Change, as the adage goes, is the only constant. Soon, this will be true for health insurance. Irda has introduced a proposal to allow health insurance policyholders to carry over benefits while switching insurers. While this had been a longstanding consumer demand, little had been achieved so far. If the proposal is approved, it could provide significant flexibility while switching policies.
Portability allows a subscriber to transfer benefits accrued under an existing policy to a new plan of a similar nature with another insurer. This can benefit consumers who want to change providers to buy an improved product.
The facility will also help boost the growth of the segment and result in increased acceptability of health insurance. The variations in underwriting principles, pricing structures and product features make it difficult for customers to migrate. However, with the growing number of insurance providers, consumers can now choose from a portfolio of products with similar features.
Insurance firms will offer different levels of portability to health plans that have similar features and sums insured. These typically pertain to waiver of the 30-day waiting period, reduction in the one- or two-year exclusion for specified ailments, shorter waiting period for pre-existing diseases and transferring accumulated bonus to a certain extent.
While the first two features are being offered by all, the reduction in waiting period for pre-existing conditions and the cumulative bonus cause problems. Let us examine these conditions and try to understand the circumstances that will decide the way customers act on these.
Waiting Period
Usually, the waiting period for pre-existing conditions varies from two to four years. So, if an insured person is trying to shift from a product with a two-year waiting period after two years of coverage to a product that requires a four-year waiting period, it poses a challenge for the insurer. Such differences have a significant risk and financial impact, and make portability among products appear infeasible.
Among the current breed of products, portability ranges from 'no waiver of waiting period' to 'waiver of waiting period for pre-existing conditions for the period of complete coverage'. Given this vast spectrum, customers should make a thorough and judicious investigation before shifting.
Transferring Bonus
With regard to bonus, some insurers transfer the entire cumulative sum accrued, while others shift up to a defined limit, say 20-50%. The transfer could also depend on age, wherein an insurer may transfer the entire cumulative bonus for a person less than 45 years old and only a restricted transfer for older members.
Since there are complicated issues involved, the customer should thoroughly analyse the underwriting practices, risk tolerance and data sharing procedures among insurers to ensure they get efficient plans while availing of portability benefits. A database of information regarding policyholders across all providers, with details of numbers and types of policies, sums insured, individual claims history and illness patterns will also assist in formulating policies that are portable across all insurance firms.
When complete portability is available in the market, we could expect to see the industry adhering to new benchmarks in terms of service standards and delivery mechanisms. Portability benefits will certainly fuel penetration and growth in the industry.
ANTONY JACOB
CEO, Apollo Munich Health Insurance
