Irdai reduces pre-existing disease waiting period from 4 to 3 years: Here is what existing policyholders should know
The waiting period for pre-existing diseases disclosed by the persons to be insured shall be a maximum of up to 36 months of continuous coverage under the Health Insurance policy. Insurers may endeavour to have fewer pre-existing disease waiting periods and specific waiting periods for health insurance products, as per the IRDAI (Insurance Products) Regulations, 2024.
While the waiting period for pre-existing disease (PED) coverage in health insurance policies has been reduced from four years to a compulsory three years, the moratorium period has been shortened from 96 to 60 months.
Now, health insurers cannot deny coverage for your pre-existing condition once you have completed the three-year waiting period on health insurance policies. The Insurance Regulatory and Development Authority (IRDAI) has updated the definitions of the pre-existing condition and moratorium period (MP) in health insurance policies effective from 1 April 2024.
While the waiting period for pre-existing disease (PED) coverage in health insurance policies has been reduced from four years to a compulsory three years, the moratorium period has been shortened from 96 to 60 months. Insurance companies enforce a “no look back” policy during this period.
The new regulations are extremely positive for the policyholders. While several insurers have already reduced waiting period for pre-existing diseases, the new guidelines set the outer limit to 3 years. But it will increase burden on insurance companies so we can expect jump in premium in future due to this step.
The previous definition used the term “look back,” which was not clearly defined, leading to ambiguity. The revised policy uses more specific language, stating that policies can’t be contested for non-disclosure or misrepresentation after the MP, except in cases of proven fraud.
The revised moratorium period now explicitly includes time covered under previous insurers through portability and migration, which ensures that policyholders will retain moratorium period progress when switching insurers. This clarification benefits policyholders.
The reduction in moratorium period will shift the onus of a thorough underwriting onto the insurer. Since insurers cannot dispute non-disclosure beyond 5 years, policyholders will be further assured about a smooth claim process. But it will increase stringent checking during underwriting as well claim process. After a continuous renewal of 5 years, a bonafide policyholder need not worry about claim rejection.
By reducing the PED waiting period from 48 months to 36 months, more individuals are likely to opt for health insurance, thereby enhancing insurance penetration in the country. Additionally, the moratorium waiting period which has been reduced from 8 years to 5 years, would too enhance customer confidence by minimising doubts about claim denials. Moreover, the specified disease waiting period may now extend to 3 years, which was four years earlier, providing customers with faster coverage. From a customer perspective, a shorter waiting period is always preferable as it reduces uncertainty and allows for quicker coverage of illnesses or claims against them. But companies will have more losses so expect a premium jump in near future.
The regulator has made these changes to ensure responsive management practices for policyholders, effective oversight, and adequate due diligence regarding insurance products, including innovative products, considering the interests of policyholders.
The regulator modified the definition of pre-existing disease in its IRDAI (Insurance Products) Regulations, 2024, notified on April 1, 2024. According to the notification, pre-existing disease (PED) means any condition, ailment, injury or disease:
a) that is/are diagnosed by a physician not more than 36 months prior to the date of commencement of the policy issued by the insurer; or
b) for which medical advice or treatment was recommended by, or received from, a physician, not more than 36 months prior to the date of commencement of the policy. However, the definition of PED is not applicable on overseas travel policies.
When you buy a health insurance policy, the insurer will ask you about any history of illnesses and any medical conditions that you still have. In case a condition falls in the category of pre-existing disease, the health insurer will ask you to wait for a certain period before the policy starts covering the diseases linked to the PED. If you fall ill during the waiting period due to the mentioned PED, the insurer will not offer any coverage. So a reduction of one year in this waiting period will help many existing policyholders and those planning to take a policy.
Moratorium period too reduced from 8 year to 5 years
The IRDA has also reduced the moratorium period significantly from 8 years to 5 years. Once an active health insurance policy’s moratorium period ends, the insurer cannot deny any claim covered by the policy on any grounds, except fraud.
The IRDA notification states that after a health insurance policy has had a coverage for sixty continuous months (including portability and migration), the insurer cannot contest the policy and any claim on grounds of non-disclosure or misrepresentation; but it can on grounds of established fraud. This period of sixty continuous months is called the moratorium period. The moratorium would be applicable on the sums insured of the first policy. When this sum insured is enhanced, the insured would have to wait for 60 months from the date of enhancement to make a claim on the enhanced limit
The IRDA has also reduced the specified waiting period. According to the notification, “specific waiting period” means a period of up to 36 months from the commencement of a health insurance policy when specified diseases and treatments (except due to an accident) are not covered. After this period, the diseases and treatments mentioned in the policy document will be covered provided the policy has been renewed
The new reduced waiting period on health insurance will benefit both old as well as new policyholders. “For first-time policyholders, this change means they will enjoy the advantage of a reduced waiting period going forward. Existing policyholders will also benefit, as the waiting period will be reduced to align with the new 3-year clause upon policy renewal. Overall, this initiative is beneficial for customers, ensuring they receive enhanced benefits and reduced waiting times when accessing health insurance coverage
