Source: Financial Times
Recently, the Supreme People's Court, the People's Bank of China, the National Financial Regulatory Administration, and the China Securities Regulatory Commission jointly released a list of typical cases on protecting the legitimate rights and interests of financial consumers and investors. One case involving claims for critical illness insurance has drawn particular attention.
The case was straightforward: Mr. Wu was diagnosed with Wilson's disease, which is explicitly covered under the policy's critical illness benefit. However, the insurer denied the claim, arguing that the diagnosis did not fully meet all clinical criteria specified in the contract. Upon review, the court determined that the disputed clause was a standard form provision imposed by the insurer; it set unduly strict requirements for claims and failed to provide adequate notice or explanation. Consequently, the basis for denial was insufficient. Through court-mediated settlement, the insurer agreed to pay a lump-sum benefit of 36 ten thousand yuan and waive 16 subsequent premium installments totaling 77440 yuan. The entire legal process concluded within 20 days.
The significance of this case lies not in resolving an isolated dispute, but in highlighting a critical issue: insurers that include certain diseases in coverage yet impose stringent diagnostic criteria through standard-form clauses are effectively narrowing their liability. Policyholders often know "this disease is covered" but struggle to determine what additional conditions must be met for the coverage to apply. This information asymmetry is particularly pronounced for rare and complex diseases.
This is not an isolated case. In a case disclosed by the Yueyang County Court in Hunan Province, the insurance policy covered Wilson's disease but required the insured to simultaneously exhibit five specific conditions: progressive limb tremors, Kayser-Fleischer rings, decreased serum ceruloplasmin, esophageal varices, and ascites. The court ruled that while the general public understands Wilson's disease as a critical illness, the multiple restrictive conditions in the policy terms exceed what an average policyholder would anticipate or reasonably understand at the time of contract signing. These provisions effectively exempted or reduced the insurer's liability.
Looking beyond these two cases, the "easy entry, strict exit" model of critical illness insurance is no longer new. Insurers often impose additional restrictive conditions—such as specific complications or treatment methods—to effectively narrow disease definitions, resulting in claims standards that are stricter than established medical diagnostic criteria. At the same time, while medical technology continues to advance, insurance policy language regarding diagnosis may not keep pace. Applying outdated standards to modern diagnoses can lead to situations where a patient is diagnosed but cannot receive coverage. In the short term, this may reduce claim payouts; however, in the long run, it undermines the foundational trust of the entire insurance industry.
While mediation resolved one family's crisis, fundamentally improving the situation requires collective effort from multiple parties.
At the regulatory level, stricter review standards should be established for critical illness insurance policy terms, particularly regarding diagnostic criteria for rare and complex diseases, to prevent insurers from evading claim obligations through technical jargon. For such standard clauses, insurers must provide consumer-friendly plain-language explanations during product filing, and these requirements should be incorporated into sales conduct regulations for oversight.
From a judicial perspective, this case sets a strong precedent. Standard terms must be subject to strict scrutiny regarding the fulfillment of disclosure obligations. If an insurer cannot prove that it adequately explained restrictive clauses, those clauses shall be deemed unenforceable, upholding the principle of contractual fairness.
At the industry level, insurers must genuinely embed consumer rights protection into their core business philosophy, rather than treating it as a mere slogan. A fair claim is the most powerful advertisement for insurance credibility; an unreasonable denial can cause a family to lose trust in the entire industry. Short-sighted denial strategies may boost short-term financial figures, but they erode long-term market trust.
Insurance is about honoring commitments when risks materialize. When patients arrive at the claims counter with a hospital-issued diagnosis, they should find clarity and certainty—not a maze of dense policy terms.
