Summary of this article
The “material change” clause requires policyholders to disclose new health conditions.
Irdai rules bar insurers from selectively raising premiums or curtailing coverage.
Premium hikes must apply uniformly across all policyholders of a product.
The clause is meant to reward good health, not penalize illness.
Health insurance policies have a material clause. This is often complex and is a source of confusion for policyholders.
However, in a recent clarification, general insurance company ICICI Lombard has clearly stated that fresh underwriting or health-based loading will not apply at renewal. This means that as long as the policyholder remains in good health, they will not be subject to increased premiums or restrictions during renewal.
Material Clause And What It Can And Cannot Do
This clause 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.
1 October 2025
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The Insurance Regulatory Development Authority of India (Irdai) has strict guidelines against misuse of this clause because the insurers cannot selectively apply this clause to raise premiums or curtail coverage for individuals who fall ill.
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 Irdai Product Management Committee process and should apply uniformly across all policyholders of that product. Premiums cannot be selectively increased for policyholders based on their health condition.
“While some insurers have introduced this clause in policies, 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 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.
The Purpose Of The Material Clause
It is important to understand the purpose of the material change clause. The idea is to reward good health behavior. Having such a clause in place can facilitate wellness benefits, such as discounts or removal of loadings, and not penalize policyholders. If a policyholder develops a new disease after the policy is issued, the clause is meant to allow the insurer to adjust certain terms and conditions of the policy and not impose penalties or raise premiums.
However, this clause can result in ambiguity and is difficult for policyholders to understand.
