Here are some of the things that you should know before you move your health cover to another insurance company
Last year, several customers of a private general insurer were up in arms against its decision to increase health premiums. They went to town crying themselves hoarse over the disproportionate hike, but many could not switch to another insurer. This was because they would have had to forgo critical continuity benefits. However, cases like these could become a thing of past once health insurance portability becomes a reality from July 1, provided it is implemented by insurers in its true spirit.
MORE POWER TO POLICYHOLDERS
The key issue that prevents policyholders from insurer-hopping at will lies in the pre-existing disease (PED) cover offered by health insurers. In most cases, claims arising out of such pre-existing illnesses are reimbursed only after a waiting period of 3-4 years. A pre-existing disease is defined as any ailment or condition that the policyholder was suffering from, within 48 months prior to buying the policy. And, the period during which the insurer will exclude coverage to such illnesses – typically around 3-4 years – is referred to as the waiting period. So far, policyholders who switched loyalties to another company were treated by it as new customers, thus requiring them to go through the waiting period all over again. Suppose, you want to shift to another insurer after three years of paying premiums under a policy with a waiting period of four years. Now, if the new policy too prescribes a fouryear-waiting period, you would be at a considerable disadvantage. This is because, instead of waiting for just one more year for the pre-existing illness coverage, you would be forced to bide your time for another four years. With portability coming through, the odds are now stacked in your favour as you can carry forward the PED cover 'credit'. Under the changed circumstances, the waiting period in the new policy would be reduced to merely one year in the above example. There are some limitations though. Irda has directed that the credit in terms of waiting period will be restricted to the sum insured (including bonus) under the existing policy. Say a policyholder has an existing policy with a sum insured of 2 lakh with an accumulated bonus of 40,000 and now, he wishes to go in for a higher sum insured, say 4 lakh. Here, the credit for the waiting period shall be only in respect of 2.4 lakh (existing sum insured & bonus) and not for 4.4 lakh (new sum insured & bonus).
MAKING THE SWITCH
No specific procedure as such has been laid out by Irda. The policyholder will have to go through the usual process of applying to the new insurance company. The forms are likely to have a section to capture information regarding previous continuously renewed policies to enable portability. Details on previous coverage would also be noted. Customers may have to attach proof regarding previous continuous coverage. The insurer will have to acknowledge the receipt of your application for portability within three working days. Likewise, the companies have to communicate their decision within 15 days. If the policy lapses due to delay in processing the switching request, this insurer will have to accept it.
IMPACT ON THE SUM INSURED...
According to Irda, those wishing to switch will be assured of health cover equal to at least the sum insured in the previous policy. But, this may not always be the case. There is no obligation on the part of the new insurer to match the sum insured if it has not filed such a product with Irda. If your current cover is 5 lakh and your proposed new insurer has filed a product with Irda with maximum sum insured of 3 lakh, you cannot force the new insurer to offer a 5-lakh-cover.
…AND THE FRINGE BENEFITS
There are other continuity benefits like no-claim bonuses and free medical check-ups too, but some confusion on how portabilitywill affect these persists. "The circular issued by Irda is vague. It appears that the new insurer would have to match the sum insured. But the terms and conditions governing the policy would be in accordance with what the insuring company offers. So, my interpretation would be that on migration, if the insuring company offers no-claim bonus, the consumer would get that benefit; otherwise not. However, ICICI Lombard's Datta is of the opinion that the new cover would include the no-claim bonus. "If the policyholder has earned a no-claim bonus in terms of additional sum insured, then the new insurer providing portability has to offer a product with minimum sum insured equivalent to the base sum insured plus bonus (i.e. additional sum insured), as available with the policyholder in the expiring policy.
THE FLIP SIDE
The intention of the regulator in allowing portability may be honourable, but it still leaves much to be desired, causing some industry watchers to be sceptical about its success. Unless regulations are framed for enforcing the portability of the policies, it is not going to help at all. Moreover, the 15-day time is given for communicating the insurance company's decision of a proposal submitted by a consumer for portability, which would mean that the discretion vests in the insurance company whether or not to accept the proposal for portability. All that is required is that the decision must be communicated within 15 days from the date of receipt of the proposal. Also, while increased competition, post implementation of portability, could benefit young and healthy individuals, those in the higher age brackets may not be so lucky. "It is not likely to help policyholders in the older age bands (say, 50 and above) and those who suffer from pre-existing ailments. Such proposals are likely to be rejected by the new insurance company.
LACK OF CLARITY
Then, there are some grey areas. Clarity is required on whether underwriting would be allowed for portability proposals; if portability will be offered from group to retail health products and similarly from benefit products like hospital daily cash to indemnity health products; and whether portability has to be provided for first one/two year exclusions too. We expect more clarity on binding the insurance company of the expiring policy to provide the required information to the new insurer in specified time limits, so that smooth portability can operate. Any mischief here could result in major hiccups in porting the policy.
EXERCISE CAUTION
Loopholes abound, but it is a step in the right direction. However, for it to work in your favour, you need to plug all the gaps at your end. You need to ensure that you submit the request for portability to the insurer of your choice well before the renewal date. Any consequent delay in processing and rejection by the new insurer could leave you unprotected.
Since 15-days' time is given for processing the proposal of portability, the application should be made around one to two months prior to the expiry of the existing policy. Also, you need to make efforts to continuously renew your policy by regularly paying the premiums so that it remains eligible for portability. Finally, study the policy offered by the new insurer and take a call on the trade-off between the existing benefits and any likely increase or decrease in premiums in the new policy.
