Can the Insurers walk out of contracts mid-term?

According to the regulations, a policy can be cancelled only if there is a case of fraud, misrepresentation or non-disclosure of material fact from the insured.

But, few corporate have faced the problem of cancellation in their group health in the mid-term because of high claims, which according to IRDA isn’t allowed.

There were a series of complaints from group health insurance customers which lead to this move by IRDA. A circular has been issued to all the companies stating that insurance policies cannot be cancelled mid-term.

Both the insurance industry and the insurance policy holders have their own stand on the decision. According to the people in industry, after giving enough notice to make alternative changes, including cancellation clause has been a regular practice internationally and historically. Plus, in the cases where cover has been provided on the basis of reinsurance, it is important to have a cancellation clause because the reinsurance companies have the similar clause.

But again, there are different views as well. If we think from the side of the policy holder, he takes the policy trusting that his claims will be settled. Just to increase the top line, insurance companies should not overlook the risk involved with the client. A proper underwriting should be done before the policy is issued to the client.

So, what is your take on the issue? Do you think IRDA did the right thing?

Source: Times of India