IRDA okays health cover portability

MUMBAI: Holders of health insurance policies can now switch companies without fear of losing benefits of a 'no claim' track record or out of concerns that they may have to wait a while before certain health conditions are covered.

The insurance regulator has said on Thursday that insurers must allow policyholders to transfer the credit in terms of waiting period for pre-existing illness and bonus sum insured from one insurer to another. The Insurance Regulatory and Development Authority on Thursday issued guidelines on portability of health insurance which will be effective from July 1, 2011 and apply to life and general insurance companies.

The insurance regulator's move to allow portability will hugely benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years. For example, if under a previous policy, a medical condition is excluded from coverage for two years and at the end of the second year the policyholder decides to switch, he will not have to go through the same waiting period again.

If under the new plan the waiting period for the same condition is three years, the new health insurance policy can only exclude the condition from coverage for one extra year. The final guidelines are a departure from earlier proposals where a standard policy, similar to the standard motor insurance cover, was mooted which could have been renewed with any insurers . However, given the difference in terms of coverage , the regulator has stuck to the nub of the issue-policyholders losing the track record they have built.

According to insurers, policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. "In a way, it will be similar to mobile portability. Just as a customer opting for a new provider will have to accept the terms of the new plan, the policyholder too will have to accept the terms and conditions of the new insurer," said Sanjay Datta, head of health at ICICI Lombard General Insurance .

Claims such as those for bypass surgeries are invariably rejected if they occur in the first year of cover on the grounds that such medical conditions do not develop overnight. Insurers agree to pay these claims only if the insured has been continuously covered for a couple of years at least.

IRDA has said that the credit (in terms of waiting period ) would be limited to the sum assured (including bonus ) under the previous policy . The regulator has put the onus on the new insurer for continuing the cover. If the policy results lapses into discontinuance because of any delay by the insurer in accepting the proposal, the insurer shall be bound to continue coverage.

All insurers have been asked to inform policyholders that all health insurance policies are portable and that the policyholder who wants to shift should take action well before the renewal date. According to Datta, the industry will move to a shared database by which an insurance company can immediately figure out the track record of any person who approaches them for health insurance. IRDA has asked companies to share the claim details of the policies, where the policyholder has opted for portability, within seven working days of a request from the renewing insurer.

Easy Switch

IRDA's move to allow portability will benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years

Insurers say policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. The industry will gradually have to move to a shared database.