Can a kidney transplant patient get life insurance?

I underwent kidney transplant 18 years back but am not getting insurance from any of the insurance companies. However I got to know that government has passed new insurance bill, does this allow insurance for patient like me?

I received the above question in a TV show which is when I realised that expectations from the insurance law amendments is not restricted to the expected flood of foreign investments because of increase in foreign holdings from 26% to 49%.

I did a quick scan of the Act and realised that it has many significant changes that will completely alter the way consumers interact with the life insurance industry in India and the manner in which the business is conducted. Some of the more significant changes that I noticed are discussed in this article.

Firstly the insurance companies have been made responsible for the acts of their agents. Penalties and fines for mis-selling has been increased manifold and moreover they are now specifically leviable per incident. The cap on commissions and charges has been removed from the Act and will be now within the purview of IRDA who will specify the cap. All this will completely change the way life insurance products are designed and more importantly sold. There have been some suggestions that the upfront commissions may now actually increase but it appears improbable that the insurance regulator will be a lone ranger to swim against the rising tide of lower intermediary margins and lower costs charged overall to consumers especially since a unified regulatory structure is supposed to be round the corner. In any case the provisions on mis-selling and ban on multi-level marketing of life insurance and making insurance companies responsible for the acts of mis-selling by their agents should lead to a sea change in the manner in which insurance is sold in India. It is unlikely to be the utopian situation where mis-selling ceases to exist but we should definitely see a drop in mis-selling complaints going forward.

The other major areas where very significant changes have been made that directly affect the insurance consumers are in the area of claim payments, nominations and assignments. The reasons for which a death claim can be rejected have been completely revamped. Now a claim made on a life insurance policy after 3 years cannot be rejected on any grounds even fraud. Even within 3 years 2 differential levels have been provided. Only in cases of consumer fraud (that has been tightly defined) the burden of proof will be on the family members of the insured person. In other cases (within 3 years) the burden of proof will remain with the Life insurance Company. This should make it very difficult for the life insurance companies to reject any death claims which is very good for the consumers.

The only worry is that the market has already seen a series of organised fraud in case of life insurance policies which might get a fillip because of these strict consumer-friendly provisions. That may in turn force the insurance company to be extra cautious in the matter of issuing term insurance policies. This can adversely affect the welcome trend of high growth of online term insurance sales. But overall these changes are positive as they will reinforce the benefits of a life insurance policy when it is most needed – after the bread winner has expired.

The whole structure of nomination in life insurance policies has been changed. Currently the nominee of a life insurance policy (means the person to whom the monies are paid on the death of the policy holder) only holds the monies received after the death of the policy holder as a trustee on behalf of the legal heirs of the policy holder. In simple terms it means that the policy holder could have provided the name of his father as the nominee in the policy. If the policy holder dies without leaving a will and as per the personal law applicable to him his spouse is the only legal heir. In the event of his death the insurance company would pay the policy amount to the father. But the father would hold the money in trust for the spouse who is the legal heir in this case. After the amendments come into force however the father will become the beneficial owner as well. This change will apply to claims paid under old policies as well as long as the claim matures after the amendments come into force. This is quite a significant change especially considering the trend of large term plans bought online where claims will start coming in the next few years.

There are quite a few other changes that will alter the industry dynamics. But unfortunately none of the changes will answer the question that I started the article with in the affirmative. As most readers will understand insurance works on a principle of grouping of risks of similarly placed individuals. For example let's say there is a group of 100 professionals of the same age and one of them is likely to die during the year and the loss incurred on the death of the individual is Rs 10 lakh. If each of them contributes Rs 10,000 and the collected money (Rs 10 lakhs) is paid to the family of the person who dies - this explains the process of insurance. The insurance company only steps in as an intermediary to calculate the slightly different risks that each individual faces and charge premiums accordingly and adds a profit margin and pays the claims. The fact remains that the claims are paid from the premiums collected from all the insured persons. When one individual has a significantly higher risk (arising from say a past kidney transplant) all the other members of that insurance group would be paying for that risk by way of increased premium if that person was included in the insurance group. Thus it is very unlikely that such a high risk individual would be covered by any insurance group. The only choice is something like a universal life insurance group of the type that the government is talking about in the context of the Jan Dhan Yojana where the increase in risk is minimal considering the sheer size of the group. This will continue to remain the only solution for such individuals.