Pay attention while buying insurance, don't be lax about it

Most consumers travelling abroad buy insurance from their travel agents. There is nothing wrong with that, provided the travel agent or the insurance company whose insurance he sells, strictly complies with the principles governing the sale of insurance and the mandate of the insurance regulator on the protection of policyholders’ interests. But that, unfortunately, is not often the case.

Given the poor insurance literacy among consumers, most of them are unaware of the importance of filling out the insurance proposal form diligently. Nor do they know that an insurance contract can become void if the person insured conceals or fails to provide critical information pertaining to the insurance. The insurance companies and their agents therefore have an obligation under the law to ensure that a consumer buys a policy only after being fully informed of all these facts. However, I find many policies being sold in gross violation of insurance laws and regulations (the insurance regulator needs to send decoy customers to check on this).

Here is a classic example. A friend, who travels abroad once or twice a year to meet his daughter and her family, buys his travel and health insurance along with his ticket, from his travel agent. I once asked him if he filled out the form fully before buying the insurance. ‘I have never been asked to fill out any form,’ was his reply.

I was surprised. Since I was aware that he had diabetes, I suggested that the next time he bought insurance for his travel, he must talk to the travel agent or the agent of the insurance company whose insurance he bought and tell them to put it in the form. He later told me that both the travel agent and the insurance agent had assured him that there was no need for him to fill out the form personally or mention the fact that he had diabetes. He was told that this was how travel insurance was sold and he need not worry about his coverage.

When I met him after his return from the trip, I asked him to show his insurance papers. I noticed that along with the certificate of insurance was an undated letter sent by the insurer and the transcript of the proposal form, supposed to have been filled out by the consumer or filled out on the basis of the information given by him. As per the transcript, the consumer had not answered the question on ‘whether he had been diagnosed with or advised to seek treatment for any illness, disease or ailment up to the date of making this proposal’.

The transcript also stated that since the information provided by the consumer formed the basis on which the policy was issued, ‘we advise you to please ensure that you have not withheld any material information, as the policy becomes void ab-initio and in such case, no claim, if any, will be considered by us apart from forfeiture of the premium’. The consumer was certainly not given this information at the time of sale.

Worse, the transcript of the policy document claimed that ‘the contents of the proposal and connected documents have been fully explained to you’. The document also carried a declaration supposedly given by the insured that ‘the statements, particulars and answers given in the transcript are true and complete in all respects’. Given the fact that the consumer was not even aware of this proposal form, the entire transcript was a farce, a violation of the obligation of ‘utmost good faith’ on the part of the insurer and his agents.

After going through the transcript and the policy, I told my friend that he was really lucky he did not fall sick during any of the trips for which he took the insurance because the insurance company could well have declared the contract void for non-disclosure of material fact (about his diabetes).

Of course, the consumer had recourse to legal remedy as there were blatant violations of insurance laws and regulations by the insurer, his agent and the travel agent, particularly the Insurance Regulatory and Development Authority’s regulation on the protection of the policyholder’s interests. But in case of sickness and hospitalisation, particularly in a foreign land, where the costs may well be formidable, you need immediate insurance coverage and not a long-drawn legal battle.

So, whenever you buy travel and health insurance (or any insurance for that matter), choose the insurer carefully, buy directly from him or better still, from an insurance aggregator, where you will also get to compare policies and prices of different insurers.

Read the terms and conditions fully and make sure that you fill out the form yourself and do not conceal any information that is material to the insurance contract. Or else, the very purpose of buying the insurance may be defeated.

— The writer is a consumer rights and safety expert