How to change insurer using insurance portability

If you are not satisfied with the services of your existing medical insurance provider, you can move to a different insurer. Health insurance companies often require a person who has been newly insured to undergo a waiting period before allowing pre-existing health conditions to be covered under the policy.

However, when a policy is transferred, the waiting period completed with the existing insurer can also be transferred. If the new insurer has a longer waiting period, the policyholder will need to wait only for the additional time period with the new insurer after the plan is transferred. The continuity in policy will also be given on time bound exclusions. Many health policies exclude certain surgeries for a fixed period, and with portability, continuity would be considered for these conditions also.

Timing

IRDA has specified that the new insurance provider has to be approached at least 45 days prior to expiry date of the policy. You may have to begin the transfer process at least 2-3 months before your existing policy expires.

Process

You have to fill up the Irda prescribed portability form which is available on its website (www.irda.gov.in) as well as the proposal form once you decide to switch insurers.

Supporting documents

- Previous policies - Claim experience - Age proof - Positive declarations, if any (discharge card, investigation reports and clinical condition)

Confirmation

On receiving the application, the new insurance provider shall ask for the required information from your old insurance provider. If the new insurer is satisfied, it shall inform you of its decision in 15 days.

Points to note

- Depending on your new insurance provider, you can also increase your sum insured while switching to it.

- You can go for portability only at the time of renewal and not during the term of the policy.

- Cover sub-limits (limits on hospital room rents) or policy features (maternity coverage) of the new policy may differ from that of your old insurer as this is not subject to portability.

Edelweiss Tokio Life Insurance launched two term plans

Recent entrant in the life insurance Edelweiss Tokio Life today launched two cost effective term plans, Life-Protection and Income Replacement.

"A sudden unfortunate death of the bread winner of the family could jeopardise dreams and bring about a drastic change in the lifestyle of a family. Our protection and income replacement plans address this core need and provide a cost friendly solution of complete protection of your aspirations for your loved ones," Edelweiss Tokio Life Insurance Chief Executive Deepak Mittal said in a statement here.

The Edelweiss Tokio Life-Protection is a pure term plan that provides lump sum payment to the nominee in case of the unfortunate event of the death of the life assured.

The Income Replacement ensures that on death of the life assured the family still continues to receive regular monthly income till the end of the policy term.

The protection scheme offers protection for a maximum period of 30 years, and depending on the age cover it may be extended up to 70 years. The company is also promoting a healthy lifestyle and has lower rates for non-tobacco users.

The income replacement scheme offers inflation mitigating benefit by way of fixed 5 per cent increase in monthly income each year. It also rewards the non-consumption of tobacco.

The minimum sum assured for the protection plan is Rs 15 lakh, while the minimum monthly benefit for the income replacement plan is 15,000.

Both the products allow an entry age starting from 18 years up to 60 years with the maturity from 28 to 70 years.

Edelweiss Tokio Life is a joint venture between diversified financial services firm Edelweiss Capital and Tokio Marine Holdings, a global leader with over 130 years of experience in the insurance business.

Change in single-pay plans on cards: Irda

Single premium product, which has caught the fancy of the life insurance industry after the change in regulations around unit-linked insurance products, may be in for some reform.

"We need to think about the need of insurance as long-term business. Focus had shifted to three-pay or four-pay products and, even worse, to single-pay products. Industry based on single premium is not good," said Irda chairman J Hari Narayan.

"We need to re-emphasize insurance as a long-term business. The marketing and selling of products (like single premium) have de-emphasized the long-term nature of the business."

Single-pay products are insurance policies where policyholders need to pay premium only once while he or she is covered for the term of the policy. In 2011-12 so far, the total single premium, including group and individual, has gone up by 46% compared to 49% in 2010-11.

Pointing to the decline in business, Hari Narayan said that this is not a function of regulatory changes but because insurance companies have not build the kind of trust required. Internationally, however, he said that de-growth has been even sharper.

