Punjab Consumer Forum Urges IRDA Intervention Amid Rising Cases Of Baseless Claim Rejections

Punjab Consumer Forum Urges IRDA Intervention Amid Rising Cases Of Baseless Claim Rejections

The State Consumer Disputes Redressal Commission in Punjab has recently raised concerns regarding insurance companies rejecting customers' claims without valid reasons.

Commission President Justice Daya Chaudhary and Member Simarjot Kaur emphasized the need for the Insurance Regulatory and Development Authority (IRDA) to intervene and prevent insurance companies from unfairly processing claims and harassing customers.

The Commission called on the IRDA to issue strict directives to insurance companies to ensure the protection of insured individuals' rights. They stressed the importance of transparent scrutiny of claims to safeguard the interests of policyholders and their nominees.

“We deem it appropriate to observe that most of the insurance claims are rejected by the insurance companies on baseless grounds. The same act had been done by the insurance company in the present case; therefore, we feel that there is an urgent need to enforce the strict provisions, which may safeguard the genuine rights of the insured and provide complete transparency in the processing of claims,” it observed.

During the review of two appeals initiated by HDFC ERGO General Insurance Company Limited and HDFC Bank Limited against an order issued by a district consumer commission, the State Consumer Commission made critical observations.

The consumer complaint under scrutiny was filed by Shubh Lata. In 2019, her husband had acquired a housing loan from HDFC Bank, and he opted to secure the loan by purchasing the Loan Credit Assure Policy from HDFC ERGO General Insurance, following the guidance of bank personnel.

In 2021, Lata's husband succumbed to renal failure and an acute kidney injury. Consequently, she approached HDFC ERGO, seeking repayment of the housing loan, as it was supposedly safeguarded under the credit assurance policy.

Subsequently, HDFC ERGO refused to honor the claim, contending that Lata's husband's medical condition did not meet the criteria for "major medical illnesses" outlined in the policy.

In 2022, a district consumer commission determined that HDFC ERGO's denial of the claim was arbitrary and carried out in collusion with the bank. Consequently, the commission barred the bank from pursuing the outstanding loan amount from Lata and instead mandated the insurer to settle the remaining balance of the loan. Dissatisfied with this ruling, the matter was appealed before the state commission.

Upon deliberation, the State Commission deliberated on whether the cause of Lata's husband's death could be categorized as a "major medical illness" as defined in the policy. To resolve this, the commission scrutinized the definitions of acute renal failure and chronic kidney disease.

“In Dorland’s Illustrated Medical Dictionary, the word 'acute' has been defined as ‘having a short and relatively severe course', and on the other hand, 'chronic' has been defined as ‘persisting over a long period of time’. Meaning thereby that the acute diseases are sudden and unexpected,” it noted.

In this instance, the State Commission determined that the complainant’s husband was afflicted with Chronic Liver Disease and Hepatorenal Syndrome, indicating a complex medical condition involving both the liver and kidneys.

Given the intricate nature of the patient's illness, the Commission concluded that it should have been encompassed within the scope of "major medical illness." This assertion was supported by additional medical literature considered by the Commission.

“No cogent reason or evidence has been placed on record by the Appellants-Insurance Company that can justify the repudiation of the genuine claim of the Complainant/Respondent No. 1. The District Commission had rightly held that the insurance companies often reject genuine claims on frivolous grounds,” the State Commission thus concluded.

In HDFC Bank's separate appeal challenging the district commission's order prohibiting loan recovery, the State Commission affirmed the bank's right to pursue the loan. It clarified that the bank and the insurance company operate independently.

However, the State Commission specified that the complainant is entitled to the claim she filed with the insurance company, emphasizing that the insurer is obligated to settle the loan amount.

Consequently, the State Commission partially allowed First Appeal No. 788 of 2022. It modified the district commission's directions, enabling HDFC Bank to claim the outstanding loan amount from either HDFC ERGO General Insurance Co. Ltd. or Shubh Lata, the complainant. Additionally, the State Commission set aside the liability for compensation and litigation expenses for HDFC Bank Ltd.