An insurance policy cannot be changed at the whims and fancies of the insurance company, noted consumer rights advocate Jehangir Gai has said, against the backdrop of an increasing number arbitrary rejection of insurance claims due to vague policy clauses, unilateral changes to policy terms without obtaining explicit consent from policyholders and lack of accountability in the insurance sector.

Addressing a gathering in a session organised by Moneylife Foundation here Thursday, Gai highlighted widespread systemic issues in the insurance sector and  hurdles being faced by consumers when dealing with insurers.

“It is the responsibility of the insurer to clearly communicate and obtain approval for any modifications,” he said.

Referring to a landmark ruling by the Delhi High Court in 'United India Insurance vs. Jay Prakash Tayal', which barred insurers from rejecting claims related to genetic disorders, he said the judgment is a significant step forward in protecting policyholders, though its future hangs in the balance as the matter is pending review in the Supreme Court.

He highlighted other systemic issues like failure of agents to properly guide customers or misrepresent critical details of policies. He said delay caused by third-party administrators in approvals of cashless treatment results in time lag for hospitals which leaves patients and their families in financial distress or denial of treatment.

Gai also pointed out that rulings by ombudsmen are often inconsistent, with decisions varying based on individual interpretation rather than clear, uniform standards. Additionally, many consumers face challenges in navigating the grievance redressal process itself. He highlighted that lack of awareness about insurance claim procedures and the options available for dispute resolution prevents policyholders from seeking appropriate remedies.

“The insurance sector is bound by consumer protection laws, and when claims are unjustly denied, policyholders have the right to approach the insurance ombudsman, who can ensure that the insurer complies with the law and upholds the consumer’s right to fair treatment,” said Gai.

He emphasised the importance of reading the insurance policy carefully and thoroughly before signing and said that understanding the terms and conditions upfront can prevent a lot of trouble down the line. Ensuring clarity on policy exclusions, renewal terms and coverage details can save policyholders from disputes later on, especially if an insurer attempts to alter terms unilaterally.

He also recommended keeping meticulous records of all communication with insurers, including emails, letters and notes from phone calls, as this documentation can serve as critical evidence if a dispute arises. In case of unfair decisions or claim denials, the consumer advocate encouraged policyholders to challenge the decisions, starting with the insurance ombudsman. While the system has its flaws, it offers a quicker alternative to going straight to court. If necessary, disputes can be escalated to consumer forums for further recourse, cautioning that the process can be time-consuming and complicated, particularly after the 2019 amendments.

He also stressed the importance of understanding limitation periods for filing complaints. “The clock starts ticking from the date the insurance company sends its final rejection notice, not from the initial denial, which can make a significant difference,” he said and advised policyholders to stay alert and take timely action to ensure that their claims are not jeopardised by delays in the process.