IRDA has put out mediclaim portability guidelines that could be tough on insurance companies with time limits for handling the portability proposal; policyholders may also lose benefits
The Insurance Regulatory and Development Authority (IRDA) has finally issued new guidelines for the 1 October 2011 implementation of health insurance portability. Even though these address some of the issues, there are several conditions that will make portability fall through the cracks. So, will insurance companies be able to meet the tough time limits for handling portability proposals?
According to Subrahmanyam B, vice-president, health and PA, Bharti AXA General Insurance, "The guidelines are comprehensive and cover only non-life insurance. The policyholder has to initiate the process for portability 45 days before it is due for renewal, by filling a proposal form with the new insurer and the portability request form. The new insurer will then have to write to the policyholder's earlier insurer within seven days. The old insurer has to provide the policyholder's medical and claims history to the new insurer within seven days thereafter.
We learn that IRDA intends to create a website (already under testing) on which the previous insurer would have to upload the policyholder's data. If the new insurer does not respond to a request within 15 days of it being made, it will be deemed as accepted.
Insurance companies have an escape route by way of the premium loading and the right to underwrite. According to one senior industry executive, "In view of the waivers offered on pre-existing diseases (PED), insurers need to have flexibility on loadings and IRDA should clear such filing requests for loadings within a fixed time frame of 30 days." Clearly, loading will be the ultimate tool that will be used to dissuade a 'bad' pool of policyholders to migrate to a new insurance company.
The other issue is no-claim bonus (NCB) where the net effect may deplete the bonus. The new insurer can port the sum insured (SI) on an existing policy inclusive of the NCB that has accrued on it. However, the premium charged will be on the higher sum which is inclusive of the bonus. This effectively erodes the effect of the NCB itself. For instance, if a policyholder has an insurance of Rs2 lakh, which has increased to Rs2.5 lakh due to the NCB, that is the sum that will be transferred to the new insurer. However, the premium charged by the new insurer will be on Rs2.5 lakh. Consequently, the net effect is that the policyholder loses the true benefit of NCB.
Interestingly, Segar Sampathkumar, deputy general manager, New India Assurance, had anticipated this. Earlier this year, he told Moneylife, "A no-claim bonus cannot be portable, as it is earned due to a relation with the insurer."
IRDA has also failed to address another major issue, that is, the medical conditions developed by the policyholder with the old insurer. For instance, a policyholder has no pre-existing diseases (PED) when the initial policy was taken, but has developed conditions over the next couple of years. If the policyholder wishes to port to a new insurer who has a standard four-year PED waiting period, the new insurer will make the policyholder wait for a couple of years to cover these conditions. These are considered PED with the new insurer even though they consider the time spent with the old insurer. In this case the policyholder would be better off with the old insurer as there is no PED and hence all the conditions are covered with no waiting period.
The guidelines address group to retail (individual) policy porting. It also allows porting to a retail policy of the same insurer in the first step. After a one-year wait, the policyholder can port to another insurer. It's a two-step process that will be far from easy.
Special Court sanctions distribution of money from liquidated assets of the scamster to the I-T department, SBI, SBI Caps and Standard Chartered
The Custodian has secured another order from the Special Court, Mumbai, allowing him to release a total amount of Rs650 crore against pending claims of the Income-Tax Department, banks and financial institutions from the liquidated assets of the Harshad Mehta group of entities.
Based on a distribution proposal submitted by the Custodian, Justice DK Deshmukh of the Special Court, Mumbai, has ordered the payment of Rs28.34 crore to the Income-Tax Department, Rs259.65 crore to the State Bank of India, Rs16.25 crore to SBI Caps and Rs345.76 crore to Standard Chartered Bank, aggregating to Rs650 crore from the attached accounts of the Harshad Mehta group.
The payments are to be released on an interim basis, on undertakings to be provided by the receiving entities that the amounts will be brought back to the Custodian if so ordered by the Special Court.
In the case of Standard Chartered Bank, the court has ordered the submission of a board resolution along with an undertaking from the Bank. The Custodian has been asked to release the amount to the Standard Chartered Bank only after the final court clearance.
This is the second time that the Custodian has released money from the late Harshad Mehta's assets this year. (Read, "Custodian releases Rs2,195 crore to I-T dept, SBI from Harshad Mehta's assets".)
In ordering these releases, the Special Court has strictly followed the priorities of claims laid down under Section 11 of the Act, placing primary income-tax liabilities above the claims of banks and financial institutions.
