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The wait is over finally. The Insurance Regulatory and Development Authority (Irda) has issued the final guidelines on health insurance portability, clearing the decks for their implementation from October 1. This means, from October you can switch from one health insurer to another without losing any benefits you have earned on your existing health cover.

THE PLUS POINTS

Till now, policyholders were reluctant to switch to a new health insurer mainly because the transfer of the waiting period credit for pre-existing diseases (PED) was generally not allowed. Typically, pre-existing diseases are covered only after one to four years of the policy being in force, depending on the company and the illness.

This is referred to as waiting period in insurance industry parlance. Portability will allow policyholders dissatisfied with their insurer's services - be it with premiums or claim settlement - to migrate to another insurer who will not insist on them biding their time for four more years to get the PED cover. For instance, if you decide to shift to another insurer after completing three policy years, and the existing policy undertakes to cover PED after four years, you will have to wait for just one more year to be eligible for PED cover under the new policy. "Health insurance portability will help policyholders as they will gain from a wider choice. It will also benefit the insurance industry in the long run," says Sanjay Datta, head, customer service, health and motor , ICICI Lombard.

"The penalty of the portability proposal being deemed accepted in case the insurance company does not respond within the timeline will make the process very efficient," says Mahavir Chopra, head, e-business , Medimanage. The most interesting aspect of the guidelines, perhaps, is that they allow a switch from group mediclaim to individual or family floater policies, and let the policyholder to retain the waiting period credit. Since many families depend solely on their employers' group policies, such transfers will help them have a policy of their own without having to wait for the four-year period for coverage of pre-existing diseases to come to an end.

WILL IT REALLY HELP?

While the insurance regulator's diktats are to be welcomed, portability cannot be assumed to be the panacea for all the grievances of policyholders. "Portability of a health insurance policy is attractive only on paper," says consumer activist Jehangir Gai. "As long as a policy is profitable, every insurance company is good to the insured (when there is no claim, there cannot be any dispute)." He points out that only after a claim arises do insurance companies get worried about the policy becoming onerous with repeated subsequent claims. It is then that the insurer becomes troublesome and, consequently, the insured becomes unhappy with his/her existing insurer and considers a migration to another insurance company.

"This is the time when portability is required. But the catch is that portability is not a matter of right. It is up to the new company to accept or reject a proposal. Which insurance company will want to take on the liability of an onerous policy? None. So, a person can submit his proposal for portability and the insurance company would reject the proposal ," reasons Gai. Then, there are other issues, too. Many feel that insurance companies will reject outright the proposals of senior citizens, who are seen as a highrisk category, thus defeating the whole purpose of portability. Besides, for those who have accumulated a no-claim bonus, portability could turn out to be a lossmaking proposition. As per the Irda circular, the no-claim bonus can be carried forward to the new policy, but the premium charged will be for the enhanced sum assured.

This means that the policyholder will have to pay a higher premium if he/she wants the new sum assured to be equal to the previous sum assured plus the noclaim bonus. Therefore, in case of a switch, the policyholder will stand to lose out on discounted premium that he/she would have obtained, since no-claim bonus component would not have attracted any premium with the existing insurer.

Arvind Laddha, MD & CEO, Vantage Insurance Brokers, points out another aspect that could go against policyholders when they migrate from group to individual plan. "It also appears that when an insured ports from a group to an individual cover, he will get credit only for the period he has been insured with the current group insurer . This seems like a compromise for the insured, especially if he has had no claims with the previous insurer," he says. Such policyholders should also remember that they can port only to the individual policy offered by the same insurer first. After a year, they will earn rights equal to all other policyholders and can then choose any other insurer.

NOT ALL BLACK AND WHITE

Confusion prevails over the definition of pre-existing illnesses in certain cases. Say a policyholder has undergone treatment for a disease and his/her insurer has settled the claim. If he/she decides to migrate, will the new company deny cover for the disease for which a claim has been made? "This is a grey area that needs clarity. If the new insurer does not offer cover without a waiting period for ailments suffered during the continuous running of the old policy, then senior citizens and others with chronic ailments would not be able to enjoy portability in the true spirit," says Chopra.

"If the new insurer is aware of the fact that the policyholder was suffering from a pre-existing condition and decides to accept the proposal, in practical terms, it will be difficult to reject a claim on the grounds of pre-existing diseases," says Subrahmanyam B, head, health insurance vertical , Bharti-Axa General Insurance . However, Gai says the new insurer will have to extend cover to these illnesses, too. "This is in view of the provisions of clause 2. If a disease is already listed as pre-existing in the existing policy , then the new insurer will also treat it as pre-existing ."

"Under the definition of PED, the waiting period is across any insurer. Therefore, if the new company accepts the risk, the time-bound PED would apply and PED would be covered," says Antony Jacob, CEO, Apollo Munich. While measures taken by Irda are commendable, health policyholders will have to wait for some more time before they have complete freedom of choice. But, at least it is a desirable beginning.