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.
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THEY ARE IN A WORLD OF THEIR OWN. THEY DONT HAVE THE NUTS & BOLTS OF ANY ISSUE & OPERATE IN AIR, IN HYBERNATION!
LEAST OF ALL, THEY DONT HAVE THE GUTS TO TAME THE VESTED INTERESTS & COMPANIES WHO INFLUENCE THESE GUYS AGAINST PUBLIC INTEREST.
Every insurer has it own premium across age slabs, National Insurance has a age slab of 0-25 and then in blocks of ten years other have it in a block of 5 years, some load the premium in case of a claim some remove the no claim bonus in case of a claim. How can anyone port their policy to a different insurer when the terms and conditions of the policy are different?
Some have Tpa's which change every year sometimes, some have in house TPA's, Max Bupa has one of the highest premiums in the industry but they have no sub limits in their policy, how will a person from a PSU Insurer Port to Max? Will he pay a premium which is substantially higher for the same cover?
Portability should only be allowed in products which are exactly same.
Mediclaim is a very loose term, Every Policy issued by every insurer is DIFFERENT, continue with your old policy and keep on renewing it, that's the best thing to do, do not port, at least you old insurer has some record of your previous policies, your claim history and no claim bonus.
The TPAs have to go.
The age slabs of 5 years ought to be standard.
There ought to be a uniform no frills standard health cover.
Portability is for simplifying health insurance problems faced by generally the elders. In stead of addressing their concerns aiding lucrative group covers is no resolution.
The issue of no claim bonus has necessarily to be addressed by providing for a straight deduction in the annual premium as is done in motor policies. If one insurer can do it why not the others. The increasing of the cover by the same % makes no economic sense, more particularly for senior citizens. I have not lodged a single claim in the last 15 years.This takes away one of the major bugbears of portability.
The issue of providing history of covers can be addressed by making available the data available in the branch records both for the past covers and claim history. It's no big deal.
All the issues raised can be resolved with one Simple Standard Policy for say Rs.1,2.5 and 5 lakhs with all the standard clauses for PED.Something on the Frill less bank savings accounts.
Let IRDA and the Insurance Council come out with sensible insured friendly policies that are easy to operate rather than going for a cut-n-paste US models that have failed there forcing Obama to come with a new policy.
IRDA EVERY MONTH MUST ASK FOR THE STATISTICS FROM EVERY INSURANCE COMPANY AS TO HOW MANY POLICY HOLDERS HAVE MOVED AWAY AND HOW MANY PROPOSALS ARE ACCEPTED, AND HOW MANY TURNED DOWN UNDER PORTABILITY SCHEME IN DETAIL WITH THE INSURED PERSON NAME, POLICY NO. AND PERIOD OF INSURANCE.