The World Health Organisation recently released some data pertaining to life expectancy across the world. Its staistics show that the average Indian's life expectancy has gone up from 61 years in 2000 to 65 in 2009. As life expectancy increases, so does the need for a plan to take care of healthcare costs for over a long period. One of the cheapest ways to do this is to buy a health cover. However, even with a health insurance policy, there are factors that could push up the cost. One of them is the loading applicable on premiums upon renewal.
LOADING ON PREMIUMS
Loading usually refers to the percentage increase in your premium in the event of a claim. So at the time of buying your policy, study the 'loading' aspect to ascertain how claims made by you could affect the subsequent years' premium payable.
Most policies — from both public and private sector insurers — come with this clause. Therefore, make sure you compare, among other things, the loading structure of various companies before you zero in on the one best suited to your needs.
TYPES OF LOADING
Loading could be primarily in two forms — one based on the risk as assessed by the insurer and the other linked to claims. With underwriting-linked loading, usually, where there is an adverse medical history or say a habit like smoking, the insurer takes into account the number of cigarettes consumed per day and arrives at the risk as per its underwriting practices. Likewise, in the case of certain pre-existing diseases, loading will come into picture if the perceived risk is high. It is generally done in line with the loading parameters filed by the company with the insurance regulator. The more relevant one during the life of the policy, however, will be the claims loading. Here, upon renewal post a claim in the previous year, the premium sees a spike in line with the parameters and calculations mentioned in the policy document.
Being a yearly contract, the loading policy on claims, in the past, was fixed by insurers as per their discretion in case of an adverse claims experience. However, in the past couple of years, almost every insurer has introduced specific claims-loading clause in their mediclaim policies.
While there is no uniform procedure adopted by health insurers, they could load premiums as per the claims ratio, claims to sum insured ratio and claims based on chronic or non-chronic ailment. In case of chronic or non-chronic ailment, the method depends on the type of claim made. A claim for a chronic treatment attracts higher loading than for a non-chronic one. For instance, an accident claim is unlikely to be repeated and, hence, should not attract a loading vis-a-vis a claim for say cancer, which would result in more claims in future. Some companies hike premiums if your average claim amount in the preceding two years, for instance, exceeds a certain ad-hoc amount mentioned in the policy. Some companies may roll back the loading in case of a specified number of claim-free years.
Then, there could be premium repricing. It can happen across any age group, depending on the company's claim experience, but in most cases, they make it expensive for people in the older age brackets. In such cases, policyholders can consider moving to another insurer.
THE NITTY-GRITTY
While loading may be a common practice in the industry, there are no set norms for drawing up a loading structure. Premium loading varies from insurer to insurer — there is no standard process; companies have their own norms. Also, as per IRDA guidelines, the details have to be mentioned in the policy documents.
In case of claims-based loading, it may not be a correct approach to load premiums at the time of renewals just because of a single claim, whatever the amount, in an expiring policy. In our case, the loading comes into play if say the insured has made more than three claims in three years.
Loading, in case of a claim, is actually unethical. If you have been holding the policy for 15 years, and make a claim in the 16th year, loading the premium in the subsequent year is unfair. It's better not to buy a policy from such a company. Many insurance-seekers do not bother to check these points."
Also, the insurer should not have the right to refuse you policy renewal. "If they deny you the renewal, you can write to the insurance Ombudsman. The regulator has clearly said that unless there are compelling reasons, policy renewal cannot be turned down.
Finally, if you feel that your insurance company is penalising you for claims made and do not agree with the loading structure, you can always switch to another insurer. If insurers adhere to its spirit, health insurance portability, which will be implemented from July 1, should make things easier for such policyholders. However, it is best to take a close look while buying the policy itself. Also, do not assume that the policy that is silent on this count will not have a loading mechanism. Rather, the one with a well-defined loading structure could be a better bet.
