Pay higher premium for lower cover

Health insurance portability to be limited to non-life insurers.

For many medical insurance policyholders, October 1 looked like an auspicious day. That was the date from which they thought they could shift their policies, after the implementation of portability. But, they will be in for a rude shock. The Insurance Regulatory and Development Authority (Irda), in its latest circular, has clarified that if the new insurer does not have a similar policy, the policyholder with cumulative bonus (no-claims bonus) will have to purchase one with a higher sum assured.

In other words, policyholders will have to shell out a higher premium for lower cover—something that could defeat the entire purpose of portability.

The Irda circular on procedural clarifications explains it: Suppose a person with insurer A has a sum insured of Rs 2 lakh and cumulative bonus of Rs 50,000. When he shifts to insurer B, his sum insured will automatically beRs 2.5 lakh. However, if insurer B has no product offering Rs 2.5 lakh as sum insured, he will have to offer the nearest higher slab of, say, Rs 3 lakh. While the premium will be charged on Rs 3 lakh, the portability benefits will be limited to Rs 2.5 lakh.

“This is a lacuna that customers will have to be careful about while shifting from one insurer to another,” says B Subrahmanyam, vice-president (health), Bharti Axa General Insurance.

Policyholders, however, will be able to carry over the waiting period with respect to pre-existing ailments. The waiting period for most pre-existing conditions is four years. So, say, the person wants to shift after a year itself. His waiting period for the pre-existing ailment will be three years with the new insurer.

Health insurance portability, which will commence from October 1, will be limited to non-life insurers. Under it, portability shall be allowed with respect to all individual health policies, including family floater policies. Even individual members, including the family members covered under group health insurance policy of a non-life insurer will be able to migrate from a group health policy to an individual health insurance policy or a family floater with the same insurer.

“Group policyholders will have to shift to an individual health policy with the same insurer in the first year, but will be allowed to migrate to a new insurer after the first year,” says Subrahmanyam.

Policyholders looking for a shift will have to approach the new insurer 45 days before the renewal of his policy. Failing to do so, it will be the discretion of the new insurer to accept or reject the application.

Both the existing and the new insurer will have to exchange the relevant medical and claim history of the applicant within 14 working days. Each insurer files policy information to Irda every month and this information is available on its website.

“Basically,” says K G Krishnamoorthy Rao, managing director and chief executive officer, Future Generali India Insurance, “in case the new company wants to reject the application, he will have to inform the policy holder within 15 days. Otherwise, it will be considered as accepted.”