HDFC Ergo-Apollo Munich merger won't hurt existing policy contract

Recently, HDFC Ltd acquired 51.2 per cent stake in Apollo Munich Health Insurance. This will be a two-stage process. In the first stage, Apollo Munich would be held as a subsidiary of HDFC. In the second stage, it would be merged with HDFC Ergo General Insurance to form one entity. For Apollo Munich policyholders there’s nothing overtly to worry about as the Insurance Regulatory and Development Authority of India’s (Irdai’s) regulations protect the interests of existing customers at every stage.
 
HDFC Ergo plans to retain the products of Apollo Munich. “Apollo Munich has a bouquet of good products in its portfolio. We don’t plan to change or discontinue any of the products. After the merger, the combined suite of products from both companies will be available to customers,” says Ritesh Kumar, managing director & chief executive officer (CEO), HDFC Ergo General Insurance.
 
In future, there would be review and rationalisation of products and their features. But this is an ongoing exercise that all insurers do with their existing portfolio. “In case a company wants to modify a product, it needs to go through an elaborate process. The insurer has to approach the Irdai and justify the changes. Once the regulator approves it, the insurer has to give 120 days prior notice to customers informing about the changes,” says Mahavir Chopra, director, health, life and strategic initiatives at Coverfox.com.
 
In case any insurer decides to terminate a policy, the company has to offer another product with the same or better features to the policyholder at the time of renewal. Similarly, the premium for Apollo Munich cus­t­omers will not change as a consequence of the merger. “Premium hikes in the normal course are primarily based on medical cost inflation trends. It’s another exercise that all insurers do periodically. For an increase in premium, an insurer has to follow the same rigorous exercise of approaching the regulator for approvals,” says Kumar.
 
In health insurance, there is a concept of accumulated bonus. “If a policyholder doesn’t have any claim, the company rewards him. It can be done by hiking the sum assured or giving a discount on the premium. It is similar to a no-claim bonus in an auto policy. The regulations mandate insurance companies to honour all such bonuses,” says Mallesh Reddy, CEO, InsureMile.
 
There would, however, be some changes on policy renewal; for instance, the list of network hospitals could expand. Policyholders of Apollo Munich need to keep track of the communication from HDFC Ergo. After completion of the merger, the helpline numbers and email addresses would change for Apollo Munich customers. All this would be communicated to the customer upon insurance renewal. “Apollo Munich sells policies for up to a two-year term. We would, therefore, continue with the existing helpline numbers and email addresses for up to two and a half years. Gradually, we would introduce common contact points,” says Kumar.
 
Chopra points out that that internationally, Ergo is part of the Munich Re Group. HDFC Ergo health insurance policies have a coinsurance of Apollo Munich.

Norms insurer must follow
 

• Modification of policy: Regulatory approval required, inform policyholder 120-days in advance
• Hike in premiums: Approval from the regulator
• Discontinuation of a plan: Policyholder gets an option to migrate to a better policy, regulatory approval required
• Change in the name of policy: Regulatory approval required
• Accumulated bonuses: Insurer needs to offer customers mandatorily
• Change in helpline: Communicate with customers