Portability of health insurance refers to the ability to change companies keeping the cover intact while the risk profile of an individual refers to the probability of a person getting sick and making a claim. The poorer the risk profile, the higher the probability of claims arising from an individual and in such cases, premiums charged are higher. Age of entry, on the other hand, refers to the upper limit for an individual to buy a cover.
"Why would an insurer want to let his premium customers — who have had no claims history, go away to others. And why would they also accept individuals with a bad claims history? We expect some more clarity over the recent guidelines issued by the regulator or there is bound to be confusion," SB Mathur, secretary general, Life Insurance Council, said.
Whether it leads to customers shifting from one insurer to another, companies may be forced to lift their service levels on fears of losing some business. "The move will call for minimum service requirements among all insurance players," said Antony Jacob, CEO, Apollo Munich Health Insurance.
Although the objective behind the move is laudable, there are many shortcomings in it. "The circular on portability issued by the regulator does not mention anything on the premium one has to pay when he transfers his health cover from one company to another. This means that the individual who wants to move will have to accept the terms and conditions of the health policy of the new company," said Subrahmanyam B, head of health vertical at Bharti AXA General Insurance. For example, a `3-lakh cover for a 25-year old will cost `3,039 from United India Insurance while the same will cost `2,776 from Royal Sundaram General Insurance, and a similar cover from Reliance General will set you back by `8,366. Hence, if one wants to move from United India to Reliance General, an individual will have to shell out the increased amount.
"Portability will ensure greater competition among insurers which will benefit customers in the long run," says Subrahmanyam. "However, as an industry, we still need to find an effective data sharing mechanism to ensure continuity in maintaining highest standards of service delivery."
There may not be any immediate monetary gains either for insurance buyers, who are battling rising claims, though customers complain that many claims are dishonoured exploiting many tiny lettered conditions which buyers don't go through. "In fact, insurers are now thinking of hiking premiums to match claims ratio," said Rahul Agarwal, director at Optima Broking.
Just like in the mobile telecom business, many customers may stick to the existing services provider despite complaining about them. The health segment is split into two. The public sector players are National Insurance, New India Assurance, Oriental Insurance and National Insurance Company. Private ones like ICICI Lombard, Bajaj Allianz, IFFCO Tokio and Reliance General are also gaining share.
Additionally, there are three health insurance companies — they only offer medical insurance products, including Star Health & Allied Insurance, Apollo Munich and Max Bupa. Private players held a 42% market share till December 2010 and the remaining is with the public sector. In fiscal 2009, claims ratio was 103% down from 105% a year earlier.
From 2009, the industry started introducing a host of restrictions like sub-limits on room rents, different ailments and doctors' fees. All these pulled down claims ratio below 100% in 2009-10. "The inertia to change insurers is huge, which means most people complain about bad services, but do not generally move. And in any case, customers satisfied with their existing insurers will not move to a new one, but portability offers a sort of peace of mind — that if I am not happy with my insurers, I can go to a new company," said Agarwal.
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