‘Health insurance portability slowly catching on'

Medical insurance portability is two-months old now, but it is off to a slow start. Mr Sanjay Datta, head-underwriting and claims, ICICI Lombard General speaks to Business Line in an interview on the nuances of health insurance portability.

Excerpts:

Health insurance portability is two months old, what is the response to it?

It has been more than a month and it's just starting off. It is not something that is immediately catching on. There is a lot of regulatory advertisement and so it will slowly catch on as people begin to look at it.

When exactly should a policyholder switch an insurer?

There are two types of reasons that would induce a person to port. There is one reason which I think should be the primary reason - that one would like to go to a product which is a better product.

This could be in terms of coverage so it allows shifting of consumers from one insurer to another but in a way that drives innovation for better products in the market which is a right lever to have. So consumers will push insurers to innovate.

Earlier people could change, but they would lose all their benefits.

The other reason for porting is when one is not satisfied with a service of a company, one would like to change the insurer. In a sense, it is a negative reason for porting and so I hope people move for the right reasons.

So if I can make an allusion to the mobile portability, there could be two reasons, you are not satisfied with the kind of connectivity service of your provider which is a negative reason for porting.

The other reason could be you are very attracted to the plan of the other service provider

What are the main benefits of the health insurance portability?

The principal benefits are the waiting period benefit. There are 2 or 3 things that an insurer will not provide.

For instance, in certain diseases such as cataract or hernia (which develop over a period of time), you can buy a policy and after 3-4 months you may have a cataract operation.

So to prevent this anti-selection most insurers put in a first- year exclusion for named diseases. That's one where one has to serve out your waiting period to start getting coverages for these named exclusions.

The second one is waiting period for pre- existing diseases, which one should reveal while taking a cover and after revealing that one has to wait for 4 years.

Some products have a lesser waiting period though the minimum is 2 in terms of what Indian market offers.

Earlier you had to start the counter again, which was the position in the market before portability.

And now, you can carry forward your waiting period with the new company.

Mostly because of the waiting period, the first 2 to 3 years tend to be claim free for the insurer. So insurers have a good claims experience or what they call no claims bonus.

The insurer gives some sort of incentive to stay on with the product. In normal case, the no-claims bonus would not get transferred.

So for good health if you have bought a policy for 1 lakh or 2 lakh, industry practice of 5 per cent every year, you will get 50 per cent extra for sum insured and now the extra sum insured does not have a waiting period.

So now when you port, you not only get waiting period for normal original sum insured but also the no-claims bonus, which is carried over to the new company.

There is provision for people to shift from a group cover to individual cover. Do you see that happening?

Yes. It will happen as we go forward. One of the reasons is that the Indian health insurance market is still underpenetrated.

There are all types of issues with health coverage. You can get covered by your employer - but what happens when you finish your employment and you move to self employment or retirement? Who takes care of that?

And that's where your needs will become more. This is a market opportunity for us. We are asking these questions internally.

We do a serious amount of corporate health business which is covering employee benefits.

The questions we are asking is why are we not able to sell retail products or cross-sell to them. There are two or three issues around that. One is that some companies do not encourage that as a matter of practice and they don't share data also so we don't have contacts.

Five years ago there was no culture of buying health insurance. You got it from your employer, so it was ok. People assumed the cost would be low.

People are now thinking that health costs are not going to be what they used to be. In our life time, healthcare costs are going to reach a different level which will be tough.

So one may need insurance to cover that risk. And so people who retire, the whole problem with Indian coverage, the older you get, there are more chances of pre- existing diseases and for someone with a heart problem it is very difficult to get a health cover. So it means you need to start young, have some sort of coverage. Earlier, you needed to have your health insurance contract. Now, we are saying that if your employer had something you get some of that benefit transferred to buy some sort of a health insurance policy for yourself. These are small steps as of now.

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