Most of the policy holders would not instantly utilize portability introduced by IRDA as it involves a tedious process and gives less benefit in return
Migration of clients from one insurer to another will be slow as the new portability rules do not benefit the policyholders in a big way. One of the major issues is that that the policyholders have to shell out higher premium for lower cover.
The other issue is no-claim bonus (NCB) where the net effect may deplete the bonus. The new insurer can port the sum insured (SI) on an existing policy inclusive of the NCB that has accrued on it. However, the premium charged will be on the higher sum which is inclusive of the bonus.
The IRDA circular on procedural clarifications explains it: suppose a person with insurer A has a sum insured of Rs 2 lakh and cumulative bonus of Rs 50,000, when he shifts to insurer B, his sum insured will automatically beRs 2.5 lakh. However, if insurer B has no product offering of Rs 2.5 lakh as sum insured, he will have to offer the nearest higher slab of, i.e. Rs 3 lakh. While the premium will be charged on Rs 3 lakh, the portability benefits will be limited to Rs 2.5 lakh.
“We feel initially policy holders will take time for migrating. People would take time to understand the process,” said an official of Bajaj Allianz General Insurance.
IRDA has also told the insurance players to share their data on the website every month so that the new insurer can easily go through policy holder’s history. The policyholder has to initiate the process for portability 45 days before it is due for renewal by filling a proposal form with the new insurer and the portability request form. In case he fails to do so, it will be the discretion of the new insurer to accept or reject the application. The new insurer will then have to write to the policyholder's earlier insurer within seven days.
Both the existing and the new insurer will have to exchange the relevant medical and claim history of the applicant within 14 working days. In case the new company wants to reject the application, he will have to inform the policy holder within 15 days. Otherwise, it will be considered as accepted.
The guidelines address group to retail (individual) policy porting. It also allows porting to a retail policy of the same insurer in the first step. After a one-year wait, the policyholder can port to another insurer. It's a two-step process that will be far from easy.
The other key issue is that that the policyholders are not allowed to migrate from life to non- life. A few officials have a difference in opinion and feel that portability will force the insurance players to improve their customer service. “Now the customers have a chance to shift from one insurer to another if they are not satisfied with their existing player,” said K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance.