Port if health insurance policy premium starts to pinch, say analysts

The best way to save on cost of term insurance is to enter at an early age

Insurance premiums are on their way up. PolicyX.com, a web insurance aggregator, has released its insurance price indexes for the April-June quarter of 2021. The health insurance price index, which had remained unchanged in the December quarter of 2020 and the March quarter of 2021, rose 4.87 per cent in the June quarter. And the term insurance price index rose 2.79 per in the June quarter over the previous one. It is up 7.29 per cent since the December quarter of 2020.

The price index for health insurance, as calculated by PolicyX.com, is the average of the premiums of the six leading health insurers — for various age groups and family combinations.

The term premium index, similarly, is the average premium of the 10 leading insurers — for various age groups, both genders, and smokers and non-smokers.

Higher claims driving premiums up

Three factors are propelling premiums up. One is the pandemic that has forced insurers to make higher-than-anticipated payouts.

“It has put pressure on insurers. While the industry has tried to manage the impact, a part of the burden will have to be borne by customers,” says Naval Goel, founder and chief executive officer (CEO), PolicyX.com.

Insurers have also widened the ambit of their coverage.

“They have started offering coverage for mental, neuro-related and psychiatric disorders, for genetic diseases, and so on,” says Goel.  

Their policies offer more features now.

“Some insurers offer unlimited ‘restoration of sum insured’ benefit, others cover Ayush treatment, and so on,” says Rachit Chawla, CEO and founder, Finway Financial Services Company.

Health insurance premiums rise with age. When you move from one age band to another, the rise can be sharp, especially in the fifties and sixties.  

Shift to a lower-cost policy

To reduce your premium, you could move to a lower-cost plan from the same insurer.

“Move to one that isn’t loaded with features you don’t require, such as maternity benefit, or outpatient department (OPD) benefit, which you can pay for out of your own pocket,” says Deepesh Raghaw, founder, PersonalFinancePlan, a Securities and Exchange Board of India-registered investment advisor.

If you have not made a claim recently, insurers are likely to move you readily.

Premiums vary considerably from one insurer to another because health policies differ widely in their features and benefits. You can port to another insurer that charges a lower premium (compare features to ensure you get a good value). 

“It is easier to port if you are in good health,” says Chawla.

Those who have had Covid may not be able to port because insurers are mandating a cooling-off period of around three months.  

For those looking to increase the sum insured on their policy, there is good news — the premium does not rise proportionately with the sum insured.

The PolicyX.com study offers an example. A family floater for a 46-year-old having a sum insured of Rs 5 lakh, which includes two adults and two children, carries an average premium of Rs 28,250. For a sum insured of Rs 10 lakh, the average premium is Rs 36,973 — an increase of 30.9 per cent.

Another way to hike the sum insured is by buying a super top-up policy, which is relatively inexpensive.

Buy early

Existing term insurance customers will not be affected by a revision in premiums—once decided at the time of purchase, the premium remains constant for the entire policy tenure.  

The best way to save on the cost of term insurance is to buy early, as premiums are much lower at a younger age. Procra­stinating carries a high cost. 

According to PolicyX.com, if a customer does not buy a cover when he is in the 25-plus age bracket and does so at 35-plus, his premium could, on average, be higher by 46.2 per cent. The curve gets steeper with age. From the 35-plus to the 45-plus age bracket, the premium, on average, rises 72.7 per cent. And from the 45-plus to 55-plus, the jump is 85.9 per cent.