Health insurance portability

Health Insurance Portability allows you to shift from one health insurance provider to another, without having to lose any of the benefits that your current health insurer provides.

What are the reasons for its introduction into the system?

The main reason why the Insurance Regulatory and Development Authority (IRDA) decided to allow health insurance portability is to improve service and delivery in the insurance industry. Insurance Regulatory and Development Authority in its new regulation claims "Persons shifting from one region to other regions are many times put to disadvantage due to lack of insurers' office providing necessary policy servicing at the new location.

Further, employees shifting from one organization to another organization many times lose health insurance cover due to lack of portability of the health insurance policies. It is essential to protect the policyholders against discontinuity and consequential loss of Pre Existing Diseases (PED) cover by making the health insurance plans portable across the insurance companies." The portability feature will allow the policyholder to shift from one insurer to the other without the fear of losing the cover of PED

What are its enhanced features?

Health Insurance Portability is going to be implemented from 1st July 2011. The most important feature is its portability, the feature that will allow switching to other companies without incurring losses. This will be beneficial for people who are not satisfied with their health policies or the services being provided. It will also be helpful:

a) For people with pre-existing illnesses.

b) For those who are eligible for bonuses and are compelled to continue with their existing policy providers due to the fear of losing benefits.

c) For someone moving to another city or state, where their present policy provider company does not work.

The main features of portability are:

1. The credit from the waiting period already completed can be carried forward to the new insurer.

2. When you switch from one insurer to another, the new insurer will provide some cover, at least up to the cumulated sum assured in the old insurance policy

3. The timelines for requesting for portability is available in the IRDA (Protection of Policyholders' Interests) Regulations and guidelines.

What are the benefits from the consumer view point - in terms of convenience, features and other aspects?

Portability helps to carry forward the waiting period of pre-existing diseases to the new plan. For instance, let us assume that the new policy covers a pre-existing disease only after three years but you have been in possession of another policy for two years. In such a case, portability will ensure that you have to wait just one year for the claim while earlier you would have to wait for another three.

There is a waiting period of 30 days when a new policy is bought and diseases incurred in those 30 days are not covered. Under the new Insurance Regulatory and Development Authority policy, the waiting period will be waived off.

What does one need to watch out for?

The following are some of the conditions for which you should consider switching your policy:

a) Maximum renewability age: Certain policies do not let you renew them after you reach a certain age. In that case it is better to change to a policy with the maximum possible renewable age.

b) Exclusions: There are certain exclusions in each policy and if the same is covered under some other policy then you should switch.

Insurers are still not clear about a few things with regard to portability. It is difficult to transfer credits from some specific policies to another like from a benefit policy to an indemnity policy.

Another point which is being discussed is that it will also be difficult to transfer credits from group insurance policies to individual policies.

What is the impact of this new intro by IRDA on the overall industry?

This reform is expected to bring about a positive change in the insurance industry as a whole. The industry players have welcomed this development. Health Insurance Portability will bring about a higher level of competition within the health insurers in order to retain the existing customers. This will ensure there is constant innovation and improvement in the efficiency standards and services.

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Insurers to lose 3.5k cr on motor claims

The non-life insurance industry stands to lose almost three times the profit it made last year by way of additional provisions for motor third party insurance claims. The government has said that the non-life industry runs the risk of insolvency if motor insurance premiums are increased.

"The insurance companies would incur a loss of approximately Rs 2,500-3,500 crore in the current year (2010-11) on account of this (motor insurance) business of which a substantial portion will be borne by the public sector insurance companies," minister of state for finance Namo Narain Meena said in a written reply to the Lok Sabha on Friday. Last year, profits made by the non-life industry had managed to touch Rs 1204.51 crore after growing three-fold over the previous year.

The non-life industry is suddenly staring at a Rs 3500cr hit on its profit and loss statement because it now turns out that companies had under provisioned for third-party claims by grossly underestimating the compensation awarded by courts.

In January, the Insurance Regulatory and Development Authority (IRDA) had proposed a review of motor insurance premium rates for third party liability cover. If the draft is implemented, it would result in a 10 per cent increase in premium for private cars and two wheelers and up to 80 per cent for goods carriers.

Insurance cos working on 'drive less pay less' policies

Drive less, pay less. That's going to be the selling point of at least three motor insurance companies . Modelled on the popular model followed in Italy, this policy lets you pay the premium according to the miles you drive. If you are not a frequent user of your vehicles, you get to pay less premium when your motor insurance policy comes up for renewal.

Bajaj Allianz, ICICI Lombard and Bharti AXA General Insurance are working on versions of the so-called pay-as-you-drive policies. ICICI Lombard has, in fact, initiated a pilot project under which it has installed tracking equipment on a set of vehicles - a mix of owner-driven and commercial.

