New insurance portability rule changes little

No insurer is willing to take a customer with a claim history in the past three to five years. Additionally, insurers don't believe portability will be profitable on the back of additional waiting periods and exclusions not applying. They blame the past regulator for not approving proposals which would have made porting profitable

Even two years after the Insurance Regulatory and Development Authority (Irda) introduced portability in medical insurance, things haven't changed much.

The process is cumbersome. Amarnath Ananthanarayanan, chief executive officer of Bharti AXA General Insurance, said only two per cent of policyholders successfully port their policies.

So, the latest change in definition from the regulator, of not allowing porting within the same insurer, means little. Portability was earlier defined as the right to transfer a health insurance policy from one insurer to another and from one plan to another of the same insurer. This has been revised to exclude the latter.

"Portability means transfer by an individual health insurance policyholder (including family cover) of the credit gained for pre-existing conditions and time-bound exclusions if he/she chooses to switch from one insurer to another," says the Irda circular dated July 3. In other words, if you are unhappy with the existing medical policy, the insurer could have earlier offered to port you to another product from its stable. Not longer so.

Anyway, insurers have made porting difficult. Most policyholders who are aware of health insurance portability, and are willing to do so, tend to have a claim history. And, no insurer is willing to take a customer with a claim history in the past three to five years. Additionally, insurers don't believe portability will be profitable on the back of additional waiting periods and exclusions not applying. They blame the past regulator for not approving proposals which would have made porting profitable. As a result, no health insurer has publicised portability.

T A Ramalingam, head-underwriting at Bajaj Allianz General Insurance, says the change in definition is fair in terms of the risk taken on by the insurer. "Portability norms allow insurers to charge a ported policyholder a little higher, in accordance to the risk being taken on." However, the existing insurer might not be able to cover the cost of higher risk at par with the new insurer, largely on the back of the existing relationship with the policyholder.

"Most policyholders upgrade their policies for a higher coverage if they want to continue with their insurer. And, upgrades can happen even without portability," says Deepak Yohannan of MyInsuranceClub.com. Another reason for cheer, he says, is that the regulator has not disallowed porting from group to individual plans within the same insurer.