The Supreme Court of India has held that renewal of a mediclaim policy, particularly by Senior citizens could not ordinarily be refused on the ground that the insured contracted a disease during the period of existing policy and that they made claims for that ailment.
A Bench consisting of Justice S.B.Sinha and V.S.Sirpurkar said a policy should ordinarily be renewed subject to such exceptions, though it was not an automatic process. It pulled up the United India Insurance Company and the New India Assurance Company for arbitrary denial of renewal,(in the present petitions)on the only ground that claims were made in the existing policy.
The Supreme Court dismissed the appeals by the two companies challenging the judgment of the Delhi and Gujarat High Courts which quashed orders refusing renewal of Mediclaim policies.It awarded Rs 25,000 each each to the two respondents.
The Supreme Court held that the action of the authorities was highly arbitrary, the conditions precedent prior to the cancellation of the policy were not fulfilled, the terms of the exclusion clause was resorted to without giving effect to the terms of it.
The Bench also held that what was necessary is a pre-existing disease when the cover was inspected for the first time. Only because the insured had started suffering from a disease, the same would not mean the disease should 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 also held that the appellants are bound to act fairly and reasonably in the matter of renewal of policies and the wrongful refusal on their part must be an act of mischief resorted to cause harm which must be remedied.
Justice Sinha observed that despite of the new economic policy of the Centre, the insurance campanies have different role to play and they are bound to regulate all contracts of insurance having the statement of Directive Principles in mind but here cannot be any doubt whatsoever that fairness or reasonableness on the part of the companies must appear in all of their dealings.There should not be any hidden agenda and the Insurance companies should not take recourse to ticketing contract.
The Supreme court directed the IRDA to lay down clear guidelines on renewal of policies which would be applicable to all players. It also directed IRDA to consider the matter in depth and undertake a scrutiny of such claims so that if it was found that the companies were taking recourse to arbitrary methodologies in entering into contracts of insurance or renewal and also to take appropriate steps.
The above judgment is significant because the Insurance Companies have been arbitrarily dealing with the cases of mediclaim policies to the extent that mediclaim policy holders in fact rued over their mistakes of opting for mediclaim policies, since their claims were invariably rejected on the pretext of one reason or another by the insurance companies.