Health Cover Portabilitys Here, But Dont Cheer Yet

[Apollo Munich CEO]

The wait is over finally.The Insurance Regulatory and Development
Authority (Irda) has issued the final guidelines on health insurance
portability,clearing the decks for their implementation from October
1.This means,from October you can switch from one health insurer to
another without losing any benefits you have earned on your existing
health cover.

THE PLUS POINTS

Till now,policyholders were reluctant to switch to a new health
insurer mainly because the transfer of the waiting period credit for
pre-existing diseases (PED) was generally not allowed.Typically,pre-
existing diseases are covered only after one to four years of the
policy being in force,depending on the company and the illness.This is
referred to as waiting period in insurance industry
parlance.Portability will allow policyholders dissatisfied with their
insurers services be it with premiums or claim settlement to migrate
to another insurer who will not insist on them biding their time for
four more years to get the PED cover.For instance,if you decide to
shift to another insurer after completing three policy years,and the
existing policy undertakes to cover PED after four years,you will have
to wait for just one more year to be eligible for PED cover under the
new policy.Health insurance portability will help policyholders as
they will gain from a wider choice.It will also benefit the insurance
industry in the long run, says Sanjay Datta,head,customer
service,health and motor,ICICI Lombard.The penalty of the portability
proposal being deemed accepted in case the insurance company does not
respond within the timeline will make the process very efficient, says
Mahavir Chopra,head,e-business,Medimanage.The most interesting aspect
of the guidelines,perhaps,is that they allow a switch from group
mediclaim to individual or family floater policies,and let the
policyholder to retain the waiting period credit.Since many families
depend solely on their employers' group policies,such transfers will
help them have a policy of their own without having to wait for the
four-year period for coverage of pre-existing diseases to come to an
end.

WILL IT REALLY HELP

While the insurance regulators diktats are to be welcomed,portability
cannot be assumed to be the 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 the
policy becoming onerous with repeated subsequent claims.It is then
that the insurer becomes troublesome and,consequently,the insured
becomes unhappy with his/her existing insurer and considers a
migration to another insurance company.This is the time when
portability is required.But 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 None.So,a person can submit his proposal for
portability and the insurance company would reject the proposal,
reasons Gai.Then,there are other issues,too.Many feel that insurance
companies will reject outright the proposals of senior citizens,who
are seen as a highrisk category,thus defeating the whole purpose of
portability.Besides,for those who have accumulated a no-claim
bonus,portability could turn out to be a lossmaking 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/she wants the new sum assured to be equal to the
previous sum assured plus the noclaim bonus.Therefore,in case of a
switch,the policyholder will stand to lose out on discounted premium
that he/she would have obtained,since no-claim bonus component would
not have attracted any premium with the existing insurer.Arvind
Laddha,MD & CEO,Vantage Insurance Brokers,points out another aspect
that could go against policyholders when they migrate from group to
individual plan.It also appears that when an insured ports from a
group to an individual cover,he will get credit only for the period 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.Such policyholders should also remember that
they can port only to the individual policy offered by the same
insurer first.After a year,they will earn rights equal to all other
policyholders and can then choose any other insurer.

NOT ALL BLACK AND WHITE

Confusion prevails over the definition of pre-existing illnesses in
certain cases.Say a policyholder has undergone treatment for a disease
and his/her insurer has settled the claim.If he/she decides to
migrate,will the new company 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 cover without a waiting period for ailments
suffered during the continuous running of the old policy,then senior
citizens and others with chronic ailments would 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 cover to these illnesses,too.This is in view of
the provisions of clause 2.If a disease is already listed as pre-
existing in the existing policy,then the new insurer will also treat
it as pre-existing. Under the definition of PED,the waiting period is
across any insurer.Therefore,if the new company accepts the risk,the
time-bound PED would apply and PED would be covered, says Antony
Jacob,CEO,Apollo Munich.While measures taken by Irda are
commendable,health policyholders will have to wait for some more time
before they have complete freedom of choice.But,at least it is a
desirable beginning.

Health Insurance Portability is Welcome,but...

Some limitations,grey areas may prevent it from being implemented in
its true spirit

Pros

Portability will allow policyholders to switch to another company and
carry forward the waiting period credit for the pre-existing diseases
cover.Till now,policyholders have been forced to stick to their
insurer for fear of losing continuity benefits

If the new insurance company does not communicate its decision on the
portability proposal within the stipulated time,it becomes obligated
to accept the proposal

Even policyholders covered under employers' group mediclaim can now
transfer the waiting period credit and move to individual or family
floater health policy

Limitations

It is up to the insurers to accept or reject a proposal for a
switch.Those dissatisfied with an insurer's claim settlement record
and wishing to migrate may not find takers

Insurers are free to levy premiums as per their underwriting
norms.Hence,those in high- risk categories,like the elderly,or those
with illnesses cannot expect reasonable premiums while porting

Those with accumulated no-claim bonus could be at a disadvantage as
the new insurer will levy the premium applicable to the enhanced sum
assured

While porting from a group cover,the insured will have to first switch
to an individual cover of the same insurer.Only after a year can they
then move to an insurer of their choice

The guidelines are confined to PED cover credit.They are silent on how
other features like exclusions and loading clauses,etc,can be factored
in

Grey Areas

Insurers should clear migration proposal in a specified time,but there
is confusion over calculation of the time limit.Some say the
guidelines stipulate 15 days,others feel it is 35-40 days

Clarity is needed on whether new insurer should immediately cover
diseases contracted during existing policys term

Bear in Mind

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

TOMORROW

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