobbies. The insurer can even refuse them coverage.

Insurance is not meant to cover something that is certain or obvious -- else the industry will not sustain. One should take a health insurance policy to get covered from future health problems. But people tend to take health insurance after a health problem is discovered. Covering such conditions would be against the ethics and economics of insurance business. The ideal time to take a health insurance is when one is healthy and fit; to make sure they get covered for any long-term medical issues.

Illustration: Dominic Xavier/Rediff.com