Health and medical insurance

1. Definition

Section 2(6C) of the Insurance Act, as substituted by the 2025 amending Act, defines health insurance business as the business of effecting contracts of insurance that provide sickness benefits or pay for medical and health expenses, and includes:

• the personal accident insurance business of contracts that provide for payment of money in the event of death, disablement or hospitalisation arising out of an accident; and
• the travel insurance business of contracts that provide sickness benefits, medical expenses, or money on death, disablement or hospitalisation from accident, or for losses suffered, in the course of travel.

Health insurance is now a separate class of insurance business (s.2(5A)), and an Indian insurance company may be formed with health insurance as its sole purpose (s.2(7A)), which is the basis of the standalone health insurers. General insurers also write health business.

2. Health insurance and medical insurance distinguished

• Scope. Health insurance covers the whole range of sickness and accident benefits, including fixed benefits, critical illness, hospital cash, long-term care, wellness and preventive care. Medical insurance is narrower: it reimburses or pays directly the cost of treatment, mainly hospitalisation.
• Nature of the contract. Medical insurance is a contract of indemnity: the insurer pays the actual expenses incurred, up to the sum insured, and the rules of contribution between policies apply. Many health products are benefit contracts: a critical illness policy pays a fixed sum on diagnosis of a listed illness whatever the bills, like a life policy.
• Trigger. Medical insurance is triggered by hospitalisation (usually for at least 24 hours, with listed day-care procedures excepted). Benefit covers are triggered by diagnosis, disablement or a stay of a stated length.
• Multiple policies. Under indemnity cover the insured cannot recover more than the bills, though he may choose which policy to claim under first. Under benefit cover he may recover the fixed sum from each insurer.
• Usage. “Mediclaim” was the name of the hospitalisation policy of the four public sector general insurers and is still used loosely for any medical expense policy. “Health insurance” is the statutory term.

3. Features of a health insurance policy

• Sum insured on individual or family floater basis.
• Hospitalisation expenses: room, nursing, surgeon, medicines, investigations; pre- and post-hospitalisation expenses for stated days; day-care procedures; AYUSH treatment.
• Waiting periods: an initial waiting period for illness, specific waiting periods for named diseases, and a waiting period for pre-existing diseases. IRDAI rules issued in 2024 cap the pre-existing disease waiting period at three years.
• Exclusions: cosmetic surgery, self-inflicted injury, war, intoxication and others listed in the standard exclusions.
• Co-payment and deductibles, room-rent limits and sub-limits.
• Moratorium: after a period of continuous cover (sixty months under the 2024 IRDAI rules) the insurer cannot contest a claim on the ground of non-disclosure or misrepresentation, except for established fraud. This is the health counterpart of s.45 for life policies.
• Renewal: health policies are renewable for life; renewal cannot be refused on the ground that the insured made claims, only on grounds such as fraud or misrepresentation.
• Portability: the insured may move to another insurer and carry credit for waiting periods already served.
• Cashless facility at network hospitals, with claims handled by the insurer or a third party administrator (TPA), an insurance intermediary registered with IRDAI (s.2(10B), Insurance Act).
• Standard products such as Arogya Sanjeevani, which every general and health insurer must offer on uniform terms.

4. Public health insurance schemes

• Employees’ State Insurance: social insurance for covered employees, now under the Code on Social Security, 2020.
• Central Government Health Scheme for Central Government employees and pensioners.
• Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (2018): a hospital cover per family per year for poor and vulnerable families, run through insurers or trusts under the National Health Authority.
• State schemes, such as Karnataka’s schemes combined with PM-JAY.

5. Disclosure and claims: the cases

Health insurance is a contract of utmost good faith, and the state of health is the most material fact. In Satwant Kaur Sandhu v. New India Assurance Co. Ltd., 2009 INSC 899, (2009) 8 SCC 316, the insured had answered “no” to questions on illness though he suffered from chronic diabetes and renal failure. The repudiation was upheld: for a mediclaim policy the health of the insured is a material fact, and its suppression entitles the insurer to repudiate.

The duty, however, is to disclose what the proposer knows. In Manmohan Nanda v. United India Assurance Co. Ltd., 2021 INSC 826, (2022) 4 SCC 582, the insurer had medically examined the proposer before issuing an overseas mediclaim policy and knew of his diabetes; it later rejected his claim for a heart attack suffered abroad. The Supreme Court held the rejection wrong. An insurer that has examined the proposer and issued the policy cannot repudiate on the basis of a condition it already knew of from its own examination, or one not shown to have been known to the proposer; the object of such a policy is to cover sudden and unforeseen illness.

Public sector insurers must act fairly. In Biman Krishna Bose v. United India Insurance Co. Ltd., 2001 INSC 337, (2001) 6 SCC 477, the insurer had refused to renew a mediclaim policy except on terms excluding an illness for which a claim had been paid. The Court held that a nationalised insurer is “State” under Article 12 and must act reasonably even in renewing contracts; it cannot refuse renewal arbitrarily.

6. Problem

S has held a hospitalisation policy for seven years without a break. She is hospitalised for a heart condition. The insurer rejects the claim saying she had not disclosed high blood pressure when she first took the policy. Advise S.

Issue. Whether a health insurer may repudiate for non-disclosure after many years of continuous renewal.

Law. Utmost good faith requires disclosure of material health facts (Satwant Kaur). But IRDAI’s moratorium rule bars contesting a claim for non-disclosure after sixty months of continuous coverage, except for proved fraud; and the insurer must prove the proposer knew the fact (Manmohan Nanda).

Application. Seven years of continuous cover exceeds the moratorium. The insurer can succeed only by proving fraud. Even apart from the moratorium, it would have to show that S knew of the hypertension and that it was material to this risk.

Conclusion. The rejection is not sustainable. S should complain in writing to the insurer’s grievance cell and, failing redress within a month, to the Insurance Ombudsman, or file a consumer complaint.

How this is examined

“Distinguish between health insurance and medical insurance” was the 10-mark question in June 2025. Open with s.2(6C), set out the points of difference in section 2 above, list the features, and end with the cases. A shorter question asks for a note on health insurance in India, where the public schemes in section 4 add marks.