The IRDA portability circular says that the prospective insurance company will lose the right to reject a proposal if there is a delay of more than 15 days in receiving all relevant information from the existing insurer. How can the insurance watchdog implement this circular?
The Insurance Regulatory and Development Authority's (IRDA) mediclaim portability circular intends to protect the insurance policyholders' interest and it also sets strict timelines for existing and the prospective insurance company to comply with the guidelines for smooth portability implementation. However, the ground reality may lead to the insured being booted out by the existing insurer-and not being accepted by the prospective insurer.
This will effectively mean that an insured person opting for mediclaim portability may end up in no-man's land.
Industry sources told Moneylife, "Getting the medical & claims history from an existing insurer within seven days itself will be a big challenge. How will IRDA implement the default acceptance of an insurance proposal if the prospective insurer does not respond within 15 days of receipt of information from the existing insurer? It is not valid in a court of law. If the insurance company (to whom the insured wants to shift) has not issued a policy, nobody can hold it liable to pay any claim. There is no way an insured can say that he has a claim against the prospective insurance company in this case. There has been a court judgment in the past, which states that paying premium and having receipt of the same is not evidence of an insurance contract. Only a policy document is evidence of an insurance contract.
"If push comes to shove, the insurer can always ask for a hefty premium or policy terms having high co-pay and sub-limits, which will dissuade the customer from porting. Moreover, the prospective insurer can always deny the portability proposal within the IRDA timeline under the power of 'right to underwrite'. Therein lies the problem. Portability will remain an illusion-it won't work out on the ground."
Though IRDA's intentions are noble, what will an insured person do if he is faced with such a situation? The problem will be more pronounced especially for senior citizens, who have neither the time, energy nor the resources to run from pillar to post for a valid mediclaim policy. And there are more glitches that could crop up.
"On a case-to-case basis, the existing insurer may not be too keen to continue, once the policyholder has shown an interest to port. The policyholder will not have the new premium quote as the procedure for porting has to start 45 days before the expiration of the policy. Without the knowledge of new premium to make a sound portability decision, the policyholder is shooting in the dark. If the prospective insurer rejects the proposal, the policyholder will have to run around to get a quote from the existing insurer… just before the policy expiration date."
So if you are planning to switch your insurer, be prepared for a bumpy portability ride. The need for portability is real and IRDA's recognition of the same is a step in the right direction. It will work in simple and straightforward cases, especially for the young with no pre-existing diseases (PED).
Obviously, insurers will lure this target segment. The sections that will be the most affected will be the elderly and those with PED-ironically, both these categories need comprehensive mediclaim policies.
So will insurance portability have a smooth take-off? Or will it be bogged down by the issues detailed above? Moneylife will keep a close watch and keep you posted on the developments in this crucial front.
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