Change insurers without making a loss

Individual health insurance policies have at times been the bane of the health insurance industry. There are quite a few stories of disgruntled customers having to suffer at the hands of indifferent insurers, all because the customers have no choice but to renew with the same insurer.

Carry the credit

The storyline is set to change as the IRDA has opened the gates of portability to all insured customers who desire to move away from their current insurer, without losing key benefits of their health insurance policy.

The principal benefit of these new guidelines is that a customer who has an individual health policy can choose to move to another insurer, without losing the credit earned for the period he was with the current insurer.

So, if an insurer covers specific ailments only after four years of continuous coverage and you have a policy for three years, you will only have to wait for a year before the new insurer starts covering these ailments.

The guidelines do not make any change in the nature of ailments that will be covered under the policy or the waiting period.

These will depend solely on the underwriting guidelines filed by the insurer with the IRDA. The guidelines will apply similarly to existing and new customers of the insurer and typically insurers will cover all ailments after a waiting period of four years.

What to note

Though it has its benefits, there are a few important aspects that a customer must remember before planning to change his insurer.

It may be possible to save premium by switching insurers, as new insurance companies could be charging lower premiums than established players.

If you are looking to change insurers, it is advisable to do so because you get benefits of a better coverage and service, rather than merely to save some premium as a lower premium may also be accompanied by lesser benefits.

In some cases a new policy could actually cost more as the new insurer will charge premium for the full sum insured, including on the bonus sum insured that you may have earned on account of claim free years.

For example, if an individual has a policy with sum insured Rs 2.50 lakh of which Rs 50,000 is the bonus sum insured under the present policy, the current insurer would be charging him premium as applicable for Rs 2 lakh.

However, if he switches to a new insurer, he would have to pay premium for a sum insured of Rs 2.50 lakh. Further, the premium would be paid as per the premium chart of the new insurer.

In case a customer desires to port his policy, he will be required to fill the portability form, giving all information in respect of the current policy including copies of all his insurance policies since inception.

He will also have to indicate the policy he desires to take, with reasons for switching insurers. An individual looking to move his policy to another insurer, must file his application with the proposed insurer 45 days before the expiry of the current policy.

While portability does give the insured freedom to choose any insurer, it does not require the insurer to accept every proposal that is received.

Insurers have 15 days to underwrite the proposal and can reject the application, if it does not meet their underwriting guidelines. In the event the insurer does not convey its decision within 15 days, it cannot reject the application thereafter and has to accept the application.

As a matter of abundant precaution, if you do not receive intimation from the proposed insurer before the expiry of the policy, you are advised to extend the existing policy with the existing insurer by paying pro-rata premium for a short period so as to avoid a break in policy.

In case there is a break in policy, i.e. if the expiring policy is not renewed before its expiry, the individual loses all credit earned even with the existing insurer.

While a customer now has more freedom to switch insurers, it is also important for him to choose the appropriate plan from the wide range of plans offered by all insurers.

He must, therefore, seek appropriate advice from health insurance experts, who can help sift through the web of complexities and help him choose the plan that suits his needs best.

(The author is CEO and MD at Vantage Insurance Brokers and Risk Advisors)

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