Portability, PED Waiting-Period Credit and Room-Category Deduction
Mr Anil Kulkarni, 47, bought a ₹10,00,000 family floater from Insurer A on 1 April 2021. He declared Type 2 diabetes, diagnosed in 2018, at proposal; Insurer A applied a three-year pre-existing disease (PED) waiting period, which expired on 31 March 2024. On 1 April 2024 he exercised portability to Insurer B for a ₹12,00,000 sum insured, declaring the diabetes again, and has held the policy without a break since.
Insurer B's wording reads: PED waiting period "three years, credit being given for the waiting period already served with the previous insurer where portability is availed"; room entitlement "single private room"; and "where the insured occupies a room of a higher category, all charges under the claim shall be reduced in the proportion that the entitled room rate bears to the actual room rate".
Between 12 and 18 January 2025 he was admitted to a Pune hospital for an infected diabetic foot ulcer - seven days in a deluxe suite at ₹11,000 a day, when a single private room in the same hospital cost ₹5,000. The total bill was ₹2,60,000, of which ₹77,000 was room charges. Insurer B repudiated the entire claim, saying the PED waiting period runs to 31 March 2027.
1. Is Insurer B's repudiation on pre-existing disease grounds sustainable? Set out the reasoning you would put in a written reply to the insured.
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No. The repudiation confuses two different dates - the start of cover with Insurer B and the start of continuous cover.
Portability exists precisely so that the waiting-period credit earned with the previous insurer travels with the insured. Mr Kulkarni declared the diabetes at inception in 2021, served the full three-year PED waiting period by 31 March 2024, and ported on 1 April 2024 with no break in cover. The PED waiting period was therefore already satisfied on the day Insurer B's policy began. Insurer B's own clause says credit is given for the waiting period already served; reading it as restarting a fresh three-year clock would make the portability right illusory. The regulatory framework caps PED waiting at 36 months and does not permit a fresh waiting period on portability where continuous coverage is maintained.
The correct handling is to treat this as an admissible PED-related hospitalisation and then apply the policy's other terms - the room-category proportionate deduction and any non-payable consumables. Two checks should still be made before admitting: that the portability application was filed within the prescribed window at renewal, and that no premium instalment was missed, because a lapse would convert this into a fresh policy.
2. Compute the amount payable, showing each step of the room-category adjustment.
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The entitlement is a single private room at ₹5,000 a day; the insured occupied a deluxe suite at ₹11,000 a day. The reduction factor is 5,000 ÷ 11,000 = 5/11.
Method 1 - item-wise:
- Room: 7 days × ₹5,000 = ₹35,000 allowed (against ₹77,000 billed).
- Other charges: ₹1,83,000 × 5/11 = ₹83,181.82.
- Total = ₹1,18,181.82.
Method 2 - on the whole bill: ₹2,60,000 × 5/11 = ₹1,18,181.82. Both give the same figure because the room charge itself is scaled by the same ratio, which is why the wording applies the proportion to "all charges under the claim".
Amount payable ≈ ₹1,18,182, subject to any non-payable consumables being deducted first and to the sum insured of ₹12,00,000 (not binding here). Note what proportionate deduction does: a ₹77,000 room choice against a ₹35,000 entitlement costs the insured roughly ₹1,41,818 in total, not ₹42,000 - that is the point most insureds miss and the point worth explaining in the settlement letter.
3. Assume instead that the diabetes was never disclosed at portability and that Insurer B discovered the 2018 records while processing the claim. How would your advice change?
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The answer shifts from contract interpretation to the moratorium.
Count continuous coverage: 1 April 2021 to the January 2025 claim is roughly 46 months. The moratorium against repudiation for non-disclosure or misrepresentation is 60 months of continuous cover, and the period runs across insurers where portability has been used. The claim therefore falls inside the moratorium, so Insurer B is not barred from repudiating on material non-disclosure grounds - provided it follows due process: written reasons, a refund of the premium as prescribed, and a finding that the suppression was material to the underwriting decision (undisclosed diabetes in a ₹12,00,000 floater plainly is).
Two qualifications matter. First, had the claim arisen after the 60-month point, repudiation would be closed off except in cases of proven fraud, which is a higher evidentiary standard than mere non-disclosure. Second, even inside the moratorium, a repudiation that ignores the causal link or the insurer's own failure to seek medical records can be upset in grievance redressal, so the file should record the underwriting judgement of what premium or exclusion would have applied had the truth been told.