Confronting Disability Discrimination in Insurance: Saurabh Shukla V. Max/Niva Bupa and Beyond

[By Saiyam Shah]

The author is a student of Auro University.

 

Introduction

Insurance, particularly health and life insurance, plays a pivotal role in alleviating stress for most individuals and families, assisting them in coping with unforeseen and unfortunate circumstances. People with disabilities (PWD), especially those with congenital disabilities, are often denied access to health and life insurance policies solely based on their disabilities, without any proper risk analysis or objective justifications. Testimonials of the PWD, who were denied insurance or were not given the amount they were entitled to when required on inconsequential grounds are many. Though the judicial intervention has provided some relief, the attitude of the Insurance Regulatory and Development Authority of India (IRDAI) was not impressive until the intervention of the Delhi High Court.. This article delves into the recent developments concerning discrimination against PWD in insurance-related matters and highlights what IRDAI can learn from the practices of the Australian Human Rights Commission (AHRC) to curb instances of discrimination.

The initial section highlights the importance of health and life insurance and sheds light on the direct and indirect discrimination faced by PWD. Subsequently, it briefs about the provisions pertaining to discrimination. In the next part, it delves into two significant decisions by the Delhi High Court on the issue of discrimination and concludes by addressing recent developments and advocating for IRDAI to consider issuing binding circulars or non-binding guidelines akin to those adopted by the AHRC to take substantial steps towards reducing instances of discrimination and fostering a fair and inclusive insurance environment for all.

Importance of insurance for the PWD

As it is for every individual, health and life insurance are essential for PWD to mitigate accidents and other such uncertain events. As noted by Thomas Weston in the context of the UK, but also applicable generally, the PWD (1) are less likely to be employed by the private sector, (2) their income may be lower than their counterparts, and (3) specific needs for assistive equipment, care, and therapy add to their daily cost burden. Therefore, it becomes all the more necessary for them to have health insurance to financially deal with the uncertain events requiring immediate payment of a large amount.

Direct and indirect discrimination

Often, PWD are denied health or life insurance solely based on their disability without conducting an objective assessment of the risk factors and considering the possibility of providing a policy with a higher premium and non-standard terms.

The PWD are discriminated against by: (1) denying to provide the insurance policy, (2) providing the policy with non-standard terms and/or a higher premium and (3) not paying the legitimate insured amount when required on inconsequential grounds. The discrimination is also visible in instances involving family insurance plans.

The legal provisions

  • Section 3 of the Rights of Persons with Disabilities Act (RPWD Act) prohibits any kind of discrimination based on disability unless one satisfies that the same act or omission is a proportionate means of achieving a legitimate aim.
  • Section 24(k) of the Act mandates the appropriate government to make a comprehensive insurance scheme for the PWD, and 26 mandates it to make insurance schemes for employees with disabilities. However, the customised insurance policies, customer service, and range of options available in the private sector make it imperative to ensure that they are available to everyone, including PWD.
  • India has ratified the UN Convention on the Rights of Persons with Disabilities, article 3 of which obligates the states to abide by the principles of non-discrimination and full and effective participation and inclusion in society. Article 25(e) of the CRPD obligates the states to prohibit discrimination against PWD in the provision of health and life insurance where such insurance is permitted by national law.
  • Due to the lack of express provision addressing this issue, the litigants seek relief U/A 14 and 21 of the Constitution against such practices.

Protection in foreign jurisdictions

  • The Australian Disability Discrimination Act (ADDA) allows discrimination in life and health insurance only if (i) it (1) is based upon actuarial or statistical data and (2) is reasonable having regard to the matter of the data and other relevant factors; or (ii) if the same is not available and cannot be reasonably obtained, the discrimination is reasonable having regard to any other relevant factors.
  • The US’s Affordable Care Act prohibits insurance companies from not providing insurance to people with pre-existing conditions.
  • Other countries or states, that have some express provision against such discrimination include Hong Kong, Japan, Spain, the UK, Portugal etc.

Judiciary on disability discrimination

Are PWD more prone to accidental risks?

In Vikas Gupta v. Union of India (2012), the petitioner filed a PIL against the discrimination in premium as well as the maximum amount ensured in the Postal Life Insurance Policy for government employees.

The respondent defended their actions on the ground that PWD are more prone to accidental risks.

As rightly countered by the petitioner, (1) there is no such empirical data to support such a general statement, and (2) living with a disability and suffering from a disease are not synonymous.

Can a class be excluded on the ground of the contractual relation

The bench referred to LIC v. Consumer Education & Research Centre and observed that though insurance is a contract between the insurer and the insured, the conditions prohibiting a class from entering into such a contract are unconstitutional. The LIC had distinguished the persons working in government, semi- government and reputed commercial firms from those living in vast rural and urban areas engaged in unorganized or self-employed sectors and denied insurance policy to the latter. The court struck down the classification as violative of Article 14 of the Constitution.

The bench, applying the same case, held that charging a higher premium and discriminating on the basis of the disability is unconstitutional.

Saurabh Shukla v. Max/Niva Bupa Health Insurance & Co.; IRDAI’s failure as a sectoral regulator

Regulations ; a paper tiger

IRDAI’s 2016 Health Insurance Regulations, Para 8(b) and (C), used the term ‘substandard lives’ for differentiating the PWD from others. The 2016 regulations obligated insurance companies to provide coverage to ‘substandard lives’ and consider the denial of coverage as a last option. Did it proactively enforce the guidelines? The case suggests it did not.

