Page 303 - Ebook health insurance IC27

Sashi Publications

The following is an example of a subrogation clause wording in a medical insurance
policy:

"The Insurer has a full right of subrogation and may take proceedings under the
Insured's name, but at the Insurer's expense, to recover for the Insurer's benefit
the amount of any payment made under the policy."

Subrogation has relevance only for contracts of indemnity.

Contribution
Contribution clauses are usually present in medical insurance contracts. These clauses
apply when more than one contract covers the same loss. For instance, a husband and
wife both have insurance coverage through their employers. Both contracts cover spouse.
If the wife falls sick, she could try to collect the treatment cost from two insurers. Should
this happen, she will be benefiting form her insurance, thus violating the principle of
indemnity.

Q. How does an insurance company handle situations where two or more policies
cover the same risk?
A. By applying the pro-rata concept. Each insurer's share of the loss is based on the
proportion that its insurance bears to the total amount of insurance. For example, assume
that the wife under the previous example is covered for Rs. 25,000 under her employer's
scheme and Rs. 50,000 under her husband's policy. If she files a claim for Rs. 300, she
will receive Rs. 100 from her insurer and Rs. 200 form her husband's insurer as a pro-
rata share of each company's loss and not Rs. 600.

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