RJ Kesari News Desk: While insurance companies have the right to reject claims under certain conditions, they cannot deny every claim arbitrarily. If a claim is rejected without a valid legal reason, consumer courts can direct the insurer to settle the claim and even award additional compensation.

Consumer Commission Orders ₹20 Lakh Compensation

A recent ruling by the Maharashtra State Consumer Disputes Redressal Commission highlighted the responsibilities of insurance companies.

In the case, a doctor's family spent nearly ₹33.58 lakh on the treatment of their son's blood cancer. The insurer rejected the claim, alleging that the family had failed to disclose the child's temporary speech delay during early childhood and subsequently cancelled the policy.

The Commission ruled that the speech delay was neither a serious medical condition nor related to the cancer treatment. Therefore, rejecting the claim on that basis was held to be arbitrary and unlawful. The insurer was directed to compensate the policyholder.

This judgment reinforces the principle that insurers must have a valid and legally sustainable reason before denying a genuine claim.

When Can an Insurance Company Legally Reject a Claim?

Health insurance contracts operate on the principle of "Utmost Good Faith", meaning policyholders must disclose all material medical information honestly while purchasing the policy.

An insurance company may legally reject a claim under the following circumstances:

1. Non-disclosure of a Pre-existing Disease

If a customer intentionally hides a serious pre-existing illness and later seeks treatment for that same condition, the insurer may reject the claim.

2. Treatment Not Covered Under the Policy

Claims may be denied if the treatment or illness falls under the policy's exclusions.

3. Waiting Period Not Completed

Many health insurance policies have waiting periods for specific illnesses. Claims made before the waiting period ends can be rejected.

4. Fraud or Fake Documents

Submitting forged medical bills, manipulated records, or false information is a valid ground for claim rejection.

5. Policy Has Lapsed

If the premium has not been paid on time and the policy has lapsed, the insurer is not obligated to honour the claim.

When Is Claim Rejection Considered Unfair?

Consumer courts have repeatedly clarified that insurance companies cannot reject claims based on technical objections or assumptions.

A claim rejection may be considered unfair if:

• The undisclosed information has no connection with the illness for which treatment was taken.
• The insurer makes allegations but fails to prove them.
• The insurer conducted its own medical examination before issuing the policy.
• The company renewed the policy for several years and later rejected a claim on the same old disclosure issue.
• The insurer misinterprets policy terms to avoid payment.

In such situations, consumer forums may order the insurer to settle the claim and pay additional compensation for deficiency in service.

What Should You Do If Your Claim Is Rejected?

If your health insurance claim is denied, don't assume the insurer's decision is final.

You can:

• Ask the insurer for a detailed written explanation.
• Review your policy terms carefully.
• Submit additional medical records or supporting documents, if required.
• File a grievance with the insurer's grievance redressal cell.
• Escalate the matter to the Insurance Ombudsman, if applicable.
• Approach the Consumer Commission if you believe the rejection is unjustified.

Tips to Avoid Health Insurance Claim Rejection

To improve the chances of a smooth claim settlement:

• Disclose all medical history honestly while buying the policy.
• Read policy exclusions and waiting period clauses carefully.
• Keep copies of all medical reports and hospital bills.
• Pay premiums on time to keep the policy active.
• Inform the insurer promptly in case of planned hospitalization, wherever required.

Know Your Rights as a Policyholder

Insurance companies are expected to assess claims fairly and in accordance with policy terms and applicable regulations. They cannot reject genuine claims simply on technical grounds or unrelated medical issues.

If a claim is denied without sufficient justification, policyholders have the legal right to challenge the decision and seek compensation through the appropriate dispute resolution mechanisms.