Delhi High Court tells insurance regulator to clean up ‘exclusion clauses’ for health covers

The Delhi high court has asked the Insurance Regulatory and Development Authority of India (IRDAI) to clean up 'exclusion clauses' in health insurance and ensure that insurers don't reject claims on the basis of genetic disorders.

Irdai needs to re-look at the exclusionary clauses in health insurance contracts and ensure that insurers don't reject claims on the basis of exclusions relating to genetic disorder, the high court said.

Although health insurers are drafting more transparent contracts with clear definitions and scope of exclusions, they still typically have a 'hereditary diseases' exclusion clause where ailments acquired due to genetics are excluded.

The Delhi High Court judgement was passed in favour of an insured whose claim was rejected on grounds that it was due to a genetic disorder and was not payable by the insurance company.

The insurance company in the case was United India Insurance Co Ltd.

Insurers in health insurance policies typically have a 'hereditary diseases' exclusion where ailments acquired due to genetics are also excluded.

This means that if a person with say a genetic disorder like Thalassemia tries to buy health insurance, the insurer can deny health insurance to that person on grounds of exclusion on genetic disorder, but the insurers cannot use this exclusion in case a perfectly healthy person who buys health insurance and many years later contracts cancer, which again may be seen denied on grounds of genetic disorder.

The question is whether the insurer can reject the claim of a person for health cover on a very broad-based definition of genetic disorder, which would lead enormous discretion at the hand of the insurer.