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In the recent past, health insurers like Apollo Munich, Tata-AIG General and Max Bupa have launched health insurance products without the claim loading clause. The clause allows insurance companies to hike premiums after the policyholder makes a claim. Needless to say, insurance customers often felt cheated by the clause, as most insurance companies used the clause to hike premiums on renewal after a person made a claim on the policy. So, a typical policy, which is supposed to help a person in future when he develops a health problem, can become very expensive with the loading, especially since premiums increase with age. If you are looking to buy a health cover, you should first check out these products without the claim loading clause.
Typically, a health insurance policy – at least the indemnity-based ones from general insurers – has to be renewed every year. Many insurers – state-owned as well as private – incorporate a claim loading clause in their policy, which allows for an increase in premium following a claim made in the previous year.
However, insurers do not follow a standard format for the purpose for loading of premium and it varies with each insurer. That is why you should go through the policy wordings to understand the calculations at the time of buying the policy itself. This is because the insurance company can't change the structure described in the policy during the course of the contract. However, don't confuse claim loading with the loading of premium. That comes into the picture if there is any adverse medical history.
Claim loading gets triggered either on individual claim or the company's overall claim ratio (premium earned versus claims paid out during the year) going haywire. It could also be linked to the type of the claim —that is, if it is chronic or otherwise — and the average usage of the total sum insured.
Besides, companies can choose to increase the rates for their overall portfolio or a particular segment, citing medical inflation. Then, of course, there is the regular rise in premiums in accordance with the advancing age of the policyholder.
Claim loading may not seem like an important parameter while buying a policy, especially at a young age, as the tendency then is to focus on cheaper premiums. However, remember that health insurance, although renewable annually, is a long-term contract. Given that the loading in case of some companies can go up to 200%, it could wreak havoc on your finances, especially in your silver years. One should not buy a policy which has claim loading clause as it can have a compounding effect, making your policy prohibitive for you in times of need.
If a policy's wordings are not upfront about loading, ensure that you enquire about the same. Also, factor in other elements. As part of long-term financial planning, there is no doubt that one should look for zero loading as one of the features, apart from lifetime renewal, lifetime zero co-pay ratio, no limits on surgeries and room rents, and the claim settlement track-record.
Now, first-time buyers have several policies to choose from and thus, can avoid the ones with unacceptable claim loading structures. But, how do those who have been paying premiums for a long period of time deal with the situation?
Being aware of the policy's terms and conditions, competitor's offerings and the regulatory scenario could be a possible solution.
The first option is to go through the claim loading clause in your policy document and question the insurance company if it has not adhered to it completely. Also, the Insurance Regulatory and Development Authority (Irda) has issued guidelines related to loading on premiums for senior citizens, which bar companies from increasing the premiums by more than 50-75%.
Secondly, thanks to the health insurance portability mechanism, implemented since last October, such policyholders have the option of switching to an insurer who offers better terms.
The flipside is that since accepting or rejecting the proposal to port is left to the new insurer, those having made claims, particularly senior citizens, in the past may not stand a great chance.
One can only hope that with increasing competition, companies will make efforts in future to retain their customers.
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