Portability is more than just voting with feet

Voting with feet is as old as perhaps civilisation itself. Restaurateurs catering to the hoi polloi are mortally afraid of losing customers, and therefore try to remain competitive both in terms of price and quality besides egging their chefs on to come up with tongue-tickling newer and fresher delicacies. . Ask the terrified sales boys and girls in the the saree shops in Usman Road in Chennai . The managers give them a routine, rankling dressing down when they see customers leaving the stores with sullen faces. But it is not as if there are no gainers when some customers vote with their feet. Competitors gain. Purchasers benefit immensely at the end of the day.

In the more rarefied environs of share markets too, investors and operators vote with their feet and dump the shares they are disillusioned with. The fear of investors voting with feet has a chastening effect on companies mindful of market reactions. ADAG group companies recently paid Rs 50 crore to the regulator lest any prolonged confrontation with it gives itchy legs to shareholders.

Beggar-my-neighbour

There could also be an element of beggar-my-neighbour, especially when voting with feet is engineered by competition. The telecom companies in the wake of number portability regime are not coy about wooing potential customers with a down-right negative sales pitch. When a customer is sulking, he/she is likely to dump the service provider if only to teach it a lesson. These are early days, and customers have not been showing proclivity to switch , though the threat itself has had a palpable positive effect on the service providers.

The decision of the insurance regulator, IRDA, to follow quickly in the footsteps of its telecom counterpart, TRAI, has brought smile to the face of the insured.

Unlike in mobile phone subscription, the stakes are far higher. Ill-health assumes calamitous and unsettling proportions in a family, especially if the resultant medical bills are high and the insurer fobs off the insured, citing the ubiquitous and one of the numerous exclusion clauses and the glib assertion of pre-existing disease.

Vital difference

But there is a vital difference between number portability and insurance portability. The telecom services are homogenous and tariff-competitive, with dog-eat-dog competition ensuring this. Insurance is a different kettle of fish. The insurance premium differs as do the health risks covered. Besides, the insured always carries a historical baggage he cannot disown. While a disgruntled insured can vote with his feet, there is no guarantee that another rival insurance company would welcome him with open arms. This danger for the disgruntled customer is not there in telecom services where the health background and age of the insured are of no consequence to the successor-service provider.

For all one knows, the insurers are reluctant to share a common data base about their customers on the grounds of confidentiality and the lurking threat of poaching. But in the absence of such a database, it would be difficult for the new insurer to take the disgruntled one on the rebound into his arms.

Health is personal whereas telecom is impersonal. Thus while number portability might gain in popularity in months to come, insurance portability might not take off unless the IRDA clears the decks for it by mandating a common database into which all insurers can dip into for vital information. On this hinges its success.

But if this is concomitantly mandated, the initial enthusiasm of the insurers may wane with the prospect of a rival accessing vital information about their customers throwing cold water on their enthusiasm. Like trading on equity, insurance portability is a double-edged weapon — you win some times with it, but you could also lose.

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