The Dark Side of Home Loan Insurance Policies in India
In India, insurers such as HDFC Life are increasingly using diabetes as a pre-existing condition to reject insurance claims, despite legal precedents stating that common lifestyle diseases like diabetes and hypertension cannot be grounds for claim rejection. This practice has left many policyholders in financial and emotional distress.
A Case in Point
Garima Gupta’s husband, Saurabh Gupta, passed away last year. When she filed a claim on the group life insurance policy taken out with their top-up home loan, HDFC Life rejected it, citing Saurabh’s alleged non-disclosure of pre-existing diabetes and fatty liver conditions. The claim was for approximately Rs 30 lakh.
The insurer’s decision was based on investigations allegedly showing that Saurabh had diabetes and was hospitalized for acute gastroenteritis before the policy was issued, information that was not disclosed at the time of applying for the insurance. However, the death certificate cited ‘AGE with Severe Dehydration, LRTI with Respiratory Failure, Sepsis with Refractory Septic Shock, MOD’ as the cause of death, conditions not directly linked to diabetes.
Legal Precedents and Insurer Liability
Legal experts argue that insurers cannot escape liability merely due to technical lapses in disclosure, especially when no medical tests were conducted during underwriting. The Supreme Court in Satwant Kaur Sandhu v. New India Assurance Co. Ltd. (2009) held that insurers are liable if they don’t conduct medical tests and still issue policies.
Sonal Alagh, Partner at Alagh & Kapoor Law Offices, explains that in group insurance policies, insurers assume risk based on simplified disclosures. If they don’t request additional information or medical tests, they’re presumed to have accepted the risk.
Forced Insurance Sales
Garima Gupta also alleged that her husband was forced to purchase the insurance from HDFC Life because the home loan was from HDFC Bank, its sister concern. This practice violates IRDAI guidelines, which mandate that lenders must offer borrowers the freedom to choose their insurer.
The RBI and IRDAI have clarified that financial institutions cannot bundle insurance products or coerce borrowers into buying from a specific company. Raadhika Chawla, Advocate at Delhi High Court, concurs that banks cannot legally compel borrowers to purchase insurance from a specific insurer.
Conclusion
The insurance industry’s practices regarding home loan insurance policies raise significant concerns. While courts have ruled in favor of policyholders, insurers continue to reject claims on grounds that are often not justified. The regulator needs to ensure that rightful claimants are not subjected to arbitrary rejection of their claims.
