LEGAL FRAMEWORK

& DOCUMENTATIO

N

Dr. Mark J Anthony (069)

( BA, BHMS, MBA)

Symbiosis institute of health sciences

INSURANCE CONTRACT

CONTRACT

“It is defined as an arrangement enforceable by

law, made between two or more person, by

which rights are acquired by one or more, to act

on the part of the other.”

OFFER & ACCEPTANCE

Conditions of making an offer

Lapse of the offer

Conditions for acceptance

CONSIDERATION

Kinds of consideration

Rules for consideration

Exceptions

CAPACITY

Minor

Persons of unsound mind

Persons disqualified by law

FREE CONSENT

Coercion

Undue influence

Misrepresentation

Fraud

Mistake• law• Fact

• Unilateral mistake• Bilateral mistakes

LEGAL PURPOSE

Not be forbidden by Law

Should not defeat the provisions of

Law

Should not be fraudulent

Should not be immoral under the Law

SPECIAL ASPECTS OF INSURANCE CONTRACTS

Principles of utmost good faith

Principle of insurability

Principle of indemnity

Actual cash value

Subrogation

HEALTH CARE AND MORAL HAZARD

To ove rcome the eff ec ts o f mora l haza rds i t i s necessa ry to f o rmu la te some o f the documents p rope r ly so

tha t the re i s no doub t to the i n su red and the insu re r regard ing the po l i cy regu la t i ons , cond i t i ons and benefi ts

g iven under the po l i cy.

Provisions under health care coverage are designed

not only to provide financial incentives but also to

control the problem of moral hazards, which is

strongly prevalent in health insurance.

I M P O RTA N T P O L I CY D O C U M E N T S T H AT A R E L I K E LY T O R E S U LT I N “ M O RA L

H A Z A R D”

Prospectus

Proposal forms and other related documents

Non-medical insurance

Age proof

Duty of Disclosure

DISCLOSURE

Disclosure means the giving out of

information, either voluntarily or to be

in compliance with legal regulations or

workplace rules.

THE LEGAL DOCTR INES OF D ISCLOSURE

Breach of Warranty

Misrepresentation

Concealment

WARRANTY

A statement that becomes part of the

contract and is guaranteed by the maker to

be true in all respects

Affirmative warranty : specifies a condition to

exist only on the date, the statement is made

Promissory warranty: states a condition that

exists throughout a part or whole of the policy

period

BREACH OF WARRANTY

If the court interprets a statement as warranty

then it may allow the insurer to deny coverage

The insurer only needs to show that the

warranty had been breached, even if it was

unintentional and not related to the loss, the

court allows him to deny coverage to the insured

MISREPRESENTATION

An inaccurate or untrue statement which is made

by the insured in response to a question from the

insurer

If an insurer can prove that the factual information

provided to him by the insured was: incorrect and

material

The insurer just needs to prove that but for the

misrepresented information, he would not have

offered the coverage

CONCEALMENT

Failure to reveal information which is not so such

common knowledge that the insurer would be

expected to be aware of.

The insurer has to prove that the insured

intentionally concealed some facts which he or she

knew to be material and that they would not be

apparent from an inspection of the exposure

STATUTORY MODIFICATIONS

All statements by the insured shall, in the

absence of fraud, be deemed representations

and not warranties

Statutes permit the insured to recover, unless1. There is breach of warranty2. The facts misrepresented increased the risk or materially effected the hazard assumed by the insurer

Waiver: • Relinquishment of a known right voluntarily

Estopple: • Prevents a person from asserting a right

because he or she acted previously in such a way to deny any interest in preserving that right

PROPOSAL

A Proposal form is an application

filled up by the applicant who

requires insurance in which he

mentions his name, address, age

and occupation.

THE PROCESS

Verification

Agent Report

Medical Report

VERIFICATION

The application is scrutinized by the agent or

the insurance company with the help of the

other documents provided by the applicants as

proof. It maybe a license or certificate,

mentioning his name, age, sex and address.

This scrutiny is very important to the company.

