Escape From Premium Spike

Every July, Vaibhav Shah, 37, from Ahmedabad, renews his family floater health insurance plan without fail. This year he is in for a shock. The plan, which also covers his elderly parents and usually costs him a premium of Rs 24,541, has become 50 per cent costlier.

The media is abuzz with reports on how most general and health insurers have increased premium costs. In some cases, this hike was reported to be 100-200 per cent.

“The average hike in the health insurance premium cost on renewal has been observed to be around 10 to 40 per cent, depending on the coverage and sum assured,” says Rakesh Goyal, Director, Probus Insurance, Insurtech Broking Company. “However, the Insurance Regulatory and Development Authority (IRDAI) has stated that the standalone and non-life insurers were allowed to alter the base premium by either plus or minus 5 per cent of the originally approved premiums.”

Cause Of The Hike

The IRDAI was earlier held responsible for the premium hike after it took a host of regulatory measures, including standardisation of exclusions. The regulator clarified that it has given permission only to change the base premium up to plus or minus 5 per cent of the originally approved rates.

The sudden spurt in medical emergencies due to COVID-19 along with the ever-growing medical inflation has led to a sharp rise in the premium cost. The adverse claim ratio observed during the pandemic has further added to the dilemma.

As Goyal explains, “The rise in the health cost, loss ratio, the addition of modern treatments and other consumable items have been the driving force behind this hike in premium rates.”

Should You Port?

Determined not to take any risk during the pandemic, despite medical costs rising through the roof, Shah went ahead with the renewal. He had an option to port to another insurer for a plan of a lower premium but he was not sure. Most of us are not sure of this kind of trade-off.

Health insurance portability in India is allowed under all individual indemnity health insurance policies, including family floater policies. Porting can also be done to another product with the same insurer. If you are porting to a plan with a lower premium, it is quite possible the coverage may not be the same as your existing policy. There could be some exclusion due to a decrease in premium cost. Also, there are chances that the wellness benefits may not get transferred to your new plan. Hence, you may actually end up paying more for medical expenses in the longer run.

Says Anand Roy, Managing, Director, Star Health and Allied Insurance, “IRDAI has allowed customers to port their health insurance policy as per their own choice of better product benefits and service expectations. Benefits availed over time like waiting period credit and others under the existing insurance plan will be carried forward to the new product after portability.”

The million-dollar question is whether you should take the option when the premium cost goes north.

Experts are of the view that porting may not be the best option if the premium cost hike stays within an “affordable” margin. Mainly because it may lead to compromising on benefits.

According to Shreeraj Deshpande, Chief Operating Officer, Future Generali India Insurance, health insurance portability should be opted when there are service issues and hence the need to move to a better product proposal. “Just by opting for portability to adjust a hike in premium cost is not recommended,” he says. Also, senior citizens and customers with Pre-Existing Diseases (PED) may find it difficult to port. This is because insurance companies offer few options to such customers due to higher risk exposure. Therefore, it is advisable to continue with the same insurer if there are no service gaps.

Top-Up And Super Top-Up Plans Can Help

However, if the hike is unaffordable, then porting to a new policy with the same insurer or with a new insurer could be done. The recent hike in the sluggish economic environment has proved a double whammy for most customers. More so for senior citizens who are made to pay exorbitant renewal premiums due to higher risk exposure.

A good option is to renew the policy with the same insurer for a lower sum insured and save money on premium payment. For a bigger coverage, you could further opt for a top-up or super top-up plan.

The top-up plans help you in claiming medical expenses that may be over the cover amount of the base plan. It gets activated if the claim is more than the sum insured. A super top-up plan provides cover for cumulative claims once you have exhausted the sum insured. A new policy to tackle the impact of the premium hike may miss out on the waiting-period benefits.

When Should You Port

Other than a premium cost hike, there could be other scenarios that may demand porting. Some of those scenarios include:

Better Service

If your insurer has not been up to the mark with providing satisfactory financial cover during medical emergencies, cashless hospitalisation or seamless claim settlement, then you can opt for portability.

Change In City

If you relocate to a new city and find your health insurer’s network of hospitals is thin or inferior, then you can move to an insurer with a large network of hospitals.

Family Expansion

If you get married or become a parent, then you may need to move from an individual plan to a family floater plan, even with the same insurer, to ensure optimum health cover for all members. The premium cost would also rise with the increase in cover size.

Wider Coverage

If you feel your current coverage is outdated and there is a need to expand, then porting could be a good solution with insurers offering customised plans. However, enhanced coverage should lead to a hike in premium.

Policy Withdrawal

Customers have faced a rise in premium after insurers withdrew from a particular plan and they had to either migrate to a different plan or lose the cover. In such a scenario, instead of opting for a plan with steep premiums, you can safely port to another insurer provided the new cover is found satisfactory.

Things To Keep In Mind

Product features and claim servicing of an insurer are the main aspects that one needs to consider before porting. Study the policy, and do a detailed research on the claims settlement ratio and solvency ratio of the insurer before opting for portability.

“Health insurance is a contract at the end of the day and hence you must read the fine print. While porting into a product, just to avoid price hike may seem like a lucrative move at present, but it may prove to be detrimental in the long run,” cautions Datta.

“Read the documents carefully to ensure proper and transparent health declaration of your family members in the proposal form, while applying for a policy. This will help you avoid any unpleasant surprises when you make claims in the time of need,” Roy points out.

The porting of a policy is only allowed at the time of renewal and the application for the same should be filed 45 days before the renewal date of the existing policy.

You can opt for increasing the sum insured while porting the policy, however, the same has to be approved by the new insurer. Also, the new insurer has to give the waiting period credit for pre-existing conditions that were gained with the old policy.

It is crucial to check all limits and sub-limits of the new policy you are porting to, as there may be a cap on the claim. You should also check for any restrictions on the age or disease in the new policy, besides taking a look at the new insurer’s network of hospitals. During an emergency, a large pool of good hospitals often comes in handy. It is important to have a holistic approach and understanding before arriving at any decision. “Apart from the premium amount, you must consider factors like the company’s portfolio, service track record, and add-on benefits before opting for portability,” concludes Bhabtosh Mishra, Director Underwriting, Products and Claims, Max Bupa Health Insurance.

nirmala@outlookindia.com