REMOVAL OF GENETIC DISORDER EXCLUSION IN HEALTH INSURANCE BY COURT ORDER

IRDAI by Cir. ref: IRDAI/HLT/REG/CIR/ 046/03/2018 dated 19th March,2018, directed that “in pursuance to the directions of Hon'ble High Court (Delhi) all insurance companies offering contracts of Health lnsurance are hereby directed that no claim in respect of any existing health insurance policy shall be rejected based on exclusions related to 'Genetic Disorder'. All insurance companies are directed not to include, Genetic Disorders' as one of the exclusions in new health insurance policies issued in respect of all their existing health insurance products and also in the new products launched and/or filed under the provisions of Guidelines on product Filing in Health lnsurance Business.”

The Court in the judgement referred above, raised the question whether persons having genetic disorders can be discriminated against in the context of health insurance. The Insured had also raised a point that the exclusion of genetic disorders was not a part of the initial policy which was issued to him but was added as part of the `Exclusions' in later years, without specific notice to him and hence felt that this exclusion did not bind him.

The Court first examined the core issue: Genes are responsible for the various traits that human beings possess. It is the difference in these traits that makes one human being different from another. While genes pass on several positive characteristics, they could at times be responsible for some abnormal medical conditions which are passed on from one generation to another. Such abnormal medical conditions which are passed on are termed as genetic disorders. The inherited traits leading to disorders could either be dominant or recessive. If the trait is dominant, the disease will surface and if the gene is recessive the trait would not show up, but the individual would be a carrier of the gene and could pass it on to the next generation.

Thus, there are several medical conditions which could be partially attributable to genetics, but could also be attributable to several other factors, such as lifestyle, environmental conditions, dietary habits, etc. Detailed genetic testing is required in order to determine the nature of the genetic disorder, in the absence of which, it would be medically impossible to determine whether a broad medical condition is a pure genetic disorder i.e, solely attributable to a gene or to the several other factors which could contribute. The fact that there are different types of genetic disorders and even common diseases like diabetes and cardiac diseases could be included in the broad definition, makes the exclusion vulnerable.

Thus, it is necessary to determine the legality of such an exclusion in insurance policies. Moreover, in order to exclude genetic disorders from insurance claims, there has to be genetic testing, which is itself a complex and expensive process. The data, so collected from testing also needs to be preserved and confidentiality has to be maintained. Without doing genetic testing and prescribing what is the kind of genetic disorder is excluded, applying a general exclusion would lead to arbitrariness. Many countries have studied the issue. In European Union, for instance, there is a stipulation that “Insurers should not require genetic tests for insurance purposes." Since the 1990s the movement against misusing genetic information to deny cover or repudiate claim is seen across the world.

The Insured suffered from HOCM i.e. Hypertrophic Obstructive Cardiomyopathy (hereinafter `HOCM'), which was paid for twice earlier. The Insured was again hospitalised for this disease on 27th November, 2011 and discharged on 30th November, 2011. A claim was made for an amount of Rs.7,78,864/-. It was rejected vide letter dated 6th February, 2012 where the reasons for rejection were mentioned as – TPA Vipul Medicorp Pvt. Ltd had repudiated your claim, since genetic diseases are not payable as per the genetic exclusion clauses.

The policy in question was a renewal of a policy issued earlier. The High court quoted the Supreme Court ruling in Biman Krishna Bose Vs. United India Insurance Co. Ltd. & Anr. 2001 (6) SCC 477 that: "A renewal of an insurance policy means repetition of the original policy. When renewed, the policy is extended and the renewed policy in the identical terms from a different date of its expiration comes into force.”

The High Court further observed that: “the clause in an insurance policy has to stand the test of `reasonableness'. Since the matter relates to health of the citizen, “exclusions such as the ones relating to genetic disorders do not remain merely in the realm of contracts but overflow into the realm of public law. The reasonableness of such clauses is subject to judicial review. The broad exclusion of genetic disorders is thus not merely a contractual issue between the insurance company and the insured but spills into the broader canvas of Right to Health....Insurance companies are free to structure their contracts based on reasonable and intelligible factors which should not be arbitrary and in any case cannot be exclusionary. Such contracts have to be based on empirical testing and data and cannot be simply on the basis of subjective or vague factors. It is for lawmakers to take the necessary steps in this regard. However, the broad exclusion of genetic disorders from insurance contracts/claims is illegal and unconstitutional.

