Insurer Cannot Arbitrarily Raise Premium If Policyholder Develops Health Condition Soon After Purchase

Can health insurers increase your premiums after you develop a new disease? No, they cannot increase the premium only for you. A general premium increase across your age and demographic is applicable, but they cannot increase it only for you.

Just because a policyholder develops a health condition after purchasing the policy, the insurer cannot legally raise the premium. Only when the policyholder increases the sum insured is the insurer allowed to underwrite the policy again.

“As per regulation, any premium changes must follow the Insurance Regulatory Development Authority of India (Irdai) Product Management Committee process and should apply uniformly across all policyholders of that product. Premium cannot be selectively increased for policyholders based on their health condition,” says Abhishek Kumar, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), and founder and chief investment advisor of SahajMoney, a financial planning firm.

Insurers may have a clause that requires policyholders to inform their insurers of significant health changes like new illnesses or conditions, after which insurers can revise policy terms at renewal, including premium increases or coverage restrictions.

However, Irdai has strict guidelines against the misuse of this clause because the insurers cannot selectively apply this clause to raise premiums or curtail coverage for individuals who fall ill.

“While some insurers have introduced this clause in policies from companies, this clause contradicts Irdai rules that prohibit denial or altering the policy during renewals based on previously made claims or recently declared changes in health conditions,” says Kumar.

What Should Policyholders Do

Whenever insurers send communication about a change in premium during renewal, the policyholders should demand written justification for the same and verify if the premium changes apply uniformly across the product or are selectively applied to them.

If faced with unfair renewal conditions, the policyholders can approach Irdai or the Insurance Ombudsman within one year of the issue.

“The key protection is that selective premium hikes or coverage reductions post-illness can be challenged under the Irdai's renewability protections, even if the material change clause exists in the policy document,” says Kumar.

So, even if the company invokes this clause and raises your premium selectively, you can fight your case.