Want to transfer your insurance policy? All you need to know

In a competitive environment it is most unnatural for competing companies to reward loyalty shown to other companies in the same sector. For instance, Loyalty to company A cannot/will not be rewarded by competitor company B.

But, why not? That is exactly the question many experts and the IRDA raised a few years ago when discussing the issue of health insurance and the transfer of credits gained in a situation where a customer shifts from Health Insurer A to B.

This intervention by the IRDA has now resulted in happy news for customers availing health insurance, especially those who are not satisfied with their existing insurer.

Effective 01 October 2011, health insurance has become portable and you are now free to move to another provider and carry along all the credits gained for having been loyal.

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To get a better perspective of the whole idea of portability we need to explore how things worked before this new rule.

Let us say you were a customer, who, had a Health Insurance policy with ABC Company, and were not satisfied with their service. You approach company XYZ to transfer your policy and they would have said that you will be treated as a new policyholder.

This means, all the benefits you had accrued by regularly paying your premium to the earlier insurer would stand nullified and you would need to build your loyalty from scratch.

The IRDA defines portability as - "The right accorded to an individual health insurance policy holder (including family cover) to transfer the credit gained by the insured for pre-existing conditions and time bound exclusions if policy holder plans to switch from one insurer to another insurer or from one plan to another plan of the same insurer, provided the previous policy has been maintained without any break."

From your perspective as a customer, you need to understand two major points from the above definition, and to realise how it applies to you.

1. Pre-existing condition credit
2. Time-bound exclusions

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Pre-existing condition/disease

Then (Before 01/10/2011) - When one availed a health insurance policy, he/she was not given any cover for claims arising out of a disease/condition he/she was ailing from, on the day of taking the claim.

Nevertheless, if he/she continued to be a regular premium payer for four years (48 months), then the insurance company will be bound to pay for claims arising out of the existing condition.

In the past, if you shifted from one company to another, you were required to again do a premium paying term of four years to claim for PEDs.

Now- With portability, you can carry forward credits gained for pre-existing disease/condition to the new insurer from day one itself.

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Time Exclusions

Then- Time exclusions in a health insurance policy are certain illnesses for which no claims will be entertained for a set period from the date of taking the policy. For example, treatment of conditions/diseases like cataract, piles etc cannot be claimed in the first 365 days of taking the policy.

The reason being, these treatments can be postponed for many days, and hence the insurance company would have individuals taking a policy just for claiming for such treatments. Such exclusions are called One-year exclusions, Two year exclusions and so on till four years.

Now- In case you were covered under the existing insurance policy for a period of one year, the waiting period of 30 days and first year exclusions will not apply in policy to be renewed.

The two-year exclusions shall apply for a period of one more year. Pre-existing condition exclusion shall apply for a period of three more years.

Similarly will be the case with 2 year, 3 year and 4 year exclusions, where the period already spent with the earlier insurer will be credited to you. This also includes the 30 day mandatory waiting period.

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How do I port my health insurance?

To transfer your policy from company A to company B, you will need to approach Company B (new insurer). You will be asked to fill in an application for porting. Company B will then process the application and post the request on the IRDA site within 7 days.

The existing insurer (company A) will have to furnish all the required data about the insured within 7 days, again through the IRDA website.

Once satisfactory data is available, Company B will underwrite your policy and you will be a customer of B and carry forward all benefits from company A.

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Five things to remember before you decide to port your policy:

1. When applying for porting, be sure that your existing policy is valid for at least 45 days more. Else, the application will be rejected.

2. The portability is only applicable for the sum-insured under previous policy.

3. Portability is applicable for all individual health policies. In case you are a part of a family/group policy, you will need to migrate to an individual policy from the same insurer and then apply for portability only after 1 year.

4. Sometimes the waiting period/exclusion period for the same disease might be different for different insurers. Ensure that you are clear about all the terms and conditions before applying.

5. Do not port for saving money on premium. With the new competitive premium regime, the differences in premium of two companies will not be very high. It is not advisable to port just because the other company is offering a lesser premium. Port if you have a service problem with existing insurer. Else, remember that all said and done, you will have to build a 'new relationship" with the new service provider (Agent, claim officers, front office staff etc). And relationships take time to mature.

You have been given the power to choose your provider. Get educated and take an informed decision. Stay healthy. Stay happy!