The Diabetes Non-Disclosure Claim
A health policy issued in March 2019 by a general insurer was renewed every year without a break. In January 2024 the policyholder was hospitalised for 11 days and the insurer settled only part of the ₹4.2 lakh bill, rejecting the balance on the ground that the policyholder had not disclosed a history of diabetes at proposal stage. The proposal form was filled in by an agent; the policyholder signed it without reading the health questions. The insurer says the non-disclosure was material; the policyholder says the agent told him that 'minor lifestyle conditions need not be mentioned'. The policy is now in its sixth year. The branch has received a written complaint, and the customer threatens to go to 'the IRDAI office in Mumbai' unless the claim is paid within a week.
1. Is the insurer's rejection automatically valid because the policyholder signed the proposal form? Explain the relevance of the three-year rule and the health-insurance moratorium.
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Signature on the proposal form is evidence that the declaration was made, but it does not make rejection automatic. The insurer must show that the non-disclosure was material, that it related to a question actually asked, and that the policyholder knew the fact. An agent-filled form and the agent's oral assurance are relevant evidence, although an agent cannot ordinarily waive the insurer's right to full disclosure.
For life insurance, Section 45 of the Insurance Act, 1938 prevents the insurer from calling a policy in question after three years from issuance or renewal on the ground of misstatement or fraud, unless fraud or a material misstatement known to the policyholder is proved. Health insurance works through a moratorium rule in the applicable product regulations: after the prescribed period, the insurer generally cannot repudiate the policy for non-disclosure except in proven fraud. The exact moratorium period must be checked in the current regulations and policy wording.
Here the policy is in its sixth year, so the insurer cannot rely only on the signed declaration. It must prove fraud or a material misstatement known to the policyholder. The claim is not automatically payable either; the facts must be examined.
2. Identify the correct grievance-redressal route and the main error in the customer's threat.
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The customer should first make a written complaint to the insurer's Grievance Redressal Officer. If he receives no satisfactory reply within the prescribed period, or if the complaint is rejected, he can approach the Insurance Ombudsman under the Insurance Ombudsman Rules, 2017; a ₹4.2 lakh claim is within the Ombudsman's pecuniary jurisdiction. He may also go to a consumer commission or a court, but that is generally a later and more formal route.
The main error is the threat to go to 'the IRDAI office in Mumbai'. IRDAI is the regulator, not a claims-adjudicating body, and its head office is in Hyderabad, not Mumbai. IRDAI supervises insurers and issues regulations; it does not decide individual claim disputes. The branch should correct this misconception politely and give the customer the insurer's grievance-redressal contact details rather than treat the threat as a reason to pay immediately.
3. What facts should the branch verify before deciding, and why is the agent's oral statement relevant?
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The branch should verify the proposal form and health declaration, the agent's report, the underwriting file, all renewal records, the hospital records showing when diabetes was first diagnosed, any earlier claims, and whether the agent was authorised to advise on disclosure. It should also check whether the insurer asked a specific diabetes-related question and whether the policyholder's signature was obtained on a blank or pre-filled form.
The agent's statement is relevant because it may explain why the disclosure was omitted and may support the policyholder's case that there was no dishonest intention. It is not automatically binding on the insurer, because an agent cannot usually waive the duty of disclosure. But if the agent filled the form and advised that the condition need not be mentioned, the insurer's own sales process becomes part of the evidence. The decision should rest on materiality, knowledge and any proven fraud, not on the signature alone.