Insurance Companies Rejecting Claims on Baseless Grounds, IRDAI Must Step in: Punjab Consumer Forum
Bar  and  Bench 05 June 2024
The State Consumer Disputes Redressal Commission, Punjab recently flagged concern that insurance companies were rejecting claims of customers on baseless grounds.
 
The Commission President Justice Daya Chaudhary and Member Simarjot Kaur stressed that the Insurance Regulatory and Development Authority of India (IRDAI) must curtail the "hands of insurance companies" who were using unfair means in processing the claims and harassing the customers.
 
The IRDAI should issue strict directions to insurance companies so that the rights of the insured are safeguarded and the claims of the insured or their nominees are scrutinised in a transparent manner, the Commission said.
 
"We deem it appropriate to observe that most of the insurance claims are rejected by the Insurance Companies on baseless grounds. The same act had been done by the Insurance Company in the present case, therefore, we feel that there is urgent need to enforce the strict provisions, which may safeguard the genuine rights of the insured and complete transparency in the processing of claims," it observed.
 
The observations were made by the State Consumer Commission while dealing with two appeals moved by HDFC ERGO General Insurance Company Ltd and HDFC Bank Ltd against an order passed on a consumer's complaint by a district consumer commission.
 
The consumer complaint was filed by one, Shubh Lata. Her husband had taken a housing loan from the HDFC Bank in 2019. On the advice of bank officials, he also insured his loan by purchasing the loan credit assure policy of HDFC ERGO General Insurance. 
 
In 2021, Lata's husband passed away due to renal failure and acute kidney injury. Therefore, she asked HDFC ERGO to repay the housing loan since it was secured under its credit assure policy. 
 
However, the claim was repudiated on the ground that her husband's medical condition was not covered under the "Major Medical Illnesses" mentioned in the policy. 
 
A district consumer commission in 2022 held that HDFC ERGO had arbitrarily rejected the claim in connivance with the Bank. 
 
It thus restrained the Bank from demanding the unpaid amount from the complainant and instead ordered the insurer to pay the balance amount of the loan. The decision was challenged before the state commission. 
 
After hearing the arguments, the state commission considered the question of whether the cause of death of Lata's husband fell under the category of "major medical illness" as mentioned in the policy.
 
To answer the question, it looked at the definitions of acute renal failure and chronic kidney disease.  
 
"In Dorland's Illustrated Medical Dictionary the word 'Acute' has been defined as 'having a short and relatively severe course' and on the other hand 'Chronic' has been defined as 'persisting over a long period of time'. Meaning thereby that the acute diseases are sudden and unexpected," it noted.
 
In the present case, the state commission found that the complainant's husband suffered from chronic liver disease and hepatorenal syndrome (liver and kidney disease).
The disease of the patient was of a complicated nature. Therefore, it ought to have been covered under the category of "major medical illness", the Commission opined while considering other medical literature. 
 
"No cogent reason or evidence has been placed on record by the appellants-insurance company, which can justify the repudiation of the genuine claim of the complainant/ respondent No.1. The district commission had rightly held that the insurance companies often reject the genuine claims on frivolous grounds," the state commission thus concluded.
 
On HDFC Bank's separate appeal against the district commission order restraining it from recovering the loan, the state commission said that the Bank has every right to claim the loan since the functions of the Bank and the insurance company are totally independent.
 
However, it clarified that the complainant is entitled to the claim lodged by her with the insurance company, which the state commission said is bound to settle the loan amount. 
 
"Therefore, First Appeal No.788 of 2022 is partly allowed and the directions issued by the district commission restraining the appellant-HDFC Bank is modified to the extent that the said Bank can claim the outstanding loan amount from either of the parties i.e. HDFC ERGO General Insurance or from Shubh Lata-Complainant. The liability of compensation of Rs10,000 and litigation expenses of Rs5,000 as fastened qua HDFC Bank is set-aside qua it," it ordered.
 
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