Insurance portability: Follow a wait and watch strategy

Now that insurance companies are offering portability the one question uppermost in every mind is: Should one opt for it? While it is too early to provide an answer in black and white the best strategy policyholders could follow now is wait and watch, says Salil Dhawan.

If not satisfied with the services of existing health insurer, now you can change the insurance company without losing policy benefits as the long-awaited portability has come into force. In February, the Insurance Regulatory and Development Authority (IRDA), the apex body that regulates insurers, had issued necessary orders for implementing portability to allow policyholders to switch over to another insurance company with the same terms and conditions.

The health insurance portability facility, which was earlier scheduled to become operational from July 1, finally has come into force from October 1. Portability is allowed to all individual health insurance policies issued by non-life companies including family floater policies. From a layman's perspective, health insurance portability will allow the customer to switch to a different health insurer with benefits from previous insurer being carried forward.

According to the guidelines, only health insurance policies offered by non-life companies are portable. Typically, non-life companies offer indemnity policies and the regulator intends to bring portability to this format of health insurance.

Portability will mean greater competition within the health insurers to retain customers which will compel them to constantly improve their efficiency standards in terms of customer engagement and relationship along with the service levels. Portability, thus is expected to bring in new benchmarks in delivery mechanisms and product innovation in the industry.

Click NEXT for more

More about health insurance portability

The accepting insurer shall provide cover, at least up to the sum assured in the previous insurance policy. The new facility will also help those policyholders who stick to one insurer throughout life for fear of losing the cover for pre-existing diseases (PED).

While issuing directions to insurers, IRDA had said it was essential to protect the policyholders against discontinuity and consequential loss of PED cover by making the health insurance plans portable across the insurance companies.

In general, health insurance policies have specific exclusions for PED for a specified period of cover during the initial year, and policyholders do not get this cover in the event of changing insurance firm. It was considered 'detrimental to competition'.

Health insurance policy portability will also help people shifting from one part of the country to another. In want of such facility they were put to disadvantage due to lack of their insurers' offices at new locations.

Also, in case of change of jobs, policyholders lose health insurance cover as they could not change their insurer.

Click NEXT for more

The request of porting the policy should be completed as per the timelines prescribed in the IRDA regulations and guidelines, the regulator had told the insurance companies.

It is to be noted that portability will enable transfer of the credit gained by the insured for pre-existing conditions and time bound exclusion if the policyholders chooses 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.

A break in policy occurs when the premium due on a given policy is not paid on or before the premium renewal date or within 30 days thereof, IRDA said in its advertisement.

The policyholders should fill in portability form along with the proposal form and submit the same to the insurance company, it said.

If the insurance company does not communicate its decision to the requesting policyholder within 15 days of providing all details as required by insurer, it said, the insurance company shall not retain the right to reject such proposal.

You need to port at least 45 days before the renewal date of your policy, failing which the new insurer may refuse portability. Typically, health insurance policies are annual contracts. An insurer can also refuse to port if you don't fit the bill as per their underwriting norms, wherein it will assess your medical history, among other factors.

Click NEXT for more

Things you can port:

In individual policies: Portability of a health policy is limited to time-bound exclusions or waiting period for pre-existing conditions. Waiting period is the time till which you do not get a cover.

Typically, a regular health insurance policy has three kinds of waiting periods.

The first is the 30-day waiting period at the time of buying a policy, which means that any hospitalisation expenses on account of an ailment will not be covered in the first 30 days; the second is the waiting period on a pre-existing disease.

Pre-existing diseases are those ailments that are present at the time of buying a health insurance policy; the third kind of waiting period pertains to the waiting period on certain specified ailments. For instance, hernia is a common ailment and is excluded in the first two years of the policy.

However, do check the new insurer's definition of a pre-existing disease. If you have made a claim on your policy on account of an ailment, the new insurer may consider that ailment as a pre-existing disease and, therefore, not include it in the initial years since you would be a fresh customer for the insurer.

Click NEXT for more

In group policies: The number of years of continuous coverage from your group insurance policy will be used to offset the waiting period, when you port it to an individual health policy.

You can also port your group insurance policy to an individual policy.

Step-by-step process of porting a policy:

1. Choose an insurer to switch your health insurance policy

2. Approach the new insurer at least 45 days before the premium renewal date of your existing policy. On missing the deadline the new insurer is not liable to port your policy.

3. You need to fill up the portability form and insurer will give you details of new policy you have chosen.

4. The insurer will then proceed with the underwriting, an assessment of your case. In order to underwrite you, the new insurer can seek data on your claim history from the existing insurance firm. The new insurer needs to send the request within 7 working days of receiving the request for portability and existing insurer need to send relevant data within 7 working days of receiving the request.

5. The new insurance company needs to accept or deny portability within 15 working days, failing which it will have to accept the proposal.

Click NEXT for more

With the implementation of health insurance portability, insurers will need to enhance their service capabilities and engage in constant innovation to service their existing and potential customers. So now insurers will not only be required to offer the best price but also enhance the service levels. Customers would opt for a change in insurer only if they are not satisfied on the service front. Retention of existing customers will be a big challenge going forward.

Should you opt for health insurance portability?

Health insurance policy is definitely a step in right direction. However, if you are satisfied with your insurer, please continue with your existing policy. Don't go for it, just because it is available to you.

If you are not satisfied with your insurer, it is recommended to wait for a while and let all insurance firms establish a smooth process as regards health insurance portability. In addition, there are still some grey areas since features of health insurance companies are very different and there is also no clarity on top up medical insurance policies.

Maternity benefits that are normally available to group health insurance policies may not be available if switched to individual policy. Last but not the least, loss of no claim bonus will be there for the policyholder who opts for portability -- as some companies don't provide no claim bonus or cumulative bonus. Having said that, it is always recommended to buy a policy which suits your needs at first place. If you don't have one, go get one now.Click NEXT for more