Most people tolerate bad service from their health insurers because they don't want to lose out on the benefits of the existing policy if they move to another insurer. So far, switching insurers has meant that you are considered a new customer and have to go through the requisite waiting period of one to four years after buying the policy in order to cover your pre-existing diseases.
However, from 1 October, health insurance portability will come into effect and you will be able to switch insurers without having to worry about losing the benefits of your existing policy. So, if you have an illness that will be covered after three years and have already completed two years with an insurer, you will only have to wait for a year with the new insurer for your illness to be covered.
What is allowed
Portability is applicable only to health insurance policies issued by non-life insurance companies. If you are covered under a group mediclaim, you too can migrate to either an individual health insurance policy or a family floater plan, but only if you have been with the same insurer for at least a year. This feature will be beneficial for employees (and their families), who do not have any health plan other than the mediclaim provided by their employer. It will be especially handy when they change jobs.
You will not be able to switch insurers at any time and can apply for portability only 45 days before renewing your existing policy. The new insurer will give you a portability form, which you have to submit along with the proposal form.
Your details will be shared by your existing insurance company and the new one through a Web portal that the Insurance Regulatory Development Authority (Irda) will be launching soon. Based on the details shared, the new insurer will underwrite its proposal and inform you of its decision within 15 days. If the insurer crosses this deadline, it will have to accept the proposal submitted by you.
However, the new insurer has the right to deny you the policy based on its underwriting policy. For instance, if the maximum entry age for the new insurer's health policy is 60 years and the policyholder is 65 years old, the application for portability could be rejected.
You could also remain stuck with the old insurer if you have had too many claims or are considered to be in the high-risk category, such as a senior citizen. Also, as the new insurer can write the proposal according to its own guidelines, the premium could be very high in some cases, and you may not be willing to pay it.
If you do not receive the proposal from the new insurer till the renewal date of your existing policy, you can extend it by paying the pro rata premium for a short period to your existing policyholder and ensure that your policy is not cancelled.
What to look for
Before opting for insurance portability, you must read the fine print carefully as there may not be a free-look period. "Before switching, policyholders should examine whether the policy coverage offered by the new insurer is at par with the old one.
Currently, there is no standardisation of policy wording in the market," says Subrahmanyam B, vice-president and head, health vertical, Bharti AXA General Insurance. For example, if you are shifting from an insurer, who is currently offering you a cover of Rs 1 lakh, and the new insurer does not offer a cover below Rs 2 lakh, you could end up paying a higher premium. So, opt for an insurance company that offers a wide range of covers in smaller incremental slabs.
"Customers should evaluate insurance companies and products not just on the basis of cost, but also on features that suit their current and future needs, price rise with age, service standards, stability and brand equity of the insurance company," says Gaurav Garg, managing director and CEO, Tata AIG General Insurance Company.
If you have accumulated a no-claim bonus, portability may lead to a loss. Though you will be able to carry the no-claim bonus to the new policy, the premium will be calculated on the enhanced cover. Suppose, you are paying a premium of Rs 1,000 for a Rs 1 lakh health plan. You have not made any claim in the past five years and your cover has been enhanced to Rs 1.3 lakh, but you are still paying a premium of Rs 1,000. If you switch insurers, your cover will remain Rs 1.3 lakh, but you will have to pay a higher premium of, say, Rs 1,300 for this cover. This means you will lose out on the discounted premium.
What's in store
Insurers believe that portability will improve customer service standards, such as easier buying process, prompt delivery of policy document, and hassle-free claims. "Insurance companies may begin to customise products and, at the same time, some features may become more standardised as customers will display their preferences by switching to insurers that meet their needs," says Garg.
He adds, "There is also the possibility of new entrants, who could aggressively price their products to attract customers away from long-standing health insurance firms." Says Mukesh Kumar, head, strategic planning, HDFC ERGO General Insurance: "We can also expect an introduction of innovative health plans which help increase the involvement with customers."
The competition may also resolve the problem of loading (if you make a claim in a year, you are charged a much higher premium the next year). To retain policyholders, insurance companies may either keep the same premium or increase it marginally.
The benefits are many, but you need to consider the disadvantages before you switch to a new insurer.