The equipment are currently tracking data like distance traversed, condition of roads used, driving time - like day or night. "We started the pilot project some six months ago and are now collecting data. Once the volume of the data reaches a critical level we will engage our actuaries - persons who do all the mathematics while designing an insurance product, to design a 'pay-as-you-drive' policy," said Amitabh Jain, head motor customer services at ICICI Lombard.

Allianz owns 20% in Berkshire India, documents show

German insurance company Allianz SE, which owns 26% of Bajaj Allianz, is also a minority stakeholder in Berkshire India, according to the company’s filings with the Registrar of Companies.

Allianz SE holds 45 lakh shares, or 20% of the share capital of Berkshire India.

The remainder is owned by BHG Structured Settlements, a Berkshire Hathaway company.

Kamesh Goyal, chief executive officer of Allianz Asia Pacific, was one of the first directors of Berkshire India, but had stepped down from the board before it became a corporate agent. Another director was Debadatta Sengupta who too is no longer with the board, said a Berkshire India spokesperson. Among the other directors were Ajit Jain from Berkshire Hathaway’s reinsurance business, and Forrest N Krutter and Kara Raiguel, also from the Berkshire Hathaway Group.

The stock of Bajaj Finserv, which holds 74% stake in Bajaj Allianz, has risen more than 20% since its tie-up with Berkshire was announced.

Berkshire India declined to comment on Allianz’s stake in the company.

The memorandum of association for Berkshire India suggests the company would primarily act as distributors or advisors in the insurance segment. The main objects of the company on incorporation have been listed as ‘soliciting or procuring insurance business’, acting as an ‘insurance agent, corporate agent and/or insurance broker’, acting as ‘assessors, values and surveyors,’ or ‘advisors and consultants’.

Berkshire India had on Wednesday issued a statement saying it would act as a corporate agent for Bajaj Allianz General Insurance.

The announcement followed months of speculation about Warren Buffett picking up stake in Bajaj Finserv, which the company has denied.



Life insurance business nose-dives in crucial month of January

January, February and March are crucial months for the life insurance industry. The new business premium collection for January was 20% lower than December 2010 for individual single premium policies, while it was 10% lower for individual non-single premium policies. It is surprising to note that new business premium (NBP) for January was 20% lower than the NBP of December 2010 for individual single premium policies. NBP for January was 10% lower than the NBP of December last year for individual non-single premium policies.

Insurance companies are coming out with new traditional plans due to business shifting away from ULIPs (Unit-linked Insurance Plans). However, this does not explain why NBP has dropped substantially. Even the behemoth Life Insurance Corporation (LIC) of India was not spared.

PNB will buy stake or plan tie-up for insurance foray

Punjab National Bank will buy equity stake and enter into a corporate agency tie-up with one of the 10 life insurers it has shortlisted, according to a release issued by the state-run lender.

The firms are Aegon Religare Life, Aviva India, Bharti AXA Life, Birla Sun Life, DLF Pramerica Life, Future Generali Life, HDFC Life, Max New York Life, MetLife and Reliance Life.

According to chairman KR Kamath, PNB, which is keen to buy stakes in life as well as non-life firms, has received applications from 42 insurers. At present, PNB has a referral arrangement with the Life Insurance Corporation of India (LIC) for selling insurance products. It's an arrangement where banks or finance firms receive commissions for selling insurance products.

PNB had earlier joined hands with Vijaya Bank for a life foray but the proposal was later dropped. Another PSU lender, Syndicate Bank , has hired Ernst & Young to help choose a partner.

Public sector banks generally prefer three-way JVs like India First where Bank of Baroda , Andhra Bank and Legal & General UK hold shares.

After recent regulatory changes, insurers are under pressure to bring down distribution cost. As far as banks are concerned, the central bank has certain reluctance in allowing small and mid-sized banks buying significant stakes in insurance firms due to their huge capital requirement.

Bajaj Finserv spurts by 20% after Berkshire Hathaway deal

Shares of Bajaj Finserv shot up by 20 per cent on the BSE on Thursday following reports that Warren Buffett's Berkshire Hathaway has struck a deal with the company's unit Bajaj Allianz General Insurance.

US-based Berkshire Hathaway, a diversified holding company with subsidiaries that include GEICO, National Indemnity, on Wednesday announced its plans to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance. Berkshire India, a majority-owned unit of Berkshire Hathaway Inc has been incorporated to sell and distribute general insurance products in India through their online distribution portal — www.berkshireinsurance.com. The company's stock surged by 20 per cent to touch an upper circuit of Rs. 527.45 on the BSE on the back of heavy buying.

"Berkshire India will sell insurance directly to the consumer by utilising the internet portal and tele-marketing. Initially, the focus will be on motor insurance, but the company will continuously update its business model to meet the needs of the fast-evolving Indian insurance sector," it said.