He said that 2012 is going to be worse than 2011. "Therefore, 2013 is going to be better. The best way to go forward is to start from absolute bottom. Future is going to be better than what the immediate past has been," he said.

The life insurance industry has seen a 17% fall in new business premium income in April-December 2011 compared with the same period last year.

He noted that there are difficulties in pension products. Such as lack of certain long-term instruments to hedge. Though insurance companies are allowed to invest in interest rate derivatives, it is only for a short period. Hari Narayan said that there are indications that we would like to develop derivatives market on debt front like RBI has come out with swap in corporate debt.

A high-level committee of regulators has suggested that all long-term products should be given tax incentives in order to underpin and strengthen the industry, he said.

New business income for life insurance companies down 17%: IRDA

Sales of life insurance policies continue to decline even during the tax-saving season. According to the data released by the Insurance Regulatory and Development Authority, or Irda, new business premium income for life insurance has fallen by 17% to Rs 71,953 crore during April-December, 2011, from Rs 86,698 crore a year ago.

While private sector saw a drop of 20.34% in income from sales of new policies during the first nine months, state-run Life Insurance Corporation registered a 15.86% fall. Large private insurers like SBI Life and ICICI Prudential witnessed a drop of 19.82% and 33%, respectively.

Industry experts blame non-availability of pension products, curbs on guaranteed products and delay in product approvals for the drop in income from insurance. The only private sector insurer to register an increase in income was MetLife.

The company recently sold its stake to the second-largest public sector lender Punjab National Bank. It has done a business of Rs 150 crore through the bank. The company has applied to the insurance regulator for approval of the deal. The regulator is reviewing the proposal and is likely to announce the deal in a month.

The volatility in the market has also acted as a deterrent for the sales of policies, especially Ulips.

LIC launched Jeevan Ankur child plan

The country's largest insurer, Life Insurance Corporation (LIC), today launched a new product in the child plan space that aims to meet educational and other needs of children.

LIC Jeevan Ankur is specially designed to meet the educational and other needs of the child, LIC said.

It is the most suitable insurance plan for parents who have a child aged up to 17 years, for this plan ensures that their responsibilities are met under all circumstances, without depending on anyone else, it said.

The plan covers the risk on the life of the parent and the named child shall be the nominee under the plan, it said.

In the event of the unfortunate death of the parent during the policy term, the basic sum assured is payable immediately on in-force policies, LIC Senior Divisional Manager R K Jha said.

In addition, an income benefit equal to 10 per cent of the basic sum assured is payable to the nominee child from the policy anniversary coinciding with or immediately after the death till the end of policy term, it said.

This will ensure the continuity of the child's education without any additional burden, it said.

Not only this, it said, the nominee child will also get a lumpsum amount equal to the basic sum assured on the predefined maturity date of the policy along with loyalty additions, if any, to support higher education or a start in professional life.

Insurance companies tie up with banks to lure customers

One can't have the cake and eat it too, but public sector banks can do it, thanks to their solid brick and mortar business model and decades-long sticky customers who can be a perennial source of revenue for insurers.

Max New York Life, Sumitomo and Birla Sun Life are queuing up at the doors of Bangalore-based Syndicate Bank, offering a stake in their insurance ventures, and also hundreds of crores to own that stake, turning known business principles on their head.

Max New York is offering a 4% stake in the company and Rs 400 crore to Syndicate Bank to become a minority stakeholder that can open the doors for selling life cover to lakhs of the uninsured middle class in more than its 2,500 branches, said two people familiar with the offer. Sumitomo is dangling the carrot of Syndicate Bank not having to invest capital for seven years but keeping its stake stable, while the Japanese company keeps investing funds to grow the business, said people requesting anonymity.

"Whenever there is demand in the system and supply is limited, there is acute competition," said Rajesh Sud MD and CEO, Max New York Life. "The need for low-cost distribution has increased in the new regime."

Budding private insurers, who battle a Goliath called Life Insurance Corporation with an army of 15 lakh agents, are leaving no stone unturned to tap the vast emerging market where incomes are rising.

