A New Parasol?

Systemic Pitfalls

• Effective July 1, all existing and new health insurance policies will be portable
• A consumer can take along the old policy’s benefits and bonus when switching
• The switch will be cumbersome as guidelines and products differ from company to company
• No clarity on exclusions—if the shift will be at a lower premium or entail the same conditions

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Though insurance and mobile phone services are about as far removed as product categories go, consumer dissonance is a common factor in each. Almost 65 per cent of complaints received by the insurance ombudsman relate to health insurance claims issues. For people in higher age brackets, rising premiums have become increasingly worrisome. Access to key hospitals has been a sore point of late—not to mention the gamut of issues with claims and pre-existing diseases.

So, there’s now a door open for an irate consumer to try another insurer. “It’s a great move for consumers who are unhappy with the service they get from their current insurance company. It will help companies differentiate not just on service, but also on product features,” says V. Jagannathan, cmd of Star Health and Allied Insurance, India’s first standalone health insurance company.

At least, that’s how the theory goes. In reality, it’s going to be a lot more complex. The “benefits” that accrue to a policyholder—such as no-claim bonuses, waivers on pre-existing diseases, exclusions, and further fine print—differ from company to company and from policy to policy. The portability guidelines state that these will be available to the policyholder when he “ports” to another company. However, the benefits will be restricted to the amount of the sum assured and the bonus of the old policy.

Let us suppose you own a policy worth Rs 2 lakh under a public sector insurer and want to move to a private insurer and enhance your policy to Rs 5 lakh. If the waiver on your old policy for pre-existing diseases was two years, and in the new company, it is four years, you get a credit for the two years for Rs 2 lakh plus the bonus on your old policy.

Sounds simple? The Insurance Regulatory and Development Authority’s guidelines on health insurance portability, insurance experts say, are still too basic and require clarity. The rules don’t address exclusions—if a new insurer excludes diseases that were available on the old policy, what happens? Also, what if your premiums turn out to be higher and the new insurer insists on a pre-acceptance check-up?

“Underwriting rules and issues like coverage of pre-existing diseases, sum assured, sub-limits, first-year exclusions differ for companies,” points out Dr Nayan Shah of Paramount Health Services, a leading third party administrator for health insurance. “It’s difficult to foresee whether the insured person will be able to move at the same terms and premium,” he adds.

Data sharing will also need time to work out. Underwriting and claims data is not entirely digitised, especially in the four public sector insurers that corner the bulk of the marketshare. That’s why most experts don’t expect a large number of ‘porters’ in the first year.

Teething problems apart, portability is good news for consumers. “The consumer will have more choice. It will force insurers to up their game,” says Rahul Agarwal, Optima Insurance Advisors.

But, as always, confusing fine print could play spoiler.