Pre-existing hypertension, an expired waiting period and proportionate deduction
A 58-year-old policyholder bought an individual health indemnity policy with a sum insured of Rs 10 lakh in March 2021. The wording declares a 36-month waiting period for pre-existing diseases, a room-rent limit of 1% of sum insured per day, a 10% co-payment, and a clause stating that consumables and implants are not subject to the room-rent proportionate deduction. At proposal the insured answered "nil" to the hypertension question.
In August 2025 he undergoes angioplasty with one drug-eluting stent. The bill is Rs 4.85 lakh: room rent of Rs 12,000 per day for five days, associated charges (surgeon, anaesthesia, operation theatre, investigations) of Rs 3.30 lakh, and pharmacy plus stent of Rs 0.95 lakh. The TPA's investigation finds a 2019 prescription for telmisartan from a walk-in clinic and a 2020 hospitalisation claim with another insurer coded as essential hypertension, neither disclosed. The policy has run 53 months; the wording provides a 60-month moratorium.
1. Assuming the claim is otherwise admissible, compute the payable amount, showing the effect of the room-rent limit, the proportionate deduction and the co-payment.
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Step 1 - Room rent. Limit is 1% of Rs 10 lakh = Rs 10,000 per day. Actual is Rs 12,000 per day for five days = Rs 60,000. Admissible room rent = Rs 10,000 x 5 = Rs 50,000.
Step 2 - Proportionate deduction on associated charges. The reduction factor is allowed room rent / actual room rent = 10,000 / 12,000 = 0.8333. Associated charges of Rs 3.30 lakh become 3.30 x 0.8333 = Rs 2.75 lakh.
Step 3 - Pharmacy and implant. Rs 0.95 lakh is expressly excluded from the proportionate deduction, so it is admitted in full: Rs 0.95 lakh.
Step 4 - Sub-total. 0.50 + 2.75 + 0.95 = Rs 4.20 lakh.
Step 5 - Co-payment. 10% of 4.20 = Rs 0.42 lakh. Net payable = Rs 3.78 lakh.
Check: the amount is within the Rs 10 lakh sum insured, so no further reduction. The trap in this kind of question is to apply the proportionate deduction to the implant and pharmacy as well, or to apply the co-payment before the room-rent adjustment. Both give a different and wrong answer.
2. Advise the insurer on whether it can repudiate for non-disclosure, and on the relevance of the waiting period and the moratorium.
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There are three separate questions and they must not be merged.
1. Materiality of the non-disclosure. Hypertension treated with a single drug and a 2020 hospitalisation is material to underwriting: it would ordinarily have attracted a loading, an exclusion or a longer waiting period. The "nil" answer is a misrepresentation, not a trivial omission.
2. The waiting period has already expired. It ran for 36 months from March 2021, that is, to March 2024. Had the hypertension been disclosed and accepted as a pre-existing disease, angioplasty in August 2025 would now be covered. The non-disclosure therefore produced no premium advantage that persists today and did not affect the claim's admissibility as a pre-existing condition - the only real question is whether the insurer would have issued the policy on different terms at all.
3. The moratorium. At 53 months the policy is inside the 60-month moratorium, so the insurer is not yet barred from raising the non-disclosure. Once the moratorium runs, repudiation would be confined to proven fraud, which is a higher bar than mere non-disclosure.
Judgement. A outright repudiation is legally arguable but commercially and regulatorily exposed: the insurer accepted premiums for 53 months, the condition is common and treatable, and the waiting period has run. The proportionate and defensible course is to pay the claim while applying the underwriting terms that would have applied at inception - for example a loading recovered prospectively, or a permanent exclusion for cardiac conditions going forward - and to reserve the right to repudiate if the investigation reveals deliberate suppression rather than a forgotten prescription.
3. Draft the substance of the insurer's reply to the insured and identify the complaint risk if the file is handled badly.
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Substance of the reply. Acknowledge the claim and the hospitalisation. State that in the course of assessing it the insurer became aware of the 2019 prescription and the 2020 claim, and invite the insured's explanation within a stated period before any decision is taken - do not repudiate and then investigate. Confirm the claim's admissibility on the pre-existing disease ground, since the 36-month waiting period expired in March 2024. Set out the computation transparently: room rent capped at Rs 10,000 per day, proportionate deduction of 16.67% on associated charges, full admission of pharmacy and stent, and the 10% co-payment, arriving at Rs 3.78 lakh. State the moratorium position factually without threatening. Invite further documents and give the grievance and ombudsman routes.
Complaint risk. The two failures that generate awards against insurers are a repudiation issued before the insured is heard, and a settlement figure explained only as a lump sum. Here the computation is complex; if the insured cannot see why Rs 4.85 lakh became Rs 3.78 lakh, he will assume the difference is a penalty for the hypertension finding. Send the working. Also note the timing: a claim decided in the shadow of a disclosure investigation will be read as retaliation unless the two issues are dealt with separately and in that order.