One popular way to reach out to new customers without investing on overheads is to tie up with banks which have lakhs of customers, who could be lured to buy insurance as well. HDFC Life, ICICI Prudential and SBI Life are among insurers who have effectively used the bank channel to grow.

"The key issue is that insurance companies cannot sustain without banks," said Ravi Trivedy, partner KPMG. "Banks bring with them ready infrastructure and customer base. This is the sweetest deal any bank can think of," he said.

The life insurance industry which was growing at 30-35% on an annual basis is struggling after regulatory changes slowed the sale of the so called Ulips. For private insurers, nearly a third of their new premium income came from the so called bancassurance where banks sell insurance policies to individuals.

If a deal happens between Syndicate Bank and any one of the insurers, it will be the second such instance where banks are paid to take a stake in an insurer, said the sources.

In September 2011, MetLife India, the Indian unit of the US insurance firm, paid around Rs 350 crore to PNB to own a 30% stake in the company, making the state-run lender a JV partner.

Age barrier for health policies may go

Regulator as well as insurers keen on such policies, but pricing may be a trouble.

The Insurance Regulatory and Development Authority (Irda) is looking to do away with the age limit for purchasing insurance policies. Even as the proposal is still at a nascent stage, the regulator is in the process of clearing products targeted at senior citizens.

By allowing policyholders to renew policies at any age, Irda has already taken the first step to make health policies ‘age free’. It had recently made it mandatory for policies to have a “life long” renewal clause. This means once a health insurance policy is issued, insurers would be obliged to continue renewing such policies during the policyholder’s lifetime. However, the entry age barrier remains.

Meanwhile, some general insurance companies have already started applying for an ‘age-free’ policy. For instance, Apollo Munich Insurance applied for such a policy a few months back and is awaiting approval.

L&T Insurance, on the other hand, has an interesting variant which permits lifetime renewal but mandates a co-payer after the age of 70. Even ICICI Lombard is looking at a lifetime renewal policy. “We will be coming out with a plan where policies issued once could be renewed throughout the lifetime of the policyholder. However, the final entry age for our health policies is 65 years,” said a senior official at ICICI Lombard GIC.

Other insurance companies are expected to follow suit or add necessary clauses in their existing portfolio of products. At present, the entry age for most existing health insurance plans is capped at 65 years.

When contacted, Irda chairman J Hari Narayan said there had been discussions about removing the entry age gap. “However, there are no concrete plans as of now,” he said.

But, the regulator is looking into these products carefully. Senior officials at Apollo Munich said though the first application was made a while back, Irda sent it back with queries. They have reapplied for the product and are awaiting a response.

For most insurers, pricing remains the main issue with policies. For a Rs 5-lakh cover for someone aged 75-80 years, the premium should not be more than 15 per cent of the cover. “But, since the loss ratio beyond 80 years is high and most people of that age suffer from some illness, the real challenge is underwriting such a product,” said a senior official at Apollo Munich Health Insurance.

As a result, the pricing for a Rs 5-lakh policy (for persons over 70 years) is expected to be around Rs 60,000-80,000 annually. In addition, there would be certain conditions, subject to the health of the individual. “For example, some existing chronic diseases might be excluded from the cover,” the official added. Another official of a standalone health insurance company said they would be filing a product without any entry age cap with the regulator soon, even as the premiums would be slightly higher.

According to industry estimates, the health insurance business constitutes more than 25 per cent of the general insurance industry. Over the last one year, premiums have risen 25 per cent. During April-September this financial year, the health insurance premium collection rose 21.3 per cent to Rs 6,721.53 crore from Rs 5,540.34 crore.

Don't forget a personal accident cover

Individuals should have a standalone policy, over and above any rider taken on life insurance.

When we take the newspaper in the morning, we see at least two pieces on road accidents, everyday. Apart from the mental trauma, such incidents can lead to terrible financial trauma. Therefore, one should be prepared to compensate such losses, if they arise as medical and hospital costs are very high. And most individuals do not have a plan if faced with this trauma.

