It is often suggested that one must not rely on employer-provided health insurance. Hence, nowadays many of us have multiple health insurance policies. However, we hardly know of how the claim process works and whom to approach in case of multiple health insurance policies.
Before proceeding further, let us understand why we try to buy multiple health insurance policies. There are many reasons and few of them are as below.
- Inadequate existing coverage
- Higher premiums of the existing plan
- Bad claim experience with the insurer
- Multiple plans as backup to avoid risk of claim rejection
- Different kinds of health plans to cater to different health contingencies
- Long waiting periods, etc.
Now let us understand few terminologies which are used in case of general insurance.
# Fixed or Defined benefit plans
Usually, products like critical illness or accidental insurance are considered as fixed benefit plans. Let us say, you have critical illness cover of Rs.10 lakh. Once the insured diagnosed with the critical illness , then irrespective of the cost of expenses of hospitalization insurance company will pay you Rs.10 lakh. Here the identification of disease mentioned in policy is important. Based on the other conditions, insurance company pay the full sum insured amount. The insurance company will not bother about the cost of such critical illness. Same applies to accidental insurance also.
# Indemnity benefit plans
Health insurance will be considered as indemnity benefit plan. Because the claim amount payable from health insurance company is based on the ACTUAL cost but not on the sum assured you opted. Let us say, you have health insurance of Rs.10 lakh and hospitalization cost is Rs.4 lakh, then health insurance company will not pay you Rs.10 lakh, but only Rs.4 lakh (subject to conditions).
# Principle of Contribution
If a policyholder buys insurance plans from different health insurance providers to cover a specified health event. In the event of a claim, then the insurer reserves the right to seek the proportionate amount of claim from the other insurers as well basis this principle.
It is like you buy Rs.5 lakh each health insurance cover from 4 health insurance companies. So you will have a total cover of Rs.20 lakh. In the case of claim of Rs. 6 lakh, then the insurance companies will share this claim amount proportionately among all. The single insurance company or 2-3 insurance company will not be allowed to settle the claim.
However, after the changes in IRDA regulation 2013, there are some changes to this contribution clause. Let see what IRDA Health Insurance Regulation, 2013 says ”
- If two or more policies are taken by an insured during a period from one or more insurers, the contribution clause shall not be applicable where the cover / benefit offered:
- is fixed in nature;
- does not have any relation to the treatment costs;
- In case of multiple policies which provide fixed benefits, on the occurrence of the insured event in accordance with the terms and conditions of the policies, the insurer shall make the claim payments independent of payments received under other similar policies.
- If two or more policies are taken by an insured during a period from one or more insurers to indemnify treatment costs, the insurer shall not apply the contribution clause, but the policyholder shall have the right to require a settlement of his claim in terms of any of his policies
a. In all such cases the insurer who has issued the chosen policy shall be obliged to settle the claim without insisting on the contribution clause as long as the claim is within the limits of and according to the terms of the chosen policy
b. If the amount to be claimed exceeds the sum insured under a single policy after considering the deductibles or co-pay, the policyholder shall have the right to choose insurers by whom the claim to be settled. In such cases, the insurer may settle the claim with contribution clause.
c. Except in benefit policies, in cases where an insured has policies from more than one insurer to cover the same risk on indemnity basis, the insured shall only be indemnified the hospitalization costs in accordance with terms and conditions of the policy”
I will sum up the whole thing. If you have fixed or defined benefit plans, then the contribution clause will not come into the picture. This I already explained above.
-If you have fixed or defined benefit plans, then the contribution clause will not come into the picture. This I already explained above.
-If you have indemnity plans, then based on the cases the contribution clause can be invoked.
What are the cases where such contribution clause can be invoked?
Let us try to understand this whole funda with few examples.
Case 1– Here Mr. Ajay possesses two critical illness health insurance policies with company A coverage of Rs.10 lakh and company B coverage of Rs.25 lakh. Then what will happen in the case of he diagnosed with a critical illness?
You notice, that critical illness or accidental insurance policies will come under defined or fixed benefit plans, both companies obliged to pay the FULL SUM ASSURED (subject to post fulfillment of the terms and conditions of the plan). Once the claim amount paid, then policy seizes there itself.
