The Insurance Regulatory and Development Authority (IRDA) has issued a notice to all general and life insurers stating:
“All insurers issuing health insurance policies shall allow for credit gained by the insured for pre-existing condition(s) in terms of waiting period when he/she switches from one insurer to another or from one plan to another, provided the previous policy has been maintained without a break.” To come into effect from 1 July 2011, it means one can switch health insurers without having to start afresh.
For policyholders it means that they can transfer their health policy from one insurer to another without losing their waiting period benefits such as those for coverage of pre-existing illnesses. They, however, need to take into account the definition of waiting period for different companies. For instance, if for a condition there is a waiting period of two years in an existing policy and four years under the policy being switched to, then the new policy can only exclude the condition from coverage for a period of two more years.
IRDA’s move is an answer to the substantial hike in premium rates by some health insurers. Currently, customers are forced to continue with their policy due to their fear of losing waiting period benefits. Ajay Bimbhet, managing director, Royal Sundaram Alliance, says: “Globally, the concept of ‘portability’ in health insurance has always been favoured and is prevalent across many developed economies. Introduction of portability is a step in the right direction to safeguard the interests of policyholders.” (Also see Plainspeak, page 30.)
Though all health insurers have welcomed the decision, they also see certain issues with the introduction of portability in the short run. “Declaration of pre-existing illnesses on the proposal form, including illnesses contracted during the course of previous policies and its applicability to renewals with different insurers, can be an issue at the time of changing the policy,” says T.A. Ramalingam, head-underwriting, Bajaj Allianz General Insurance. Similarly, guidelines on how portability applies to different kinds of policies (such as indemnity, floater, group or individual, and critical illness) and what will constitute continuity will also be areas of confusion.
Others say that portability of benefits in the short run can be detrimental for insurance companies with superior service standards and can result in facilitation of various frauds and misuses. Antony Jacob, CEO, Apollo Munich Health Insurance, says: “Every company and its policy should be governed by its underwriting principles when it comes to accepting a proposal. We would like to request all consumers willing to port to place such requests with the insurance company of their choice at least 45 days prior to the renewal date. This would enable the incumbent insurance company to ensure all underwriting guidelines are met before accepting a risk.”