IRDA APPROVES HEALTH INSURANCE POLICY PORTABILITY – SHIFTING POLICIES FROM ONE INSURER TO ANOTHER ON SAME TERMS – IN EFFECT FROM JULY 1, 2011
Taking cue from the mobile number portability, Insurance Regulatory and Development Authority (IRDA) has allowed policyholders to change their existing insurer and still carry forward the benefits of the old insurance. This means one need not stick to the current insurance provider and can shop around for cheaper plans and better services. The move came as a huge sigh of relief for the unhappy policyholders. The portability will apply to General and Life Insurance Companies.
The conditions state that all insurers will have to acknowledge a request to port the health insurance policy within three working days and make data on claim details available to the counterpart within seven working days.
ISSUES ADDRESSED IN THE PORTABILITY
• WAITING PERIOD FOR PRE-EXISTING DISEASES: The major factor that was preventing customers from transferring their health insurance policies to another company was the possibility of losing continuity of benefits such as cover for pre-existing diseases or illnesses. IRDA has ensured that insurers allow policyholders to transfer the credit in terms of waiting period for pre-existing illness and bonus sum insured from one insurer to another.
• INSURANCE AMOUNT: The accepting insurer shall provide cover, at least up to the sum assured in the previous insurance policy. Also, the sum insured that is carried forward will include the no-claim bonus that the previous insurer would have given.
• INITIAL WAIT TIME: The initial waiting period of around 30 days, which most insurers have, will also be waived off in case a customer decides to port policy. This makes the wait period a onetime affair.• LOCATION: The policyholders who shift from one country to another will also be benefitted due to this portability. Previously, they were put to disadvantage due to lack of their insurers’ offices at new locations. Now, they can simply shift to the insurer whose office is available at the location one is being transferred.
DRAWBACKS
• FEATURES CANNOT BE TRANSFERRED: One cannot carry forward the features of the previous insurer, but only the credits on waiting period on pre-existing ailments.
• LACK OF CLARITY: There is not enough clarity on various issues like whether portability is possible between policies offered by life and non-life companies or indemnity policy.
• GROUP COVERS: There is no wait-time for group covers. Also, group insurance policies do not underwrite the individual but the organization as a whole; it will be difficult to port credits from group insurance policies to individual policies.
• PREMIUMS MAY REMAIN UNCHANGED: There is rise in claims, higher demand for health covers and medical inflation. So it may be very difficult on the part of the insurers to decrease the price of the policies: portability or no portability.
The move, however, ensures customer satisfaction, better services and product variations. It will also lead to competition among the insurance providers that can benefit the policyholders in the end. The directive to insurance companies to provide all records and claims history of the customer to the new insurance company will bring in more transparency. Critics, on the other hand believe that in the absence of standardization of products in India, the switching of insurers can lead to misunderstandings, frauds and misuses.
The portability is expected to increase the number of people to opt for health insurance. Only 2% of Indians currently have it, which constitutes only 20% of the overall insurance business. This is too low by the world standards. While the health insurance claims in India are extremely high as compared to other countries.
Currently, IRDA allows portability of motor insurance policies. For successful implementation of the health insurance portability, we still need to find an effective data sharing mechanism. IRDA has directed insurance companies to mention in the prospectus and sales literature that all health insurance policies are portable.
The main players in the health insurance industry viz. Star Health & Allied Insurance, Apollo MUNICH and Max BUPA, along with number of other players like National Insurance Company, United India, Oriental Insurance and ICICI Lombard are active in the field.
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Aditi Rindani 