However, a growing number of insurers seem to be ignoring this rule by asking customers to disclose their health status at the time of renewal, with the caveat that “any material change can alter the scope of coverage or premium at renewal if a policyholder discloses a major change in health condition”. While asking policyholders to report any material changes to their health upon renewal is standard practice, warning that these changes could influence premiums and other policy conditions certainly isn’t.
The number of policies with such a clause appears to be increasing as insurers now operate under the “use and file” system which replaced the earlier “file and use” system in 2022. Under the new framework, insurers are no longer required to seek approval from the regulator before introducing a plan.
But this does open the door for caveats and clauses that go against health insurance regulations, said Suresh Mathur, former executive director, Insurance Regulatory and Development Authority (Irdai).
“Health insurance regulations don’t allow for fresh underwriting at the time of renewal. Insurers should follow these guidelines, especially now that the system has moved to ‘use and file’,” he said.
Beshak.org, an independent insurance research platform, reviewed more than 50 popular health insurance products and found that 10 policies contained such wording. These included ICICI Lombard Health AdvantEdge, SBI General Arogya Supreme, SBI General Health Edge, SBI General Super Health, Acko Retail Health, ManipalCigna LifeTime Health India, Raheja QBE, Reliance General Health Gain, and Zuno Health Insurance.
Sample this from the ICICI Lombard Elevate policy document: “The insured person shall notify the company in writing of any material change in the risk in relation to the declaration made in the proposal form or medical examination report at each renewal, and the company may adjust the scope of cover and/or premium, if necessary, accordingly.”
Mint asked these insurers the reason they included such clauses in their policy documents but our queries remained unanswered.
Should you be worried?
First thing first—it isn’t mandatory to disclose changes in your health status when renewing your policy. Bhaskar Nerurkar, head – health administration team, Bajaj General Insurance, said, “It is a good practice that insured persons can adopt so that in case of a claim, the conditions noted are easily accommodated. However, once a health insurance policy is issued, it can be renewed for life without any fresh medical underwriting under Irdai’s portability and renewal guidelines.”
This doesn’t apply if you seek increased coverage on renewal, though. “If the policyholder chooses to increase the sum insured or wants additional coverage at renewal, the insurer may seek a fresh health declaration or medical examination to underwrite only the increased portion. In such cases, the premium may be revised based on the new risk assessment for the enhanced amount,” he added.
Neeraj Khushalani, founder of InsureSmart, an insurance brokerage, did he didn’t see such clauses as a threat to policyholders. “Irdai’s guidelines on health insurance supersede all insurer-level clauses. So, even if an insurer tries to impose restrictive conditions on an existing policy—whether explicitly or silently—at renewal, such conditions are unenforceable. They can be challenged on multiple grounds: the principle of lifelong renewability; the moratorium clause; and Irdai’s own stipulation that any change in coverage, premium, or general terms must be communicated to the policyholder in advance and approved by the regulator,” he said.
“Insurers may include such clauses as a safeguard or fallback in future, but under the current health insurance regulations, they hold little practical value,” he added.
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An executive at a leading general insurer explained that premiums can be revised only at the portfolio level. “Insurers may revise premiums based on broader actuarial assessments such as claims experience across cohorts defined by age, geography, or other demographic factors. These adjustments are applied uniformly and cannot be targeted at an individual policyholder who may have filed claims or disclosed new health conditions,” the executive said. Premiums can also be altered for specific age groups, but not specific individuals.
To be clear, this applies only to health issues that arise after you bought your policy. If you reveal a health issue at renewal that you failed to inform the insurer of when buying the policy, it can certainly change the terms based on the new information, said Mayank Gosar, founder and CEO of financial services company Softcon Capital. “In such cases, the insurer may initiate fresh underwriting, which could lead to a higher premium,” he added.
While the ‘material clause’ instils the practice of reporting health conditions to insurers, using such disclosures to hike premiums, or denying claims if no disclosures are made, is completely against the law and violates the spirit of ‘use and file’, which was meant to speed up product launches, Gosar added.
Ask but don’t change
Material-change clauses aren’t new. In fact they’re a standard feature of insurance products, which require policyholders to disclose all the information honestly at the time of purchase and renewal. However, they generally state that the premium and other conditions won’t be changed on the basis of new information disclosed upon renewal. “Other products have this clause, but clearly mention that policy terms and conditions will not be altered,” said Beshak.org.
A typical clause reads as follows: “Material information to be disclosed includes every matter that you are aware of, or could reasonably be expected to know, that relates to questions in the proposal form and which is relevant to us in order to accept the risk of insurance. You must exercise the same duty to disclose those matters to us before the renewal, extension, variation, or endorsement of the contract. The policy terms and conditions shall not be altered.”
A senior executive vice president of a non-life insurance company, who requested anonymity, said, “In wellness-linked constructs, where an individual’s health status may influence premium discounts or incentives, such information may be sought, but only within the defined parameters of the wellness program.”
