An innocuous redefinition of portability has ramifications for the insured interested in porting from an existing mediclaim product to a new innovative product launched by the same insurer
Insurance Regulatory and Development Authority (IRDA) released amendments to guidelines on ‘standardisation in health insurance’, which redefines portability. The circular dated 3 July 2013, says, “Portability means transfer by an individual health insurance policyholder (including family cover) of the credit gained for pre-existing conditions and time-bound exclusions if he/she chooses to switch from one insurer to another.” The existing definition had additional words that have been deleted – “...or from one plan to another plan of the same insurer, provided the previous policy has been maintained without any break.” What does this mean?
Before 1 October 2011, if you needed to move to a new health insurance company, you would have to become a new customer for them and lose all the benefits that your existing health insurance policy might have accumulated for pre-existing diseases (PED) and waiting periods for specific procedures. With portability, mediclaim PED and time bound exclusions for specific procedures will be given credit for the time period spent with existing health insurance product. Till now, portability was allowed within the same insurer.
Porting from existing mediclaim product to new innovative mediclaim from same insurance company, from family floater to individual mediclaim and group to individual product within the same insurance company was allowed. The portability guidelines clearly state that individual member, including the family members covered under any group policy shall have the right to migrate to an individual policy or a family floater with the same insurer.
If so, the new innocuous looking redefinition of portability is a game changer. As such, hapless senior citizens and those with PED are denied porting by the new insurance company under the “right to underwrite”. Please read Moneylife cover story Switching your Mediclaim?to understand how insurance companies are selectively allowing porting. Porting for young and healthy may be embraced with open arms by insurance companies, but for old or unhealthy it is just an illusion due to strict medical underwriting by many private insurers. It is a great scheme on paper, but difficult to implement in reality.
An existing insurance company has a relationship with the insured and may find awkward to deny porting to other products from same company. There will be some percent of policyholders filing claims who are renewed by the insurer, much against its own wishes. With the portability redefinition, the existing insurer is relieved from being answerable to allow porting to new product. The new insurer too will deny porting for consumers with claims history and hence these policyholders will be stuck to not just same insurer, but even to the same product.
Group policy may be discontinued by employer or no longer be applicable due to retirement; porting will now be denied to individual mediclaim policy of same insurer. Family floater may have maximum age limit and these policyholders will not be allowed to port to individual mediclaim of same insurer. IRDA move is surely not in consumer interest; insurance companies will be a happy camper.
Moneylife had emailed to several insurance companies to get their feedback, but there were only three responses till the time of writing. As of now, the redefined portability seems to be given benefit of doubt by the insurance industry respondents. We are not sure how long it will continue as the insurance company will start seeing the benefit of using the new definition of portability to prevent porting a policyholder within the company products on a case to case basis.
M Ravinder, national head - rural, accident & health, Tata AIG General Insurance, says, “Portability will be allowed within the same insurer to the extent that you can migrate from a group policy to an individual health insurance policy or a family floater policy. However you cannot move from a group policy of one insurer to a retail policy of another insurer. Also, the industry, so far, has not experienced as many portability cases or migration cases as expected.”
According to Dr Amarnath Ananthanarayanan, CEO and MD, Bharti AXA General Insurance, "The IRDA has recently come out with a corrigendum to the portability guidelines whereby it appears that the definition of portability has been restricted to mean transfer of retail policies from one insurer to another. A plain reading of the revised condition leads to the conclusion that portability does not apply to changes in plan with the same insurer. However, we are seeking clarification from IRDA on this aspect as we are of the opinion that logically, the benefits in respect of pre-existing condition and time bound exclusions should always be allowed to the insured if he/she chooses to shift from one plan to another of the same insurer. We shall formulate our future course of action once we receive clarification from the regulator."
According to Mukesh Kumar, head strategy and marketing, “We are allowing portability from our group to an individual policy however due to specific reasons only, like change of job or retirement. For old discontinued products (if any) we may extend a continuity benefits subject to terms and conditions. We are offering continuity from family floater to individual if the customer requests for a change; subject to underwriting and product terms and conditions.”
According to Arvind Laddha, CEO, Vantage Insurance Brokers Pvt Ltd, “Yes, the circular does seem to suggest that portability refers to movement from one insurer to another. However, my sense is that the intent is not to prevent movement from group to individual policy or from one product of the insurer to another, but just clarify that this term refers to movement from one insurer to another. Insurers should be able to offer similar benefits of movement from one plan to another offered by them, not withstanding this clarification.”
Yashish Dahiya, CEO, Policybazaar.com, says, “It must be a miss. I am sure there will be a clarification as customers should obviously get the benefit of new product innovation by insurers, else companies with the largest portfolios have most to lose. They have the right to innovate and offer their existing customers the benefits of that innovation.”