AGENT REPORT

The agent works as an intermediary between

the applicant and the company by providing

information to the applicant about various

policies. Similarly he also provides information

about the applicant to the company. Both the

Insurance Company and the Applicant depend

on the agent.

MEDICAL REPORT

The insurance company then scrutinizes

the health of the applicant in such a way

that he fits the various criteria laid down by

the insurance company. This medical report

is then Verified and then submitted to the

company.

CONTRACTUAL PROVISIONS

CONTRACTUAL PROVISIONS

Contractual provisions for medical

expense reimbursement includes: 1. Coordination of benefits2. Policy limits3. Coinsurance 4. Deductibles 5. Co- payment

CO-ORDINATION OF BENEFITS

Prevent s duplicate coverage for the same set of

medical expenses.

The co-ordination of benefits provision stipulates that

any plan without COB is Primary plan

And with COB is a Secondary plan.

Duplicate coverage arises under: • An employee has two jobs• If the children are covered under both parents

and stepparents.• When husband and wife both work for employers

which provide health coverage.

POLICY LIMITS

Specify a specific maximum amount that can be

recovered for medical and health expenses for

specific time period.

May extend as long as an individual lifetime.

In case of a lifetime limit, separate clause for

annual restoration.

EXAMPLE

Annual restoration : 5,000/-

Life time limit : 1,00,000/ -

Medical expenses : 40,000

lifetime limit reduced to :

Rs.60,000

Limit increased to:

Rs. 65,000 (after annual rest.)

DEDUCTIBLES

Provisions designed to reduce morale hazard among the

insured.

A deductible is the initial amount of covered medical

expenses that an individual has to pay so as to receive

benefits under the major medical plans.

The policy document should specify the type and the

amount of deductibles that is being used under the health

insurance policy.

TYPES OF DEDUCTIBLES

1.Initial Deductible:

• Most simplest and convenient mode of deductible.

• Mostly under the comprehensive plans.

• Here the insured has to meet the deductible

expenses purchased under the policy, so as to

claim the benefits under the policy.

2. Corridor Deductible:

Mostly under the supplementary medical expense

plan

Here, insured first pay the prescribed deductible

from the covered expenses above those paid under

basic coverage

example

Covered expenses : 8000/-

Expense under protection : 4000/ -

4000

Less deductible : 2000

2000

Amt. payable under theMajor medical plan

=Rs.2000

CO-INSURANCE

Major medical plans contains a provision for co-insurance.

It requires insured to share certain percentage of medical

expenses after meeting the deductibles from his own sources.

Different co-insurance percentages for various categories of

medical expenses.

Like, in case it is a catastrophic medical expense, the

individual may be required to pay a large share in the co-

insurance arrangement.

EXAMPLE

Covered expenses :

2000

Less deductible :

400

1600

Less 80% to be insured by the insurer :

1280

The amount to be borne by the insured :

Rs. 320

presume that under the co-insurance of 80/20

Represents a cost sharing arrangements in the

form of deductibles or co-insurance

In simple words: • It is the fees paid by the insured, which entitles

him to• receive medical benefits and other services.

Are designed so as to provide financial incentives

to the customer availing medical services.

example

Co- Payment

A fee of Rs. 50 will be imposed

For routine visit to physicians

CONTENTS OF POLICY DOCUMENTS

Policy document should be signed and

stamped as per the stamp duty

Special terms and conditions are

printed on the document.

Policy preamble

Provise

Schedule

Attestation

Conditions & Privileges

Declarations

Warranties

GRIEVANCES REDRESSAL MECHANISM

INTERNAL CONTROL SYSTEM

Sound Control system

Factors that influence control system• Technological Innovations• Quantum Growth in Business• Competition• Globalization of Business

OMBUDSMAN

Powers of an Ombudsman

Functions of an Ombudsman

CONSUMER PROTECTION ACT

THE CONSUMER’S RIGHTS AVAILABLE UNDER THE ACT

Right to safe consumer environment

Right to information

Right to choice

Right to be heard

Right to seek redressal

Right to consumer education

THE HIERARCHY ESTABLISHED BY THE ACT

District forum at district level

State commission at state level

National commission at national level

THANK YOU!