The cancellation process of group health policy falls under the following heads:
1. Cancellation by policyholder/insured –
If a policyholder thinks of cancelling the group health policy, a 30-days prior written notice is required to be given to the insurance company. After receiving the notice, the insurer will cancel the policy for the remaining policy coverage period and refund the unutilised premium (excluding service tax). However, the refund will be initiated only if no claim has been made under the policy by or on behalf of the policyholder. Also, when the company decides to cancel the Group health insurance policy, the insurer will not accept any claim during the notice period.
The refund will be made as per the below table –
|Parameters||Refund Premium (%)|
|Policy Term – 1 year||Policy Term -2 years|
|Up to 90 days||100%||100%|
|91-365 days||Refund is on the basis of pro-rata – the number of days left in the policy term||Refund is on the basis of pro-rata – the number of days left in the policy term|
|366-455 days||Not Applicable||25%|
|456-545 days||Not Applicable||12%|
|Exceeding 545 days||Not Applicable||0%|
2. Automatic Cancellation –
In the case of the death of the policyholder, the policy coverage shall be automatically terminated. The refund will be made as per the above table, provided no insurance claim has been made under the policy by or on behalf of the policyholder.
3. Cancellation by the insurance company –
The insurance company has the rights to cancel the policy or coverage by sending 30 days prior written notice to the policyholder to the address mentioned on the certificate of insurance. Therefore, no refund will be made if:
- Insured or any person acting on behalf of either has acted in a dishonest manner
- Insured has not disclosed the material facts or misrepresented facts
The cover can also be cancelled if the insured has not cooperated with the insurance company. In such a case, the insurer will refund the premium on a pro-rata basis, provided no claim has been made under the policy.
Cancellation in case of credit-linked cases – In those cases, where the coverage is attached to the credit/loan tenure, the coverage will exist till the end of the loan term, closure of the loan or policy tenure, whichever is earlier. In such cases, the insured/policyholder should immediately inform the insurer about the closure of the loan so that policy or coverage can be cancelled.
Case Study 1
Established in 2010, M.S Electricals has been recognised as a profound service provider of maintenance and installation services for electrical equipment. Acknowledged for reliability, effectiveness and timely execution, the company has created a conducive working atmosphere and also offered various health benefits to its employees, like free health camp, reimbursement of medical expenses, etc.
Last year, the company also bought a group health insurance coverage to extend medical insurance services to its more than 2,000 employees. In addition to offering free health services at network hospitals, the policy also promised to cover family members of employees. It was a one-year policy and required to be renewed annually. However, the insurer promised to cover maternity expenses at the time of policy issuance, but later refused to give the maternity coverage at the same premium rate and asked for extra premiums for that.
The policyholder (i.e, M.S Electricals) decided to cancel the policy and opt for another group health policy which was ready to offer extensive coverage, including maternity benefits, at nominal premium rates. M.S Electricals sent a one-month written notice to the first insurance company to cancel the policy. As M.S Electricals had sent a notice within three months of buying the policy, the first insurance company refunded the entire premium amount, excluding service tax.
Case Study 2
R.J Bank is offering group health insurance to its savings bank accountholders. Without pre-policy medical checkup, the bank is offering a group medical insurance, which is available both as individual and family floater options. In March, this year, the company renewed its group health insurance policy and covered its new saving bank accountholders. Those account holders who died in the previous policy year or closed their accounts with R.J Bank, their insurance coverage was cancelled.
Case Study 3
As a leading health insurance company, ABC Insurance Company has been offering different health insurance policies to both individuals and corporate. Last year, J.S Mills, a distinguished name in the clothing business, approached the insurer to buy a group health insurance for its 500 employees. Though J.S Mills was offering various health insurance benefits to its employees, it was the first time that the company decided to buy a group health insurance policy as well.
One of the representatives of the ABC Insurance Company visited J.S Mills, where the HR department of the company gave the complete details of the employees, withholding the information related to the age-group of employees. ABC Insurance Company issued a group health insurance policy on the basis of information shared by J.S Mills. However, one month after the issuance of the policy, the insurance company started receiving claims from employees aged above 45 years due to cardiac ailments. Though the number of claims was few, the insurance company decided to cancel the policy because J.S Mill hides the maximum age limit of its employees.