NEW DELHI :
It’s always better to have an individual health insurance plan even if you are covered under group insurance. This is because retail health is renewable for life; even if the insurer decides to discontinue the policy it has to mandatorily port you to another. On the other hand, in group health insurance, once the relationship with the group ends—like when you quit your job—so does your health insurance cover.
While you can try to port your group policy to individual, there are no guarantees. “Policyholders normally can’t port from one group policy to another but can port from group to individual. But insurers have significant discretion to design the construct and underwriting of a group policy." said Abhishek Bondia, principal officer and managing director, SecureNow.in. This hits senior citizens and those with pre-existing ailments the most.
The Insurance Regulatory and Development Authority of India (Irdai) seems to be aware of this. Last week, it issued a circular to all general and health insurers in the interest of group insurance policyholders of the 10 public sector banks that are being merged. In August last year, the government decided to merge Oriental Bank of Commerce and United Bank with Punjab National Bank; Syndicate Bank with Canara Bank; Andhra Bank and Corporation Bank with Union Bank of India; and Allahabad Bank with Indian Bank.
The announcement led to confusion among customers of the merging banks who have group health policies. Irdai has tried to clear the air by saying that the underlying group health policies of the customers of the merged banks shall continue to be serviced by the respective insurers till the end of the policy period. The regulator also said that banks as a group organizer can have group insurance arrangements with any number of insurers for the needs of the consumers.
However, experts said banks usually push for insurers that have a bancassurance arrangement with them. “Currently there are no restrictions on how many insurers a bank can tie up with for offering group policies but, typically, banks offer policies from companies for whom they operate as a corporate agency," said Mahavir Chopra, director of health, life and travel insurance, Coverfox.com, an online insurance marketplace.
The Irdai circular doesn’t help solve the long-term problems associated with group policies.Know that there’s no guarantee that the acquiring bank would want to tie up with the insurer you have a group policy from. If that happens, you will have to port to an individual policy which could result in a spike in premiums.
In situations when a bank changes its group policy tie-up from one insurer to another, the policies are not considered to be ported. Even if you wish to port your group policy to an individual one, there’s no regulation which guarantees the portability. “There is no mention about group relationship in the portability guidelines. The insurer is mandated to port the policy only when the application is received 45 days before the expiry of the plan. The proposal will go through routine underwriting before it gets approved," said Chopra.
Cases like the ongoing bank mergers throw light on why buying a group policy is not a great idea. Experts said group plans don’t offer the same benefits they did earlier. Conditions such as the waiting period are similar to those in a retail policy. “The only difference is the waiting period could be three years instead of four," said Chopra.
He said there’s also no control on premium rates in a group policy with a one-year tenure. Depending on the loss ratio, the insurer can choose to hike the premiums at its own discretion. “Even if there’s no change in the insurer for a group policy, the same insurer, by looking at the loss in the portfolio, can decide to hike premiums every year," Chopra added.
In case of senior citizens, the issue can be more worrisome because if they don’t get the option to renew their group policy, they may be at the risk of not being sold an individual policy either. In case they do get a plan, the premiums could be high. “There is no regulation which says banks must continue with the group policies but my sense is, they might try and work on some transition planning," said Chopra.
Also, insurers have the right to cancel a group policy midway. “It’s a negotiation that happens between a bank and an insurer and if the insurer feels like its portfolio is loss making, it might decide to end the relationship. Also, if the losses are very high, no new insurer might want to take it on," he added.
An official from Irdai told Mint, on the condition of anonymity , that the regulator is looking at the matter closely. But in the meantime, you shouldn’t just bank on group plans. “The regulator has kept customers’ interest in mind without letting it affect their ongoing policy. However, we advise customers to buy individual retail products as that isolates them from any corporate activities like bank mergers," said Amit Chhabra, head, health insurance, Policybazaar.com, an online insurance marketplace.
Always prioritize buying an individual health policy with an adequate cover and if you do feel the need to supplement it, go for add-ons instead of banking on a group insurance policy.