Hidden “Material Change” Clause in Health Insurance: How Insurers Can Raise Premiums Quietly

Health insurance promises peace of mind — pay premiums, follow rules, and get coverage when needed. Yet a little-known clause in several health policies could undermine that promise. According to Prashant Mhatre, All India President of the General Insurance Agents Federation Integrated (GIAFI), the “Material Change” clause quietly embedded in many retail policies may allow insurers to increase premiums or restrict coverage after a claim.

What Is the “Material Change” Clause?

The Material Change clause requires policyholders to notify insurers about any significant change in health, such as new illnesses or medical conditions.

Upon notification, insurers may revise the policy at renewal. This could include:

• Increasing premiums

• Limiting coverage

• Adding new exclusions

While legally filed in policies from insurers like Acko, ICICI Lombard, SBI General, and Zuno, its use post-claim raises questions about IRDAI rules protecting lifelong renewability.

Are Insurers Misusing This Clause?

Mhatre highlighted that invoking this clause after a claim may conflict with regulatory guidelines. Under IRDAI rules:

• Health policies must be lifelong renewable, except in cases of fraud or non-disclosure.

• Renewal cannot be refused or altered solely because a claim was made.

• Fresh underwriting is permitted only if the sum insured increases.

Shilpa Arora, CEO of Insurance Samadhan, warns that selective premium hikes or coverage cuts post-claim undermine the very purpose of insurance, eroding trust in the system.

What Can Policyholders Do?

Policyholders can protect themselves by:

1. Requesting written justification from insurers for any renewal changes, with references to IRDAI approvals.

2. Verifying uniformity — ensure changes are applied across the product, not selectively.

3. Escalating unfair actions to IRDAI or the Insurance Ombudsman.

4. Considering portability to maintain continuity benefits, bonuses, and coverage.

Mhatre emphasises: “The Material Change clause cannot override IRDAI renewability protections. Any selective premium hike or coverage reduction after illness is challengeable.”