Reasonable And Customary Clause
  • Explore Reasonable and Customary clause
  • Benefits to Insurers
  • How To Protect Yourself?
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Reasonable and Customary Clause: An Introduction

Reasonable and customary charges refer to the costs related to any medical procedures or item in any geographical location In India. The health insurance companies have a 'customary and reasonable' clause which states that your health insurer is liable to pay the costs for medical procedures and treatments if they are 'reasonable and customary'

In simple words, if the medical procedure or treatment you avail is not in line with what other healthcare providers charge in your geographical area then they will pay for what they deem reasonable and choose not to pay for the rest.

Do not worry if you are confused. The purpose of this article is to further expand your understanding of the concept of reasonable and customary clauses in health insurance and how it impacts your health insurance policy.

Understanding Reasonable and Customary Clause In Health Insurance

In theory, the reasonable and customary clause seems simple. Let us further understand the impact of the clause on your health insurance with the help of an example:

Ishika purchased a health insurance plan with a sum insured of INR 8 Lakhs. Later she is diagnosed with cancer and on the advice of her doctor she needs to undergo a hysterectomy. Ishika purchased a high-value health insurance plan, so she chose to undergo her surgery in a premium hospital without comparing the prices of the surgery in the other hospitals in the same geographical area.

Post surgery her hospital bill added up to INR 1.6 Lakhs. However, her health insurance plan only covered her for INR 1 lakhs. On inquiry, she was informed that according to the 'reasonable and customary' clause, the health insurer is liable to pay INR 1 Lakh only.

Reasonable and Customary Clause In India

Unfortunately, in India, there are no regulations that place an upper limit on how much a hospital can charge for a particular service or medical treatment. In theory, a hospital can charge you any amount they prefer for a treatment.

To protect themselves from unreasonably high medical treatment charges, health insurance companies have the 'reasonable and customary clause'. It is the amount of money, a health insurer pays for a particular medical procedure or treatment.

Who Imposed Reasonable And Customary Clause In Health Insurance?

As per IRDAI regulations, your health insurance provider can refuse to pay any hospital bill. Health insurers calculate the same by estimating the average treatment charge by gathering data with similar healthcare providers in the same geographical location.

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How To Protect Yourself From The Reasonable and Customary Clause In Health Insurance?

Often a legitimate claim may be denied or rejected citing the 'reasonable and customary clause' in health insurance. If your health insurance provider believes that your health insurance bill is unreasonably inflated, they may refuse to pay above a certain amount.

To avoid this situation from arising, consider the following factors:

  • In case of a planned hospitalisation for any surgery or medical treatment, cross-check the average pricing. For related expenses, depending on the category of room you select, the hospital provides you with an estimate that you can cross-check with similar-level hospitals.
    A difference of 10-20% is acceptable. However, if it is over 40 to 60% then you must re-evaluate the chosen hospital.
  • Opt for a good health insurance company with a good CSR and reputation. The higher a company's CSR the more reliable they are for paying out claims.
    Check out the best health insurance companies with the highest CSR for making an informed purchase decision.
  • Look for a good hospital for your medical treatments. We all are aware of the kind of hospitals that tend to overcharge patients. Steer clear of such hospitals to avoid the reasonable and customary clause.
  • Select the right insurance aggregator or agent whom you can trust for the right advice. With PolicyX we make sure that the claims filed by you are passed through successfully.

In Conclusion

Simply put, the customary and reasonable clause in health insurance is a technicality used by health insurers when they want to deny a claim. However, not all health insurance companies will reject your claim on these grounds.

To avoid claim rejections based on reasonable and customary clauses consider reading the terms and conditions of your health insurance policy, and opt for a trusted hospital. Take active steps to avoid any claim rejections. For any further information contact our insurance experts at PolicyX.

Reasonable And Customary Clause In Health Insurance: FAQ's

1. What is a customary and reasonable clause in health insurance?

A reasonable and customary clause in health insurance is the condition under which a health insurer can refuse to pay your claims if they can prove that your hospital has overcharged you for a certain medical treatment.

2. How is the reasonable and customary clause applied?

The health insurer usually has a rate card that is associated with zone-wise cities and hospitals in those areas for average costs for listed treatments.

If the treatment you avail deviates over 40 to 60% of their given rates, the insurers can reject claims filed by the insurance holder.

3. How to protect yourself from reasonable and customary clauses in health insurance?

Follow the steps mentioned below:

  • Select the health insurance provider carefully
  • Consider the Claim Settlement Ratio (CSR) of the health insurer
  • Do not forget to find a reputable hospital and avoid hospitals which tend to overcharge

4. Why do health insurance companies apply the reasonable and customary clause?

To protect themselves from being overcharged by hospitals, health insurance providers have a reasonable and customary clause in place.

5. Is the reasonable and customary clause in health insurance legal?

Yes, as per the IRDAI regulations, the reasonable and customary clause gives insurance providers the power to reject any claim if they can prove the medical bill has been inflated and the customer is overcharged.

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Simran Kaur Vij

Written By: Simran Kaur Vij

Simran is an insurance expert with more than 3 years of experience in the industry. She may have all the answers to your insurance queries. With a background in Banking, she proactively helps her readers to stay on par with all the latest Insurance industry developments.