Health insurance portability: How underwriters filter out the policyholders who need it most

Every renewal cycle, an all-too-familiar friction plays out across Indian households. Consider a 62-year-old retired teacher who, exasperated by delayed claim settlements and another steep premium hike, decides to move her coverage to a rival insurer.

She expects her decade of policy continuity and waiting-period credits to transition seamlessly. Instead, after weeks of paperwork and medical evaluations, her application is turned down without a clear explanation. Left with no realistic alternative at her age, she quietly renews with her existing insurer.

Her predicament captures a structural blind spot in retail health insurance: portability is merely a right to apply, not a guaranteed transfer.

According to Suresh Mathur, former executive director at the Insurance Regulatory and Development Authority of India (Irdai), while the framework was introduced in 2011 to dismantle customer lock-ins, its real-world execution remains heavily constrained by commercial underwriting.

Underwriting Barrier

When the regulator introduced the portability mandate, the intent was to empower policyholders to vote with their feet, Mathur noted. The rules established that accrued benefits—specifically, waiting periods served for pre-existing diseases and accumulated bonuses—must be transferred to the new insurer. However, destination insurers retain the statutory prerogative to underwrite every incoming proposal from scratch.

This discretion creates an acute selection bias, he said. Insurers compete aggressively for young, healthy policyholders through instant digital approvals. But for senior citizens, diabetics, or individuals with recent hospitalisations, the underwriting gates narrow sharply.

Those with the strongest reasons to exit an underperforming insurer are precisely the profiles underwriters avoid. When older applicants are accepted, policies frequently arrive laden with heavy premium loadings, mandatory co-payments, or fresh exclusions. For applicants past 70, outright rejections remain routine.

Fine print and disclosure traps

The mechanics of porting introduce strict procedural hurdles:

• 45-day window: Transfer requests must be initiated at least 45 days prior to policy expiry. Missing this deadline locks the customer in for another year, while letting a policy lapse mid-process permanently voids years of accumulated continuity benefits.
• Sum insured reset: Continuity credit applies strictly up to the existing sum insured. Porting a ₹5 lakh cover and upgrading to ₹10 lakh resets the waiting-period clock to zero on the incremental ₹5 lakh.
• Diluted terms: Mathur cautioned that differing room-rent caps, internal sub-limits, co-pays, and hospital networks can dilute coverage quality. A lower premium often masks a weaker financial safety net.
• Fresh disclosure liability: Porting requires a new proposal form and a comprehensive medical history. Any inadvertent omission of a past consultation can later be weaponised to repudiate a claim—a risk falling heavily on senior citizens, who now account for a 61 per cent jump in porting inquiries.

Regulatory tightening vs Market realities

To curb systemic friction, Irdai has progressively tightened operational norms.

Mathur highlighted the regulator’s May 2024 master circular, which mandated that existing insurers share an applicant's claim history within 72 hours and required destination insurers to deliver an underwriting decision within five days.

The circular also reduced the maximum waiting periods for pre-existing conditions and codified a five-year moratorium, after which insurers cannot contest claims on non-disclosure grounds, except in cases of proven fraud.

Yet structural distortions persist. Despite clear regulatory restrictions prohibiting agency commissions on ported accounts, distribution networks routinely bypass these norms, prioritising profitable young switchers over higher-risk cohorts.

How policyholders should navigate a switch

For consumers contemplating a switch, Mathur recommended the following safeguards:

• Start early: Initiate paperwork 45 to 60 days before renewal, and ensure the existing cover does not lapse while a decision is pending.
• Disclose fully: Provide an exhaustive personal medical record to eliminate future grounds for dispute.
• Demand written confirmation: Insist on written verification of how cumulative bonuses, waiting periods, and room-rent limits will map onto the new policy.
• Escalate failures: If continuity credits are arbitrarily denied, register a formal complaint with the insurer's grievance cell and, if unresolved, the Insurance Ombudsman.

Mathur warned that while portability remains a progressive consumer reform on paper, until underwriting discretion is balanced with greater accountability for older and vulnerable policyholders, the exit door will remain firmly shut for those who need it most.