August 16, 2008

Health cover portability faces last-minute hurdle

Last minute-glitches have held back a health insurance cover that would have enabled policyholders to retain the benefits even if they switched companies.

The new health cover is a common minimum standard cover, which will be renewable and portable across companies. This means no insurer can refuse renewing the policy on grounds of adverse claims, making it mandatory for insurers to pass on the benefits, such as cumulative bonus and discounts, even if a person changes his insurer.

While pre-existing diseases are only covered after four years of a policy, an insured will be eligible to these benefits from the first year of switching to a new company.

Insurance company executives said there is an in-principle agreement on the new product, though there are several grey areas, on which clarity is required.

The General Insurance Council, the self-regulatory body of non-life companies, met yesterday in Hyderabad, but could not reach an agreement. Insurers have now asked a team of health underwriters to prepare the final blueprint for the proposed product, which may take a couple of months.

Pricing is a major issue on which a decision has to be taken, said a source who was present at the meeting. A section of non-life insurers is insisting that portability should come at a price. So you may be able to move from company A to company B and retain all the features that you were entitled to earlier, including bonuses and continuity benefits, only if you are willing to shell out a little more money.

The head of another insurance company said insurers were unclear about the minimum sum insured under the portable and renewable product. The mechanism to cover pre-existing diseases in the new policy, after a change of the insurer, is another issue that has divided the industry.

At present, pre-existing diseases are covered after a health cover has been in operation for four years. So if a policyholder has a heart ailment at the time of purchasing the policy, no related claims then will be honoured in the first four years.

In case of perpetual claims or in policies where there is a high level of claims, a few insurance companies that were present at the meeting were unclear on how renewability and portability will work. The long-term impact of such a product on insurance companies will be analysed.

Similarly, companies have different underwriting guidelines in terms of client segments for various businesses. Some insurers have raised issues about how the proposed product will fit into their overall business. The other reason cited by insurance company executives is the mechanism for sharing of the consumer data.

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