Beware of traps when porting your health insurance policy

As your health insurance policy's renewal date approaches, you may receive tempting offers to switch to a new insurer with lower premiums. While the allure of reduced premium rates is strong, remember that cost alone should not drive your decision. Hidden pitfalls can make switching your policy a regrettable choice.

"Two major issues arise when porting a policy. First, agents may bypass the porting option in paperwork to issue a new policy and earn a commission. Second, they might port your policy but fail to disclose your previous claims and illness history to new insurer. This omission is critical because only when previous claims are declared, the new insurer needs to obtain your claim history from the old insurer. Agents avoid this to ensure the new insurer underwrites the policy and they secure their commission. This misuse can be particularly damaging for older individuals, who may lose continuity benefits, face claim denials, and end up underinsured," warns Shailesh Kumar, Co-Founder and Insurance Head at Insurance Samadhan, a grievance redressal platform.

According to the Insurance Regulatory Development Authority of India (IRDAI), after the expiry of the five-year moratorium period, health insurance claims cannot be contested except for proven fraud and permanent exclusions specified in the policy contract. However, this rule can be tricky when porting a policy, as you need to declare your health condition again at the time of porting.

If a claim is needed and the new insurer discovers undisclosed health conditions at the time of porting, they can reject the claim, regardless of how long your policy has been in force, explains Kumar.  Non-disclosure at the time of porting can also lead to policy cancellation, affecting your future insurability. IRDAI states insurers should check claim history, but many port policies without proper underwriting.

S.K. Sethi from RIA Insurance Brokers highlights that policyholders’ data is often bought and sold to target individuals with porting offers as their renewal date approaches. "Policyholders are enticed by offering low premium but in many cases, they hike the premium from second year onwards. Moreover, it’s essential to scrutinize the details of the new policy, as the devil is in the details,” he adds.

Porting for better services, better coverage or reduction in premium is common, but ensure the new policy meets your healthcare needs. Sometimes, lower premiums may come with reduced coverage or longer waiting periods. Be cautious and make informed decisions to avoid regrettable pitfalls. For instance, both old and new policies may offer treatment abroad, but the new policy might have conditions like requiring diagnosis to occur in India. Such small changes in policy wording can lead to reduced premiums.

Siddharth Singhal, Head of Health Insurance at PolicyBazaar.com, an insurance aggregator, points out that modern insurance plans are modular, which allows insurers to offer lower premiums. He advises carefully comparing the features of your old and new policies before making a decision.

“Awareness about porting policies needs to be increased. You should check the claim ratio of the company you are porting to. Proper porting requires giving complete details of your previous policy, illness history, and claim history. Disclosures at the time of taking the policy are not enough, you need to make fresh disclosures at the time of porting,” says Kumar.