Why Switching Insurers may not be Smooth

[Apollo Munich CEO]

While portability offers greater choice to customers,certain grey
areas need to be addressed before buyers can benefit from the change.

Health insurance portability has finally become a reality.You can
switch from one insurer to another without losing out on accumulated
benefits.The Insurance Regulatory and Development Authority (Irda) has
also put into place rules to make the process smooth for the
customer.For instance,if an insurance company does not respond within
the specified time,it will be assumed that the proposal has been
accepted.This clause will make the portability process very quick and
efficient, says Mahavir Chopra,head,e-business,Medimanage.

Also,the Irda guidelines allow a switch from a group mediclaim to
individual or family floater policies,and allow the policyholder to
retain the waiting period credit.Since many families depend solely on
their employers group policies,such transfers will help them buy
polices on their own without having to wait for four years before pre-
existing diseases are covered.

Will it really help

While Irdas diktats are welcome,portability should not be regarded as
panacea for all the grievances of policyholders.Portability of a
health insurance policy is attractive only on paper, says consumer
activist Jehangir Gai.As long as a policy is profitable,every
insurance company is good to the insured (when there is no claim,there
cannot be any dispute).

He points out that only after a claim arises do insurance companies
get worried about repeated subsequent claims.It is then that the
company starts nitpicking and the customer considers migrating to
another insurance company.

The catch is that portability is not a matter of right.It is up to the
new company to accept or reject a proposal.Which insurance company
will want to take on the liability of an onerous policy asks Gai.There
are other issues,too.Many feel that insurance companies will
outrightly reject the proposals of senior citizens,who are seen as a
high-risk category,thus defeating the purpose of portability.

Besides,for those who have accumulated a no-claim bonus,portability
could turn out to be a loss-making proposition.As per the Irda
circular,the no-claim bonus can be carried forward to the new
policy,but the premium charged will be for the enhanced sum
assured.This means that the policyholder will have to pay a higher
premium if he wants the same insurance cover under the new policy.

Arvind Laddha,managing director & CEO of Vantage Insurance
Brokers,points out another aspect that could go against the
policyholders.When the customer migrates from a group to an individual
cover,he will get credit only for the period for which he has been
insured with the current group insurer.This seems like a
compromise for the insured,especially if he has had no claims with the
previous insurer, he says.Policyholders should also remember that they
can migrate only to the individual policy offered by
the same insurer.After a year of continuing with that policy,they will
be free to move to any other insurance company.

Not all black and white

In certain cases,there is confusion over the definition of pre-
existing illnesses.If a policyholder has undergone treatment for a
disease and his insurer has settled the claim,will the new company,to
which he decides to migrate,deny cover for the disease for which a
claim has been made This is a grey area that needs clarity.If the new
insurer does not offer a cover without a waiting period for ailments
suffered during the tenure of the old policy,then senior citizens and
others with chronic ailments will not be able to enjoy portability in
the true spirit, says Chopra.

If the new insurer is aware of the fact that the policyholder was
suffering from a pre-existing condition and decides to accept the
proposal in practical terms,it will be difficult to reject a claim on
the grounds of pre-existing diseases, says Subrahmanyam B,head,health
insurance vertical,Bharti-Axa General Insurance.
However,Gai says the new insurer will have to extend the cover to
these illnesses too.If a disease is listed as pre-existing in the
current policy,the new insurer will also treat it as pre-existing.

The waiting period for preexisting diseases is across
insurers.Therefore,if the new company accepts the risk,pre-existing
diseases would be covered, says Antony Jacob,CEO,Apollo Munich.It
seems health insurance policyholders will have to wait for some more
time before they have complete freedom of choice.Till then,they should
make the most of the benefits offered by portability.

Whats good about portability

It allows policyholders to switch to another company and carry forward
the waiting period credit for pre-existing diseases.If the new insurer
does not respond to the portability application within the stipulated
time,the proposal is considered to have been accepted.Even the
policyholders who are covered under employers'group mediclaim can
transfer the waiting period credit and move to individual or family
floater health policies.

The limitations

An insurance company can reject a proposal for a switch.Those in risky
groups,especially senior citizens,may not be accepted by any insurance
company.Insurers are free to levy premium as per their underwriting
norms.Hence,those in high-risk categories should not expect a
reasonable premium while porting.Customers with an accumulated no-
claim bonus could be at a disadvantage as the new insurers will levy
the premium applicable to the enhanced sum assured.While migrating
from a group cover,the customer will have to first switch to an
individual cover of the same insurer.Only after a year can he move to
an insurer of his choice.The guidelines are confined to PED cover
credit.They are silent on how other features,such as exclusions and
loading clauses,should be factored in.

Grey areas that require clarity

Insurers should clear the migration proposal within a specified
time,but there is confusion over the prescribed time limit.Some say
this period is 15 days,others believe it is 35-40 days.Also,its
unclear if the new insurer should immediately cover the diseases
contracted during the existing policys term.

What you should know

Submit the migration proposal 45 days before the renewal of your
existing policy.Porting will be possible only if the policies are
maintained without a break.