Health Insurance Portability

A NEXUS between insurance companies, their distributors and agents, seems to have torpedoed insurance regulator's move to allow portability of health insurance policies to ensure competition, quality of service and to rein in premiums.

While insurance agents do not encourage portability for lack of incentives, it's fine with insurers who need not face competition.

Lack of awareness has only come to advantage of insurers, their agents and distributors.

Though not many speak about this vicious ring in which policyholders are caught in, brokers' community has been forthright in their demand seeking commission on portability.

At present, neither agents nor brokers are allowed any commission on new health insurance cases that are ported. Insurance Brokers' Association of India (IBAI) has approached the regulator on this issue and we expect some conclusion very soon.

The commission earned by brokers on new health insurance business is around 17.5 per cent while individual agents get somewhere around 15 per cent. On ported policies, they may not be entitled for commission but from the second year, they do get the agent's or broker's commission.

Traditionally, agency channel generates highest business for insurance companies. Brokers and corporate agents contribute a substantive chunk while the direct sales account for about 10-20 per cent.

So, the companies also seem to have not consciously pushed for insurance portability as in the case of Ulips that virtually vanished from the market. Without offering any explanation for very low level of portability, insurance companies do put the blame on their agents for not processing porting cases.

Intermediaries like brokers, individuals and corporate agents play a key role in making health insurance portability a success. As agents or brokers do not get any commission on the ported health insurance business for first year, the motivation is lacking. Insurance companies are also required to be more proactive in their approach to educate customers about porting facility.

However, there are hardly any signs of this happening anytime soon. Internationally, health insurance portability is very popular and in case of dissatisfaction with services of health insurance providers, policyholders can easily switch from one company to another unlike in India where the unholy nexus of insurers, intermediaries and agents has made it next to impossible.

Also, in countries like the UK and the US, customers are covered under group scheme as their employees pay for health insurance.

Health insurance portability was allowed beginning October 1, 2011 wherein a customer can move from one insurance company to another along with accrued benefits such as no claim bonus and waiting period for pre-existing diseases.

As an industry, the number of porting requests have been low -for individual insurance companies the numbers are even lower. For example, Bajaj Allianz General Insurance processed around 2,000 successful porting requests while Max Bupa Health Insurance Company accepted around 75 per cent of total porting requests. Insurance companies are allowed to reject new portability cases depending on risk profile but they have to give a valid reason for it.