In January 2015, life took an unexpected turn for author Naina Rao (name changed) when she was diagnosed with ovarian cancer. Over the next year, in the midst of all the hospital visits, surgery, chemotherapy, physical pain and emotional turbulence, she had to contend with another unwanted beast: a health insurance company inexplicably rejecting her claim.

Rao and her husband had signed up for a health insurance plan with a private sector insurer in 2011. The policy, at a premium of Rs 50,000 for two years, offered “cashless” treatment at all major hospitals in Mumbai. In other words, the hospital bills would be settled directly by the insurance company at the time of discharge. When it was time to renew the policy in 2013, the agent offered the couple a better plan for the same premium amount, assuring them that the new plan would be considered “continuous” with the old plan of 2011 – they would not be considered as new clients.

But after Rao’s surgery at a reputed Mumbai hospital in April, she quickly realised that they had been taken for a ride. “First, the hospital told me that I did not qualify for cashless treatment, because they did not have any tie-up with my insurance company,” said Rao, who realised the company had lied just before the surgery when she checked with them about cashless tie-ups with that particular hospital. She eventually had to settle the bill herself.

She then filed for an insurance claim of Rs 8 lakh to cover the surgery and hospitalisation costs. “We got no response for two months,” said Rao. “When we finally reached the company on the phone, they asked us to post them more hospital documents” Rao sent in the required documents. But a month and almost 50 phone calls later, the insurer rejected her claim on the grounds that her new policy was not continuous with the old one. The company had treated her as a new client since 2013, and as per the policy, refused to cover cancer costs in the first two years. “I was undergoing chemotherapy at that time, and had to shout at them on the phone in the midst of all that pain,” she said.

The ombudsman’s office

In November, after six months of “mental trauma” at the hands of the adamant insurance company, a friend told Rao about the insurance ombudsman – a bima lokpal appointed by the government to help insurance policyholders settle complaints out of court and free of cost. Although most insurance policyholders are barely aware of them, there are 17 ombudsmen across India, and the one in Mumbai adjudicates over complaints only from Mumbai and Goa.

Rao approached the ombudsman’s office with some scepticism, but the experience turned out to be a pleasant surprise – within a month of filing her complaint, her case was heard and settled in her favour, and her claim money was deposited in her bank account. “Everything went smoothly at the ombudsman’s office – I didn’t have to make endless phone calls, the staff was helpful and the hearing was over in ten minutes,” said Rao. “It was unlike any other government office I had seen.”

Rao’s smooth experience at the office of Mumbai’s insurance ombudsman – AK Dasgupta – is not unique. Since he was appointed to the post in mid-2013, Dasgupta and his team of 13 officers have acquired a reputation for efficiency by disposing of 21,000 cases and clearing a huge backlog of pending complaints.

The team investigates the merit of every single complaint lodged with them, attempting to reconcile as many as possible amicably, over the phone. The rest are sent as cases to be heard personally by the ombudsman, on days designated for hearings every week or two. On some days, Dasgupta hears up to 20 cases, sitting with complainants and insurance company representatives around a bare conference room table.

Half the cases that come to the ombudsman’s office deal with life insurance claims, but among non-life cases, says Dasgupta, nearly 60% deal with health insurance. With an expanding middle class and rising costs of medical treatment, India’s health insurance sector has been growing at 20% every year.

It is also a sector that’s riddled with disputes at the time of settling claims, with the fine print of medical and insurance jargon often costing policyholders dearly.

The ‘pre-existing disease’ problem

“One of the major problems with the insurance sector, and health insurance in particular, is the mis-selling of policies – people buy policies with genuine expectations but often there are mismatches,” said Dasgupta, who took up the ombudsman’s chair after retiring as the managing director of Life Insurance Corporation of India.

Insurance, as a “subject matter of solicitation”, is meant to be bought only after careful understanding of every aspect of the policy on offer. The onus of this lies with the customer, but often they are at the mercy of insurance agents who misguide them, either fraudulently or unwittingly.

All health insurance policies, for instance, exclude a range of pre-existing diseases from their plans, but don’t always define those conditions clearly. In 2013, the Insurance Regulatory and Development Authority of India – the central agency monitoring the insurance sector – standardised the definition of pre-existing diseases to mean “any condition, ailment or injury...for which the insured had signs or symptoms, and/or was diagnosed, received medical advice or treatment within 48 months prior to the first policy issued by the insurer”.

