Portability in health insurance is difficult if you have a disease

Here are some lessons for policyholders in case of medical insurance, where it is already allowed

The Insurance Regulatory and Development Authority of India (Irdai) is planning to permit portability in life insurance, say recent reports. However, in health insurance, where portability has been around since July 2011, moving from one insurer to another hasn't been easy and riddled with hurdles.  

People want to port their policies for a number of reasons. One, they may not be happy with the features of their existing product. “New products have come into the market that offer superior features. They don't have a cap on room rent. They cover day care procedures. The newer players may also be willing to offer you a higher sum assured," says Rahul Mohata, chief operating officer, 121policy.com. A bad claim experience with the existing insurer is another reason for customers wanting to port. 

Younger people with no pre-existing disease will find porting easier. Their proposal may get accepted without a medical check-up. By contrast, someone aged above 45, or one who declares a pre-existing disease, may have to answer a lengthy questionnaire about his/her health and also undergo a medical check-up. 
 

There's a reason why insurers apply stringent checks. Suppose a person has been with Insurer A for four years. After buying the policy he contracts a disease. Now he wants to port to Insurer B. From the second insurer's perspective, it means that the customer has been paying premium for four years to another insurer, and yet he should offer him coverage for the disease from Day One. "In a scenario where the first four years’ premiums have gone to Insurer A and Insurer B has to bear the cost of claims from Day One, the latter is naturally reluctant to take such cases," says Mahavir Chopra, director-health, life and strategic initiatives, Coverfox.com. 

Insurance companies undertake thorough underwriting before taking on such cases. "Applicability of premium loading, any specific exclusion related to the diagnosed illness, additional waiting period, or rejection of proposal will depend on the present health condition, severity of illness, past claims history and other factors specific to the plan opted for and the underwriting guidelines followed by Insurer B," says Sandeep Patel, managing director and chief executive officer, Cigna TTK Health Insurance. In other words, the proposal to port could be rejected. If accepted, the second insurer could impose a premium loading (charge a higher premium), or it could impose an additional waiting period. Sometimes, it could even place conditions such as a cap on the amount it will pay for a pre-existing disease. If the proposal gets rejected, the customer will have to try his luck with another insurer or go back to his old insurer. 

As for the bonus, suppose you have a pre-existing disease and you have completed four years with Insurer A. Whatever bonus you have earned during these years can be used for the treatment of this disease even after you port. However, the bonus becomes chargeable and you have to pay for it.

If you wish to port, apply to the new insurer 45 days in advance. According to Irdai's portability guidelines, your group cover can also be ported to an individual cover. Many customers think they will do so when they grow old. "If you contract a disease, your request to port may not be accepted. So, buy an individual policy with an adequate sum insured at an early age," says Chopra. Also, anyone buying a health insurance policy for the first time should do thorough research so that the need to port the policy at a later date does not arise.