Here is a list of important terms, conditions and limitations to keep in mind before you decide to port your health insurance policy to another company.
Come this September, health insurance portability would be 5 years old! Yet, it is not an easy process to shift a health cover from one insurance to another. It never was!
Although IRDA has mandated no claim-based loading, medical inflation and a general increase in the number of claims (lower profits) can force an insurer to hike premiums to up to 200% as seen in the case of Oriental Insurance.
Then, is porting to another insurer a good idea? It is not easy to give a simple 'yes' or 'no' answer.
Here are the important portability conditions
1 Portability applies to only individual and floater plans. A group policyholder can only shift to the individual cover offered by the same insurer. Porting to another policy is possible one year after the first shift.
2 The premium of the old policy should have always been paid within 30 days of the due date to be eligible for portability. A break in the old policy implies no portability!
3 Only the pre-existing disease conditions and other time-bound specific exclusions will be ported. No bonuses or discounts (see below).
4 Portability is a right of the insured but not the duty of the new insurer!! Meaning, just because you applied, there is no obligation to for anyone accept! This is a major rule. The health insurance business being as it is, why would they take on policyholders who have fragile health!
5 The new insurer will have to respond within 15 days or will have to accept the transfer. Meaning they will well within that, especially if they wish to reject the proposal!
6 There is no free look up period for portability. If a new policy is issued, that is it! This is what the rules suggest. Please correct me if I am wrong.
7 Within the time that the new insurer is taking to evaluate the transfer application, it can be cancelled and the old policy renewed with no change in conditions (because of the application). The old policy will not be cancelled until portability is confirmed. A 30-day grace period is allowed if porting is being considered.
8 Transfer requests can be made only when the policy is due for renewal and within 45 days of the due date. Bajaj Allianz suggests initiating the process 2-3 months prior. Good advice, but many know about the increase in premium quite late! So the only way out is to have a practice of renewing 1-2 months before the due date. Then one has time to prepare for bad news!
9 Key condition: The (potential) new insurer will assess the application as per their underwriting guidelines. This means they can reject straight away (with proper justification) or ask for a medical test (and then reject!) or increase the premium as per their rules.
In fact, Bajaj Allianz says medical tests are mandatory for porting above age 45. Should be similar for other policies too.
Moral: You will know your new premium only when the potential new insurer responds! Do not use their online premium calculator and assume you will save costs by porting!!
10 Waiting period: Suppose the old policy had a 4-year waiting period for pre-existing diseases and a transfer was made in the 3rd policy year, the new policy will have a 1-year waiting period.
Suppose a new disease is detected after say 2 years of holding the old policy, any increase in cover (in old policy) will be subject to the waiting period for that disease. This is the situation with any insurer and before porting. For example, suppose I have a 4 lakh cover before the advent of a condition and then increase my cover (in old policy) to 5 lakh. The new condition will be eligible only for 4 lakh cover until the waiting period is over. After the waiting period, the full 5 lakh will be valid.
It is not clear what the porting rule in this case is. Bajaj Allianz says
After the medicals are conducted by the new insurer, there is a positive finding in the medical reports, what would be the decision of the new insurer?Ans:The new insurer would take the decision as per the UW guidelines decided by the company, if the proposal is accepted the terms & conditions would be informed to the customer. If the illness is not pre-existing exclusion would not be applicable. However the insurer has the discretion to either accept or reject the proposal.
This means for conditions that develop after the old policy is in force, portability benefits will not apply!
11 Any cover accrued as a no-claim bonus will be lost upon porting. In the sense that the bonus will be added to existing cover and the new insurer will charge a premium for that as per their rules. So we would be paying for the bonus in the old policy!
12 If you opt for a higher cover with the new insurer - either because you wanted it or they do not support the cover that you have (base+bonus), then the portability benefit will not apply to the additional cover. For example, if the old cover is 4 lakh and new insurer says they can only offer 5 lakh (as per their policy rules) or if you wanted to increase cover, the extra one lakh will have waiting period and other exclusions.
My take: If you or your family members suffer from fragile health and have claimed before, portability is either not possible or can be expensive
We need to think beyond costs here. Portability does not imply retaining benefits of pre-existing diseases. It means going from one set of (unknown) underwriting rules to another (unknown) set. After a few years, it may come back to bite us! Who knows, after we port, the new insurer will increase the premium by 200%!