Despite this, pre-existing diseases are one of the most contested aspects of claim settlements, with insurance companies often rejecting claims on the grounds of allegedly undeclared diseases that policyholders have. “Sometimes, the insured don’t know of pre-existing diseases they may have in the absence of manifestations of any symptoms,” said Dasgupta. “It is unfair when regulators allow companies to reject these claims even after the policy has run for many years.”

But many believe that the very premise of the clause excluding pre-existing diseases is unfair and discriminatory. “Many non-communicable diseases, like asthma, for instance, are common in India,” said Leena Menghaney, a treatment activist and patient living with lung disease. “Insurance companies make clients go through mandatory check-ups for these conditions and deny them coverage for these chronic conditions.”

Other exclusions

In addition to pre-existing diseases, different health insurance policies include a string of other exclusions that critics find discriminatory.

Insurers routinely discriminate against patients of HIV and hepatitis, says Menghaney, even if they have acquired these infections after applying for the policy. Dental expenses are rarely covered. Women almost always get a raw deal – most policies don’t cover pregnancy and delivery costs, caesareans and certain vital procedures like the removal of the uterus or ovaries.

What Dasgupta finds particularly absurd is that policies are often not updated to include new medical technologies even after they start being used fairly commonly. “Robotic surgeries, for instance, are not covered under many policies even though their use is fairly common in better-equipped hospitals these days,” said Dasgupta.

Another issue, according to health economist Dr Shakti Selvaraj, is that insurance companies focus almost entirely on hospitalisation costs. “But the biggest expenses when a person falls ill are the out-of-pocket OPD costs, which are excluded from most plans,” he said.

Companies also often place illogical conditions that make it very difficult for patients to claim insurance for critical illnesses. “If one gets a heart attack, many insurers would say that they will pay if and only if three arteries were blocked,” said Dasgupta. “But if one has two blocked arteries, can he tell the hospital to wait for a third blockage before seeking treatment? What if he dies before that?”

As an ombudsman, Dasgupta finds it difficult to appreciate such unreasonable conditions that insurance companies place at a time when clients are already going through physical and emotional turmoil.

Last month, for instance, he heard a case of a father who lost his three-year-old son to sudden encephalitis. After 20 hours of hospitalisation, the doctors gave up hope of the boy’s survival, and granted permission for discharge so that the family could take the child to their religious priest for final blessings. He died in the ambulance itself. The insurance company rejected the family’s claim because their policy mandated at least 24 hours of hospitalisation.

When questioned at the ombudsman’s hearing, the insurer admitted that the claim would have been payable had the child died in the hospital instead of the ambulance. “This effectively means that the insurer gives importance not to the treatment but the place of death, which is completely unreasonable,” said Dasgupta, who eventually settled the case in favour of the child’s father. “These are not situations where an insurer should argue over the number of hours spent in the hospital.”

Should companies pay for hospital malpractices?

Unlike popular perception among policyholders, insurance companies are not necessarily out to take advantage of clients, insists Dasgupta.

“No company can afford not to pay genuine claims, because they have to stay in the market,” he said. “What they lack is quality and coordination in their grievance redressal system and the ability to correctly interpret rules.”

Lipi Roychowdhury, a director of Kolkata-based insurance broking firm Axiom, believes a major problem is the lack of adequate training among intermediaries selling the policies. “Often they are not aware of all the terms and conditions of the policies themselves, and they wouldn’t want to admit that if a client asks them for those details,” said Roychowdhury. “It is a combination of inefficiency and incompetence.”

Of course, there are times when the blame for a rejected insurance claim lies entirely on hospital malpractices. “A lot of hospitals give patients fraudulent or inflated bills that may not justify the treatment, and they also insist upon unnecessary hospitalisation,” said Dasgupta. “Should there not be a system in place to monitor and regulate these malpractices? The Indian Medical Council has not come out with anything to control these unethical practices even though they have an ethics committee. Should insurance companies pay for this? The answer should be absolutely no.”

What is missing from the healthcare sector, he says, is a means of regulating charges by hospitals and doctors so that patients – whether or not they have insurance policies – are protected from overcharging.

As for insurance policyholders, Dasgupta wants more people to be aware that the office of the insurance ombudsman exists. “People should know that there is an alternative mechanism to get justice, and that it is free, fair and less time-consuming.”