In 2020, it directed all insurance companies via circular to publish their underwriting philosophy and approach with regard to offering insurance coverage to PWD and persons affected by HIV /AIDS and Mental Illness/diseases by October 1, 2020.

Facts

Saurabh Shukla, a PWD and investment professional working with a hedge fund, was denied health insurance by Oriental Insurance & Co. and Max Bupa, now renamed Niva Bupa Health Insurance (NBHI). He averred that NBHI denied insurance coverage without looking at his medical records.

The Chief Commissioner of persons with disabilities directed IRDAI to take necessary action, but it replied stating that, ‘It is essential that the products that the insurance companies design shall be financially viable and self-sustainable for them to meet the liabilities as and when the claim arises’. Was it not its duty to enquire whether the companies considered other options, including policy with the higher premium, exclusions and lower maximum insured amount, before denying the insurance? If it had, it would have realized that the same cannot be done without looking at the medical records. He then moved to the Delhi High Court, which culminated in a landmark case for PWD seeking insurance coverage.

Denial of health insurance coverage to persons with disabilities; a violation of their rights

The bench referred to C.E.S.C. Ltd v. Subhash Chandra Bose and reiterated that the right to life enshrined in U/A 21 of the Constitution includes the right to health and healthcare. It further referred to Article 25(E) of the UNCRPD and Section 3, 25 and 26 of the RPWD Act and held that the PWD cannot be discriminated against in health-related aspects, including insurance.

IRDAI’s failure in protecting the rights of the PWD as a regulator

The bench rightly recognized that it is the obligation of IRDAI to ensure that the insurance companies follow its circulars. The failure of IRDAI is visible in the way it reacted when CCPD asked it to look at the petitioner’s case. As the bench acknowledged, IRDAI’s inability to effectively bridge the divide between policy directives and actual implementation was conspicuous.

Current status and way forward

The bench directed IRDAI to (1) convene a meeting of insurance regulators and ensure the expeditious design and introduction of insurance products tailored for PWD in accordance with the 2020 circular, preferably within two months, and (2) omit the term “non-standard lives” from the 2016 regulations. It instructed insurance companies to review their decision.

  • After the decision, the IRDAI conducted the meeting, and a committee of six senior members from insurance companies was constituted to (1) Design and develop specific and comprehensive insurance products tailored for PWD, persons with mental illness and HIV/aids and (2) prepare a complete document for proposal form, schedule, policy wordings, including the various terms and conditions, etc.
  • On February 27, 2023, IRDAI issued a circular to all general insurance companies mandating to have a board approved underwriting policy not denying insurance coverage to PWD, HIV/aids and mental illness due to their disabilities/illness and design and launch specific products for these categories immediately.
  • IRDAI removed the term “substandard lives” from its 2016 regulations.
  • NBHI offered an insurance plan with a higher premium, which was accepted by the petitioner with reservations about raising grievances before the IRDAI.
  • As of 18 August, 29 insurance companies have issued policies for PWD, however, many are with higher premium and loading charges. Though the bench, while disposing the case, did not go into merits of each policy, it noted that IRDAI, being a sectoral regulator, is obligated to ensure that PWD “are not unduly prejudiced” and issue suitable directions to insurance companies after a comprehensive review of the launched products.

As the bench noted, the policies may not be most ideal, but “this would merely be a first step in the process of achieving Equality for PwDs, which is the solemn intent of legislations including the Right of Persons with Disabilities Act, 2016”.

Learnings from Australia and way forward

As mentioned above, Section 46 of the ADDA allows insurance companies to discriminate in providing insurance on two grounds. The AHRC issued a comprehensive, non-binding guideline assisting the companies to decide what would qualify as lawful discrimination.

  • Data limb; as per the guideline, the company need to satisfy that (1) the data is applicable on the facts in question, has sufficient sample for reliable use, not outdated, discredited etc. and is complete and up to date and (2) it is reasonable to discriminate considering data and other relevant factors. Factors such as practical and business considerations, availability of less discriminatory options, the individual’s particular circumstances, the objects of the ADDA, especially the object of eliminating disability discrimination, all other relevant factors of the particular case etc are relevant in determining the reasonability.
  • No data limb; to get exemption under it, the company has to satisfy that (1) the data is not available and could not reasonably be obtained and (2) discrimination is reasonable having regard to other factors such as medical opinion, Relevant information about the individual, Opinions from other professional groups, Actuarial advice or opinion, Practice of others in the insurance industry and Commercial judgement.

The guideline referred to previous cases and covered what is reasonable and what is not. EG, discrimination based on stereotypes, unsubstantiated assumptions, or prejudices is not reasonable, and previous decisions cannot be justified based on future studies.

The IRDAI, in light of its obligation to assist the insurance companies in taking write decisions, should consider issuing a binding circular or non-binding guideline laying down tests for determining a higher premium, the exclusion of standard terms, a lesser maximum insured amount, and denial of an insurance policy. As the 2020 circular states, denial should be the last option, but to ensure that it is followed diligently in practice, it is important to obligate the companies to give reasoned decisions based on specified tests and parameters and deny insurance only after exhausting all other options.

Hopefully, the IRDAI will act proactively and make further progress in reducing instances of discrimination by assisting companies in distinguishing between differentiation and discrimination.

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