The court examined the nature of insurance contracts. “Insurance documents are standard form contracts and usually the insured person signs on the dotted line. It would be extremely tenuous to expect a layman to read each and every clause of an insurance document before signing it. On most occasions, a person who intends to obtain insurance has no choice to say NO to a clause in an insurance policy. Medical insurance is primarily obtained for the purpose of unforeseen medical conditions which may affect a person and so long as there has been no fraud, concealment or suppression, at the time of obtaining insurance, policies ought to be honoured.” …There could be different terms specified by the insurance company in the case of serious ailments, provided they stand the test of reasonableness and the differentiation is intelligible.

A broad categorization and exclusion of genetic disorders of every and all kind would lead to enormous discretion in the hands of the insurance company to reject genuine claims. The ambiguity and the uncertainty of the precise definition of genetic disorders makes the exclusion too broad. Firstly, exclusion of genetic disorders by itself would be unconstitutional and the broad unqualified exclusion would not stand the test of non- arbitrariness and unreasonableness. There has been enormous thought, which has gone into such exclusions in most jurisdictions. Pure genetic disorders such as Huntingtons disease, Downs syndrome, etc., can be treated differently in insurance policies. However, exclusion of the entire gamut of disorders which are speculatively genetic would be totally illegal.

A perusal of the exclusions in clause 4 of the policy and an analysis of the same reveals that the policy excludes more than it includes. Usually persons, who have paid premium for a long time, hope to be able to avail of medical insurance at a later stage in life. However, the manner in which the exclusions are worded, are so broad that it would be easy to reject any medical claim under one of the clauses in these exclusions. It is a known fact that citizens are usually not able to get insurance claims passed and it requires a lot of effort and time before their claims get passed.

The insurance policy in the present case, which has been issued to the Plaintiff, contains an exclusion qua genetic disorders, which was not based on any tests conducted on him or results thereof. It was a clause suddenly inserted in the year 2011, prior to which the Plaintiff had undergone treatment for the same medical condition, and for which his claim was sanctioned. The Court referred to Insurers adhering to the principle of uberrima fides (utmost good faith), which applies, equally on the insurance companies and the insured, as held by the Supreme Court in Hanil Era Textiles Ltd v Oriental Insurance Co. Ltd & Ors (2001) 1 SCC 269.

Insurance companies are free to structure their contracts based on reasonable and intelligible factors which should not be arbitrary and in any case cannot be exclusionary. Such contracts have to be based on empirical testing and data and cannot be simply on the basis of subjective or vague factors.  The Exclusionary clause of `genetic disorders', in the insurance policy, is too broad, ambiguous and discriminatory - hence violative of Art. 14 of the Constitution of India.

Points to note by Insurance Professionals

1.      The Court has been critical of both the Regulator and Insurers and points to the need to deepen their understanding of the basics of insurance concepts in the interest of customers.

2.      The Principle of Utmost Good Faith is equally important for Insurers to practice. Insurers need to ensure that disclosures are made to expand their duty of good faith to consumers.

3.      Courts will always read down exclusions. Exclusions fundamentally have to be narrow, specific and be intended to exclude what is clearly uninsurable or what can be insured by paying additional premium.

4.      Courts apparently understand the concept of renewal as mirror contracts of the original one. However, in Health Insurance renewal has to be lifelong and covers may undergo changes in exclusions, conditions etc. So, the renewal concept may need to be modified to mean uninterrupted coverage, but with modifications when needed based on morbidity concepts that emerge in the course of time. This modified concept has to be brought into Regulations, to make courts accept the same.

5.      There has to be more R&D in the insurance area and matters that evolve to improve insurability need to be brought in and matters that go against public policy and customer betterment need to be modified/removed proactively.

6.      Anything in the contract that can be interpreted subjectively, randomly and on whims and fancies are not acceptable. Repudiation in matters of health insurance particularly, can affect the fundamental rights of the citizen (right to health), as the above judgement implies. This now puts health insurance (health financing) on a high pedestal as intrinsic to good health.

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