Importance of Material disclosure

By Sunil Kumar LLB in Health Insurance-Legal opinions

Jun 2

When you buy a health insurance policy from your insurer, there are many health-related disclosures that you need to make. In fact, knowing your health status is quite important for an insurance company to underwrite your policy. Underwriting is a process by which the insurer gauges the risk and prices its products accordingly.


Insurance is a contract between two parties i.e. you and the insurance company. The principle basis of insurance is that contract is issued at “Utmost good faith”. This means that the insurance company accepts all declaration made by the insured is true and issues the policy to cover the risk. Insurance is a contract where money in form of the premium is collected from multiple people and pooled money is used to pay claims assuming that only few will claim. Your insurer needs a full account of your medical condition and history at the time of insuring you. It needs to ascertain two facts one is are you insurable and the other is does the price justify the risk.


Consequences of non-disclosures:


If you had any ailments, it is considered a pre-existing ailment and the insurer, after a waiting period accepts to ensure you these pre-existing ailments. So non-disclosure of material information that has a bearing on giving you a health insurance policy in the first place or a claim that is related to the non-disclosed ailment may mean that insurer may reject your claim. Intentional non-disclosure will lead to the adverse selection of the patients and high payouts and losses to the company and premium revisions for all members. As this has an adverse impact on the business and all individuals involved, the insurance company has the right to terminate the policy and forfeit premium of the member as the principle of utmost good faith has been breached and the contract becomes null and void. Hence it is important that all conditions irrespective of whether you consider it important or not should be disclosed.



What has to look for while filling up the form?


So the proposal form given by your insurer that you fill will also ask for all your medical details in detail other than just asking for usual information like your smoking and drinking habits. For example, a sample proposal form of a health insurance company categorizes medical details into three.


The first category asks for past policies:  Health insurance which was declined or postponed.

The second category has specific questions. It asks if the customer ever suffered or suffers from conditions such as high or low blood pressure, cardiac disorder, lung or respiratory disorder or any other ailment which is not listed in the proposal form.

The third category is much detailed and wants to know if you have undergone any surgery in the past or took lab tests, or any medical scans in the last five years or so other than your routine and pre-employment check-ups. It also asks the person to list if she has suffered from any ailment, disease, accident or injury other than a common cold or viral fever.

Answering each of these questions accurately and to the best of ones, knowledge is essential so that it may not lead to termination of the policy in the nearby future.


Hence it is important that all conditions that a person has been disclosed at the time of taking the policy so that the insurer can assess the risk properly and charge premium accordingly. Therefore, it is important that you make full disclosures, especially about your health and not just in the present but also in the past.

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