Nifty should close above 4,980 for the uptrend to resume
The market erased gains in morning trade to end flat with a negative bias, down for a third day in a row today. However, volumes on the National Stock Exchange (NSE) were at 62.72 crore shares which was higher than yesterday. In the closing report yesterday, we had mentioned that if the Nifty was able to stay above Monday's low, the current fall would be curtailed. Today, the Nifty again hit exactly yesterday's low at 4,911. The index will now have to close above 4,980 to resume its uptrend. On the other hand, if the index falls tomorrow and goes below 4,911, we may see it going down to the level of 4,890 and then to 4,785.
An uptick in the global markets supported the higher opening on the domestic market this morning. Overnight, the US market closed higher, recovering from early losses on reports that China is in talks to purchase Italian bonds. The developments also resulted in the Asian bourses opening up this morning.
At home, the Nifty opened at 4,978, up 31 points, and the Sensex rose 116 points at 16,618. Broad-based buying across all sectors took the indices to a higher trajectory in subsequent trade.
The market rose to its intra-day high around noon, with the Nifty touching 5,030 and the Sensex at 16,766. However, profit-booking at higher levels, a negative opening on key European bourses and the fall in US futures pushed the indices into negative terrain in post-noon trade.
Offloading by institutional investors pulled the indices to their intra-day lows shortly after 2pm, when the Nifty dropped to 4,911 and the Sensex slipped to 16,375. However, the market witnessed a minor recovery and closed off the lows of the day. At the end of the session, the Nifty had lost six points at 4,941 and the Sensex closed at 16,467, down 34 points from its previous close.
The advance-decline ratio on the NSE was 823:865.
The broader indices closed with a positive bias, with the BSE Mid-cap index and BSE Small-cap index adding 0.03% and 0.01%, respectively.
BSE IT (up 0.93%), BSE TECk (up 0.40%) and BSE Oil & Gas (up 0.37%) were the top sectoral gainers, whereas BSE Auto (down 0.67%), BSE Healthcare (down 0.54%) and BSE Consumer Durables (down 0.49%) led the losers.
The major Sensex gainers were DLF (up 1.82%), Jindal Steel (up 1.74%), Bajaj Auto (up 1.52%), Wipro (up 1.25%) and Infosys (up 1.21%). The main losers were Tata Motors (down 4.61%), State Bank of India (down 1.56%), Hindustan Unilever (down 1.36%), Jaiprakash Associates (down 1.31%) and Bharti Airtel (down 1.23%).
The best performers on the Nifty were Cairn India (up 5.09%), Sesa Goa (up 2.74%), Kotak Bank (up 2.68%), ACC (up 2.41%) and DLF (up 2.10%). Tata Motors (down 4.68%), SBI (down 1.90%), Sun Pharma (down 1.81%), Cipla (down 1.66%) and Tata Power (down 1.50%) settled at the bottom of the list.
Markets in Asia, which opened higher on supportive cues from the US, lost steam and most of them closed lower. While media reports of China's proposal to buy Italian bonds boosted the bourses across the region in early trade, a sharp dip in the European markets resulted in a sell-off late in the day.
The Shanghai Composite declined by 1.06%, the Jakarta Composite fell by 0.55%, the Straits Times lost 0.52% and the Taiwan Weighted tumbled 2.88%. On the other hand, the KLSE Composite added 0.12% and the Nikkei 225 gained 0.95%. Markets in South Korea and Hong Kong were closed for a local holiday.
Back home, foreign institutional investors were net sellers of stocks worth Rs934.74 crore on Monday. On the other hand, domestic institutional investors were net buyers of shares worth Rs427.93 crore.
The country's largest software exporter Tata Consultancy Services (TCS) today said it has partnered Felda Prodata Systems for joint development and delivery of IT services and solutions in the Malaysian market. Under the agreement, both organisations will jointly develop and market IT solutions and services to local companies, Malaysian government-linked companies and global companies within Malaysia. TCS added 0.59% to close at Rs991.50 on the NSE.
Cairn India (up 5.09%) was the top gainer on the Nifty as the company's board is to meet on Wednesday to approve payment of royalty and cess on its mainstay Rajasthan fields. The company's UK parent Cairn Energy had in February opposed changes in the Rajasthan contract, making it liable to pay royalty and a cess of Rs2,500 a tonne.
Workers at auto component-maker Munjal Showa's Manesar plant resorted to a strike today that hit production, an indicator that the labour unrest at Maruti Suzuki India's unit in the region is spreading to surrounding areas. The workers were protesting against the transfer of two of their colleagues from the Manesar plant to Gurgaon. The stock gained 0.78% to Rs64.75 on the NSE today.