Monday, November 25, 2013

Insurance co can’t unilaterally change policy terms

Background: Insurance companies unilaterally and surreptitiously change policy conditions without the knowledge of the insured. When a dispute arises, the company claims that it is a yearly contract and it has the right to revise the terms governing the policy. Insurers adopt a “take it or leave it” attitude, and claim that the policy holder can opt out if he/she does not agree to the revised terms. This is patently illegal.

Case study: 
Jayshree Shah had first taken a medical insurance policy of New India Assurance in 1999. Later, the insurance company changed it to ‘Hospital benefit policy/ Mediclaim Policy 2007’, with revised terms and conditions. This policy was also renewed and premiums for 2011-12 were paid. After Jayshree fell ill and was hospitalized, she lodged a claim for Rs 29,155. The insurance company’s TPA, Health India, processed the claim and sanctioned Rs16,879, disallowing an amount of Rs12,276 under the revised terms and conditions. Jayshshree protested against this deduction, contending the claim ought to be paid according to the original terms when the policy was first taken. She filed a consumer complaint through the Consumers Welfare Association.

The insurance company contested the case, saying that it had the right to change the terms and conditions, and the insured was free to opt out if the terms were not acceptable. The South Mumbai District Forum,
in its judgment of September 27, 2013 observed that the policy stated that it was issued on the basis of a proposal form and declaration dated February 2, 1999. The original policy as issued in 1999 provided for a claim to be reimbursed up to the sum insured, without imposing any limits under each head of expense. But these terms were changed and limits were not prescribed for various heads of expenses. The forum held that such unilateral change in the terms of the policy was not permissible. It relied on the judgment of the Supreme Court in the case of Biman Krishna Bose v/s United India Insurance Co Ltd, where the apex court had observed that a renewal of an insurance policy means repetition of the original policy. The renewed policy merely extends the period of insurance on identical terms and conditions contained in the original policy. The forum then set aside the revised terms of the policy and directed the insurance company to renew the policy as per the original terms prevailing when the insurance coverage was first taken. It ordered the company to pay Shah the balance claim of Rs12,276 along with 9% interest from May 12, 2011 and Rs 5,000 as litigation cost.


Once issued, the policy terms cannot be unilaterally changed, unless specific consent of the insured is obtained for such changes.
Jehangir B Gai
(The author is a consumer activist and has won the National Youth Award for Consumer Protection. His email is

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