Now that mediclaim portability is here, I will change my insurer during the next renewal and teach them a lesson,” said my friend, who had also changed his mobile operator when mobile number portability was introduced. Though he may have taught a lesson to his earlier telecom service provider (by not being its customer), I am sure the scenario is not going to be same when it comes to health insurance portability.
The simple reason is two different business environments. The mobile industry is a falling-tariffs-and-improved-customer-benefits industry, where cellular connection is affordable and has almost become a necessity. However, health insurance is an increasing-tariffs-and-shrinking-customer-benefits industry, where insurance is not affordable for most of the population and definitely not a priority.
Then why do we have mediclaim portability? This was a long-standing demand from consumers, with a lot of unpleasant experiences, and the Insurance Regulatory and Development Authority (Irda) thought that this choice should be offered to policyholders. However, I am sure that this choice is not going to be a big help to individuals as well as group policyholders as the nature of industry is not so conducive for such a change at this stage.
With the average premium levels being much lower than the international standards, mediclaim is seen more as a social obligation (government-owned insurers set their premiums with this obligation in mind and private operators don’t charge much higher than these levels due to fear of being termed as expensive) and the claims levels being high, mediclaim is a bad business. In such an environment, every proposal is screened thoroughly to avoid adverse risk and policy conditions are made more stringent. All the new customer acquisition is aimed at 20-45 years of age, which is termed as good risk. Anybody beyond this age group is exposed to medical tests to identify the risk factors and apply specific exclusions or deny cover.
Typically, a portability option is looked at when you are not happy with your current insurer (due to bad handling of a claim situation); or the insurer has imposed some new restrictions in your policy; or you are looking at a better product. In the first two cases, you are already an adverse risk for the current insurer and hence, do not expect the new insurer to view you in a different light and roll a red carpet for you. The third reason for portability is not so common in the current market place as there is no great product innovation that has happened in this industry; there are some minor feature changes but those are not significant enough to contemplate portability.
Though Irda has put in sincere efforts to define timelines (if the insurer does not adhere to the timelines mentioned, they would have no right to refuse portability) and streamline collection of past policy and claims data (through a portal), the choice to accept or reject the cover is left with the new insurer. This is not a seamless portability situation. I feel that for the following people, portability would be an unpleasant experience.
•People who are above 45 years of age (and have to undergo tests to obtain a cover)
• People who already have some pre-existing ailment in the current policy
•People who have acquired a new ailment during the tenor of the policy
Irda has mentioned that the new insurer will have the right to accept the cover with new conditions or deny the cover as per their underwriting guidelines. Though the policy wording is open for the customers to read, the underwriting guidelines are not made public and we have seen a lot of insurers using this tool to apply restrictive conditions or deny cover. To take a simple example, the policy conditions say that after four years of continuous coverage, all pre-existing diseases are payable. Looking at this possibility, a customer declares that he has hypertension and diabetes as health conditions. However, there have been cases where while issuing the policy, the insurer has mentioned these two ailments as “permanent exclusions”. This means that even if the customer continues to insure himself under this policy for more than four years, during his entire lifetime, he will not be paid for hospitalization arising due to hypertension and/or diabetes or any other ailment arising due to these disorders (which means no cardiac ailment or stroke would be paid for during one’s lifetime). I fear that such restrictive underwriting guidelines would be applied while opting for portability.
Many believe that the group mediclaim policyholder, upon separating from the company, will be able to carry credits for the years he/she has been insured under that policy. But the current insurer will give you credit for the number of years you are with that insurer. But if your company, in pursuit of lower premiums, has changed the insurer every year (which is the case with most of the companies), your credits are not going to be significant at all.
Though Irda, in the past, had looked at concepts such as special portability products (but killed that idea as it was not well received), a better method would be to create a portability pool (like a terrorism pool) and allow the new insurer to withdraw money from this pool for paying claims of such portability clients in the first three-four years of cover.
Though portability is a positive step taken to safeguard policyholders’ interests, I am sure there will be lot of activity in this space in the next two-three years and, finally, we will have a far different portability solution than what we are experiencing today.
Sudhir Sarnobat, chief executive officer, Medimanage Insurance Broking Pvt. Ltd.
Your comments are welcome at firstname.lastname@example.org