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Insurers Say Pricing Risk For Genetic Disorders Difficult 

Delhi High Court ruled excluding genetic disorders from health covers violates right to equality.

A doctor, right, examines a patient in Indraprastha Apollo Hospital, New Delhi India (Photographer:Amit Bhargava/Bloomberg News.)
A doctor, right, examines a patient in Indraprastha Apollo Hospital, New Delhi India (Photographer:Amit Bhargava/Bloomberg News.)

Insurers said it will be difficult to assess and price the risk of genetic disorders, if included in health covers after the Delhi High Court ruled that they could not exclude such conditions to deny claims.

“Insurance works on probable loss. If we can estimate it, we can price it,” Sanjay Datta, chief of underwriting and claims at ICICI Lombard Insurance, said. The industry needs to re-examine genetic disorders and if we can assess the size of probable loss then it can be priced. Only then it can be included.”

Typically, most insurance companies exclude genetic disorders from mediclaim policies without specifying the diseases covered. For instance, in the case before the Delhi High Court, it was the terms of United India Insurance’s health policy that were being contested. The policy included an exclusionary clause to say that no claims can be made for “genetic disorders and stem cell implantation/surgery”.

A quick check of the policy terms of the other three national insurers—Oriental Insurance Company, New India Assurance and National Insurance Company—revealed a similarly worded exclusionary clause. The court directed insurers to structure their contracts based on “reasonable and intelligible factors which should not be arbitrary, and in any case cannot be ‘exclusionary”.

The broad exclusion of ‘genetic disorders’ is not merely a contractual issue between the insurance company and the insured, but spills into the broader canvas of right to health.
Delhi High Court Order

Insurance can be provided to somebody who is unaware of an event happening, a senior official at United India Insurance told BloombergQuint requesting anonymity. If the risk is already known to the insured, then insurance cannot be provided, he said. The insurer will appeal to a higher court if required, the official said.

Some insurers include congenital anomalies such as heart defects, Down Syndrome and neural tube defects in their policies. Since most of these conditions can be known at the time of birth when the policy is issued and are not hereditary, the risk premium can be ascertained to some extent, the official quoted above said. Genetic disorders are permanent defects that are hereditary and may not get detected or expressed until later in life. So, calculating their risk premium is not possible, the official added.

United India Insurance didn’t formally respond to BloombergQuint’s queries.

V Jagannathan, chairman and managing director of Star Health and Allied Insurance, said the need to cover genetic disorders can be addressed by designing specific policies.“Genetic disorders cannot be covered under general mediclaim policies. The best way is to design specific policies which can also be added on to general health covers, as the pricing for such policies will be different from the general plans.”

Jagannathan’s suggestion found support from Ashvin Parekh, managing partner and insurance advisor at Ashvin Parekh Advisory Services.

Insurance works on the principle of risk pooling and it’s based on the assumption that everybody in the pool has more or less the same health conditions, Parekh said. Therefore, one segment of the portfolio cannot pass on additional risk to other segments in the pool, he said.

Parekh suggested a way around that. Instead of a periodical premium, insurers could link pricing to adverse events such as detection of a genetic disorder or terminal disease. That allows the premium to be revised at a later stage where insurers can also increase prices. This can be a workable solution for both the insurer and policyholder, he said.

The Delhi High Court order didn’t stop at reprimanding insurers. It said the Insurance Regulatory and Development Authority should have supervised the manner in which the term ‘genetic disorders’ was being misused by insurance companies to reject genuine claims. “Obviously, the IRDAI has turned a blind eye to the functioning of the insurance companies,” the order said.

J Hari Narayan, former chairman of IRDAI, agreed. Insurance works on the fundamental of large numbers and as more and more people are getting genetic disorders, they can in no way be excluded.

“It is only a matter of time that a host of diseases will have genetic predisposition, therefore genetic disorders cannot be exclusionary,” he said. “If these are not included in basic mediclaim covers, we will end up making insurance for genetic disorders inaccessible. If we charge a higher premium for such risks, then it will become unaffordable.”