Case 2-Here Mr. Ajay possesses one health insurance plan of Rs.5 lakh from company A and one accidental insurance plan of Rs.25 lakh from company B. He met with an accident and the hospitalization cost was Rs.4 lakh. Then how much amount he will receive?
You noticed that insurance company A paid the actual cost of hospitalization. However, insurance company B pays the full sum assured irrespective of the actual cost (subject to the conditions explained in policy document).
Case 3-Here Mr. Ajay possesses two health insurance policies of Rs.5 lakh from insurance company A and Rs.4 lakh from insurance company B. Here two possibilities are there and try to explain both.
Possibility A-Mr.Ajay hospitalized and the bill amount is Rs.3 lakh. Note that this Rs.3 lakh is less than the health insurance coverage provided by both insurance companies. In such situation, he can approach either insurance company A or insurance company B. It is purely his wish. His claim will be accepted by any one company he approaches. I explained the same in below image.
Possibility B-Mr.Ajay hospitalized and the bill amount is Rs.4.5 lakh. Note that this Rs.4.5 lakh is less than the health insurance coverage provided by insurance company A. But it is more than the health insurance coverage provided by B.
In such a situation, if he approaches the insurance company A, then the contribution clause will not apply. Insurance company A will settle the amount (subject to condition) easily as the claim amount is less than the sum insured under the plan.
If he approaches the insurance company B, then the contribution clause will come into the picture. The insurance company will accept the claim amount of Rs.2 lakh (Rs.4,00,000*Rs.4,50,000/Rs.9,00,000). Remaining Rs.2,50,000 will be payable by insurance company A (Rs.5,00,000*Rs.4,50,000/Rs.9,00,000).
I explained the above scenario in below image.
Possibility C-Mr.Ajay hospitalized and the bill amount is Rs.6 lakh. Note that this Rs.6 lakh is more than the health insurance coverage provided by both the insurance companies A & B. So in this case, at any cost the health insurance companies will insist for contribution clause. The claim will be settled as below.
Rs.3,33,333 will be settled by insurance company A (Rs.5,00,000*Rs.6,00,000/Rs.9,00,000). Rs.2,66,666 will be settled by insurance company B (Rs.4,00,000*Rs.6,00,000/Rs.9,00,000). I tried to expalin the same from below post. I explained the same from below iamge.
Hope all scenarios are now clear. Let us now discuss the claim process in case of single policy and multiple policies
It is imperative to inform all the insurers about the event.
# In case of Reimbursement:
Collect all the requisite documents from the Hospital and submit the required ones to the respective insurer you are filing the claim from.
- Duly filled Claim Form
- Medical Certificate confirming the diagnosis of the kind of Critical Illness
- Discharge Summary
- Investigation Reports
- Other supporting documents to prove the illness, etc.
(Requirements and documents may vary from insurer to insurer)
# In case of Cashless Treatment:
The chosen insurer or insurers will settle the claim directly with the hospital as per the limits of the health plans and later the contribution clause may be exercised, or you may follow the claims process of the respective insurer from whom you want to claim the balance amount as per the claim specifications.
Other factors to be considered while filing a claim with multiple insurers
- Claims efficiency of the insurers
- Claim settlement turn around time of the insurers
- List of network hospitals of the insurers
- Claim formalities of the insurer
- Efficiency of associated TPA of the insurer
- Previous Claim experience with the insurers
- Check on No claim Bonus status
- Assess the sub-limits and other related clauses in your respective policies
- Claim from your Group Health Policy first
Few points to note regarding having multiple health insurance products-
- You are not allowed to be in profit in case of health insurance policies. The claim amount will be settled based on the actual cost. Because such plans are indemnity plans.
- It will not make sense to have multiple insurance products in think that one company reject means another company may accept it. It is very rare.
- In some cases having multiple health insurance products is beneficial. For example, if you bought a health insurance long back before you diagnosed diabetic then you bought one more plan where the diabetic disease is in waiting period condition, then claim due to diabetic may be claimed by the first insurance.
- It is always best to first claim your company provided health insurance. Because there loading due to claim or some other issues will not pop up. Because it is group insurance and claim settlement will be easy.
- When you are buying multiple health insurance products, then always inform the subsequent insurance companies about your existing cover.
- Always keep in mind that buying one big sum insured plan is cheaper than having multiple health insurance products. Hence, always try to buy big sum insured single product. If in future you need further insurance, then you can use the top up or super top up options.