There’s good news on the health insurance front, thanks to a recent notification (March 20) from the Insurance regulator, IRDAI. One relates to lowering of the waiting period for pre-existing disease to a maximum of 36 months and the other, to the lowering of the moratorium period of 60 months. We explain the two changes and how policyholders can benefit from the same.

Pre-existing disease

Pre-existing disease or PED are diseases that have been already diagnosed by the time of policy issuance. Insurers will cover any medical care for these diseases only after a waiting period. That used to be four years (ie 48 months prior to the onset of the cover) prior to the notification but will be reduced to three years (36 months) now This implies that policyholders can wait for a shorter time, to cover PEDs. As health insurance policies are yearly contracts, existing policyholders with PEDs can expect their waiting periods to be shortened by a year in new contracts.

PEDs are generally chronic diseases, including diabetes, asthma, heart and kidney diseases, high blood pressure or arthritis. Any other disease not part of PED list and which is diagnosed in the policy period is covered under a valid health insurance after an initial waiting period of 30 days. Even induced claims (complicated by PED or resulting from PED) may be reimbursed on a case-to-case basis.

At the time of issuance, either by medical screening or by self-disclosure, a policyholder has to ensure that the right and accurate information is conveyed to the insurer. Otherwise, a health insurance claim from a PED can be rejected, and in some cases even the policy may lapse.

At the time of porting (when policyholders can switch insurers), the PED waiting period is an asset which also can be ported. IRDAI regulations already allow for completed PED waiting periods to be ported to a new insurer, along with the coverage, under already existing regulations. With the new regulations in force for the new contracts, that remaining period will be carried forward and shortened by a year. For instance, a policyholder completing two years of waiting period can port to a new policy and will have to wait out only the remaining period (one year) even in the new policy.

That said, policyholders shoud note that while the new regulations limit the maximum waiting period to three years, on ground, many health policies have moved to shorter waiting periods already. There are policies offering three, two, one or day one coverage, by way of an add-on rider or by the basic feature of the policy itself.

Shortened moratorium

According to the new regulations, after a moratorium period of five years from policy issuance (earlier, eight years), no health insurance policy can be contested on grounds of non-disclosure or misrepresentation, when a claim is made. This implies that, after a certain period, if a disease was not indicated by the policyholder — unintentionally, the insurer cannot reject a claim. That period has been shortened from eight to five years.

The period of five years is applicable on the first coverage amount. However, any enhancement of the coverage amount after policy issuance will have to complete five years to overcome the moratorium period. Similar to PED waiting period, this is applicable even in case of porting or migration.

Both the waiting periods — PED and moratorium — rely on disclosure at the time of policy issuance, and are an important aspect for policyholders to understand. Even if a policyholder was diagnosed with a disease which was cured at the time of issuance, it has to be disclosed to the insurer. A diagnosis after policy issuance also has to be disclosed for renewal. Thus, it is essential to intentionally disclose all relevant health information at policy issuance. Unintentional non-disclosure, where even the patient is not aware of a disease, symptoms, or other markers, should not impede claims. But intentional non-disclosure can complicate claims and should not be attempted.

Customer-friendly

Siddharth Singhal, Business Head - Health Insurance at Policybazaar.com, feels that both these moves are customer-friendly. With PED shortening, customers will have to serve less time before covering all health risks, including PEDs. And with moratorium of five years, which is a good enough time to know the medical history of customers, insurers cannot reject a claim on account of non-disclosure.

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