Health Insurance: The Porting Paradox
Any new Insurance Advisor who’s venturing into the business of Health Insurance is sure to face the ‘porting paradox’ soon enough. While the regulator permitted insurers to ‘port’ in existing Health Insurance plans from competing insurers some time ago, the current framework is nothing but a damp squib.
The first dampener is the fact that while porting out your existing Health Insurance plan to a new insurer, you’ll end up foregoing all the no-claim bonuses that you’ve accrued on your planto date. Considering that most insurers will now bump up your Sum Insured value by anything from 10% to 20% for each claim-free year, this is a very heavy price to pay; especially for clients who’ve been renewing a single policy for several years consecutively.
The above stated point doesn’t appeal to reason, though. Take Motor Insurance, for instance. If you decide to switch your policy from one insurer to the other, your entire no-claim history is taken into account while pricing the new policy. This is the rational way; the argument being that ‘being a disciplined driver’, for which the no-claim bonus is a reward of sorts, is an attribute of the car owner, and not the car. Spot on.
Similarly, a no-claim bonus in medical insurance parlance, is a reward for being prudent with your health; therefore, avoiding the need for making claims in a given year. It’s only logical that the insured person be rewarded for this ‘good behaviour’ while opting for a new plan with a new insurer, à la motor insurance. In an ideal scenario, the new insurer should consider your past claims history (say, 3 consecutive no-claim years) and apply its rules accordingly while pricing in your new policy. But alas, that’s not the case! You begin from ground zero.
Take scenario two – that is, you’ve made a claim in your current plan, and would now like to port out your existing policy to what you perceive as a better one. It now makes sense for you to do so, as there are no bonuses you’ll be foregoing in the process. However, in this scenario, you’ll be viewed as ‘unfavourable’ from an underwriting standpoint, and your porting request will most likely be rejected! After all, insurers would like to keep their claims pool as small as possible in the interest of their profitability; and an individual who’s already made a claim in his or her previous policy will be perceived as a lot likely to make a claim this year too.
In order to create a more competitive playing field in the Health Insurance arena (which, in the long run, is always beneficial for customers), the regulator needs to take concrete measures to dispel the above defined paradox. Clients shouldn’t have to suffer a loss off their accrued bonuses while porting out their policies, and insurers shouldn’t be able to flatly decline inward porting requests simply because a claim was made in the previous year. Only then will Health Insurance porting become relevant. Presently, the whole activity is pretty much a moot point.
