Porting polices? Wait and watch, say experts

Health portability came into force this month. However, financial planner Gajendra Kothari is advising health insurance clients to wait and watch before shifting one's insurer.

He says portability has a number of grey areas needing clarification. Customers are better off waiting for the processes to smoothen.

When you port, policy rejections would be in line with the underwriting norms of the new insurance company. One concern insurance experts have is of the new company not being accommodative towards customers with pre-existing diseases.

Even when the policy is accepted, such customers are likely to be asked to pay extra charges or may find the disease listed as a permanent exclusion.

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Again, policies of customers in the higher age bracket might be rejected. "A 50-year-old who shifts has already paid his old insurer premiums for a good 20 years or more. As chances of claims arising are high for older customers, the new company faces the risk of paying claims, though it has not enjoyed the premiums. This does not make good business sense for the new insurer," explains Mahavir Chopra, head of e-business and retail at medimanage.com, a general insurance broker.

Also, at the time of porting, you may not get a discount, even if you have an accumulated no-claim bonus (NCBs).

"NCBs become a part of your sum insured. With the old insurer, you would not have to pay for the NCBs; instead, you could earn a discount on premium. The new insurer can ask you to cough up a higher premium for porting the same sum insured," warns B Subrahmanyam, vice-president (health), Bharti AXA General Insurance.

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For instance, you have a health cover with insurer A, a sum insured of Rs 2 lakh and cumulative bonus of Rs 50,000. When you want to shift to insurer B, your sum insured will become Rs 2.5 lakh. Hence, the premium will jump.

Then, if the new insurer does not have a similar policy with the same sum insured, you will have to purchase one with the nearest higher or lower sum assured amount.

In the above example, if insurer B does not offer a sum insured of Rs 2.5 lakh, it will offer the nearest higher slab, say Rs 3 lakh. While the premium will be charged on Rs 3 lakh, the benefits will be limited to Rs 2.5 lakh. This could defeat the purpose of portability and health cover.

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Experts say customers should pay attention to the benefits from the new policy, since there is no guarantee that you will get the same benefits on porting. Health cover   benefits vary across insurers.

Specially so when shifting from a group policy, as it offers much more benefits when compared to regular health covers. Like, maternity benefits are covered under group policies but not by individual policies.

Here, you will first need to shift to an individual plan of the same insurer and wait for a year before porting to a new insurer.

You can port only when your policy renewal is nearing 45 days before the renewal date. The new insurer then has seven days to get in touch with the old one and procure more information on you. The old company, in turn, has to revert in seven days. The new insurer has to update you the acceptance or rejection within 15 days.

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If not, your policy is considered as accepted. However, most insurers are tight-lipped about how the process would work. If the policy is rejected, you will have to stay on with the old insurer.

Subrahmanyam says that porting requests for health covers show that policyholders are not clear about what features can be ported.

"Many want to shift from a critical illness cover to a standard policy. Only the standard health insurance plan can be ported," he notes.