A study suggested premiums from personal accident covers account for less than three per cent of the total market premiums of Rs 30,000 crore as on 2008-09. This, when it is a must for everyone and is available at affordable premium. One reason for individuals not buying this cover is that it neither offers any investment opportunities nor helps save taxes.

Individuals mostly cover the risk of death by buying life insurance. However, the same is not true when it comes to covering the risk of an accident. Such individuals may face the risk of getting disabled and losing their capability to be actively employed. Not only would the recurring medical costs keep increasing, the loss of income earning opportunity would also loom high.

To illustrate, a 35-year old individual, earning approximately Rs 15 lakh per annum, today on an average should have a life insurance cover worth anywhere between Rs 50 lakh to Rs 1 crore. And, it is also important to cover the risk of loss in income due to an accident. Considering a life expectancy of another 25 years after meeting with an accident at the said age, the individual would require approximately Rs 90 lakh to provide for a monthly expense of Rs 30,000. Further, considering increased medical expenditure of Rs 15,000 a month, the corpus required would add up to another Rs 45 lakh. No support would be received from the life insurance covers in such an eventuality and the gap will need to self-funded.

What is covered?
These policies cover the risk of death / disability arising due to an accident.

Accident, for this purpose, means unforeseen and unexpected events caused by external, violent, visible means and that led to physical bodily injury. As a corollary, bodily injury or death arising solely and directly as a result of such events are settled under this policy.

How much cover should be bought?
In case of life insurance contracts, the underwriters determine the maximum insurance cover that can be granted to an individual. In case of personal accident policies, the extent of coverage is based on the current level of income of the policy proposer (one who has proposed to buy the policy). Across companies, the maximum coverage varies anywhere between 6-10 times of the annual income of an individual, as per the income tax returns records.

Individuals, proposing to take a personal accident cover, should also note that this policy is an annual renewable policy. And at every renewal supporting income documents need to be submitted to justify the cover taken. If required, you could increase your cover as well at renewal, provided your income supports it and you can pay a higher premium.

It is also preferable that individuals have a standalone cover for personal accident over and above a rider that he/she might have added to his/her life insurance policies.

From the insurance company’s perspective, as long as the bodily injury or the death is a direct result of an accident, fitting well as per the definition, the claim procedures are also quite simple. With added benefits, now possible, the traditional personal accident cover has come a long way and definitely merits a place in one’s insurance portfolio.

Benefits under the policy

Death due to an accident

Permanent and/or total disability in an accident

Loss of both limbs / one hand and one foot / loss of limbs and eyes / complete loss of eyesight, speech

Any permanent but partial disability (subject to limits)

Temporary and total disablement - Fixed sum will be paid (based on the sum assured), weekly for a fixed tenure

Additional benefits: With a number of private players entering the insurance space, a lot of innovative benefits are now offered under this cover along with the traditional cover.

Here are some of the extra benefits that are provided by many general insurers -

Education benefit: The policy will bear the education cost of maximum two dependent children, up to the age of 23, subject to limits.

Employment benefits: The policy provides financial compensation up to a specified limit in the event of loss of employment of the insured following an accident resulting in loss of limbs/eyes or permanent total disability.

Ambulance benefits: If the insured has used an ambulance to reach a hospital, the policy will pay the necessary charges up to a specified limit.

Funeral expenses: In case of accidental death, funeral expenses can also be covered

Hospital / Daily cash benefits: The policy provides payment of a fixed allowance on a daily basis on hospitalisation in India for accidental bodily injury, if the hospitalisation exceeds a specified number of days. The rate of allowance and the minimum period of hospitalisation qualifying for payment of this allowance would depend on the plan.

Other benefits: The policy also covers expenses for transportation of dead body, reimbursement of medical expenses incurred for treatment following an accident, cost of supporting items used like crutches, wheelchair, artificial limbs are also reimbursed.

