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Power to switch insurer
- Medical policy portability from July 1

Calcutta, Feb. 10: Medical policyholders can switch insurers like mobile phone service providers from July 1 this year.

The insurance watchdog today issued guidelines for portability of health insurance policies, putting in place a system that offers flexibility on pre-existing diseases and hassle-free service to those with transferable jobs or a penchant for changing employers.

However, the Insurance Regulatory and Development Authority (IRDA) did not specify the premium to be paid when one policyholder moves to a different health insurer. One insurance company executive said this could mean different premia for different services.

One of the big headaches for medical policyholders now is the exclusion period for pre-existing diseases or conditions that act as a disincentive in dumping an insurer and taking another policy afresh.

For example, ailments associated with gall bladder stone are not covered for the initial two years from the commencement of the policy. Till now, if you wanted to change your insurer after one year, you would have had to buy a fresh policy from another insurer with the same exclusion clause.

But this means you would have had to wait for another two years before becoming eligible to claim the medical insurance for removing the gall bladder stone. You would not get any credit from the second insurer for the one year you had waited with the first insurer.

With the portability of health insurance from this July, you will get the full credit for the period of cover as well as the no-claim bonus with the previous insurer.

This credit in terms of waiting period will be limited to the sum assured, including no-claim bonus, under the previous policy. If you want to increase the sum assured, you will have to pay a higher premium.

Portability also helps when you are transferred. “Persons shifting from one region to other regions are often put to disadvantage due to lack of insurers’ office providing necessary policy servicing at the new location. Employees shifting from one employer to another many times lose health insurance cover due to lack of portability of the health insurance policies.

“It is essential to protect the policyholders against discontinuity and consequential loss of pre-existing diseases cover by making the health insurance plans portable across the insurance companies. The portability will also ensure that the policyholder is not tied to one single insurer throughout his life for fear of losing the cover of pre-existing diseases,” the regulator said in its guidelines.

The Irda added that “the accepting insurer shall provide insurance cover, at least up to the sum assured in the previous insurance policy.”

Although the proponents of health insurance portability had said benefits and premia should not change when a policyholder switches to another insurer, others are not so sure. The guidelines issued today are silent on premium.

“The premium rates will vary for insurers, depending on their claim experience (the amount they had claimed till then because of ailments) and cost structures,” said K.G. Krishnamoorthy Rao, chief executive of Future Generali India Insurance Company. “If a policyholder wants to switch to another insurer, he or she may have to pay a higher or lower premium depending on whether he/she has changed the insurer for better services or for lower premium,” he added.

The General Insurance Council, the lobbying body of general insurance companies, had proposed a plain-vanilla medical insurance policy with standardised terms and conditions and having a minimum sum assured of Rs 1 lakh (with no upper limit on sum assured) for portability.

But the guidelines issued by the regulator have bypassed the suggestions, stating that the portability facility would be applicable to all existing and new health insurance contracts with effect from July 1, 2011.

For effecting quick portability, Irda is making available to health insurance companies the claim history of policies.

An element of portability now exists in motor insurance. Car owners can switch insurers every other year and carry over the benefit of a no-claims bonus while negotiating a lower premium. “This is possible because the terms and conditions are standardised in the case of motor insurance,” said an official with Bajaj Allianz General Insurance Company.

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