HDFC Life Launched Click2Protect online term insurance plan

Private insurer HDFC Life said it has augmented its online channel with the launched of 'HDFC Life Clsick2Protect' - an online term insurance plan.

The plan is aimed for those who seek insurance cover at nominal premiums against their liabilities, HDFC Life said in a release issued here.

"HDFC Life Click2Protect is available in more than 750 cities across the country, the highest reach of an online term insurance plan in the industry. The objective of launching HDFC Life Click2Protect is to cater to the needs of informed customers based not only in metros, but in Tier 2 and 3 cities in the country," HDFC Life Executive Vice President and Head, Marketing and Direct Channels, Sanjay Tripathy said.

This plan is aimed at an informed customer who understands their liabilities; the extent of cover needed and is fairly conversant with online purchase practices. Click2Protect offers the convenience of experiencing a simple, fast, convenient, transparent, and cost-effective way of buying a life insurance plan, Tripathy added.

Apart from HDFC Life Click2Protect, HDFC Life also offers other online products such as HDFC SL Young Star Super II and HDFC SL Crest.

HDFC Life is a joint venture between Housing Development Finance Corporation Limited (HDFC) and Standard Life plc, the leading provider of financial services in the United Kingdom.

Life insurers increase in group insurance sales

Life insurance companies have seen an increase in group insurance business, while they continue to report negative growth in individual insurance category in last eight months.

Group insurance consists of life insurance bought by companies for their employees. So, while individuals are deferring buying insurance, companies have not reduced investment in insurance for their employees.

During April-November 2011, premium collected from group insurance grew by 16 per cent to Rs 29,466.01 crore, from Rs 25386.66 crore in the same period a year ago.

Both, Life Insurance Corporation (LIC) and private insurance companies, reported growth in group insurance sales. During April-November 2011, LIC premium collected from group insurance increased by 11.9 per cent to Rs 24,567 crore, from Rs 21, 631 crore in the previous year. Whereas, new business premium for private insurers from group insurance sales jumped by over 30 per cent to Rs 4,898 crore, from Rs 3,754 crore in the previous year.

“Normally, group single premium policies consist of group gratuity and super annuity (pension) plans. This year, there was an overall trend of positive appraisals and salary hikes that pushed the employer contribution to such policies. Considering the same trend to follow next year, we expect this segment to grow consistently,” said GV Nageswara Rao, chief executive officer, IDBI Federal Life Insurance Company.

Business from sale of insurance to individuals saw declined by over 36 per cent to Rs 32,962 crore, from Rs 51,603 crore during same period in the previous year.

However, despite growth potential, some of the companies like Aegon Religare Life Insurance, Bharti Axa Life Insurance, DLF Pramerica Life Insurance and Edelweiss Tokio Life Insurance, have stayed away from group insurance business or have very low portfolio. These companies are also non-bank funded insurance joint venture companies.

P Nandagopal, chief executive officer, IndiaFirst Life Insurance Company said, “Bancassurance channel (banks selling insurance products) helps insurance companies to cater to a vast number of corporate clients who are in need of group regular premium policies such as term insurance policies. Group insurance business has a high potential of growth if the insurer provides good and efficient service to their customers.”

Companies that have reported significant growth in their group insurance portfolio include ICICI Prudential Life Insurance, Reliance Life Insurance, Canara HSBC OBC Life Insurance and IndiaFirst Life Insurance.

Reforms marked 2011 for insurance sector

After a long wait and prolonged consultation with stakeholders, the Insurance Regulatory and Development Authority (Irda) finally came out with guidelines on initial public offers (IPOs) during the year. This development will see private insurers hitting capital market in the coming years.

The IPO notification came in December, enabling private sector life insurers, such as HDFC Standard Life, ICICI Prudential and SBI Life, to tap the capital market for funds.

According to the guidelines issued by the Irda, life insurance companies which have been in business for over 10 years would be eligible to come out with IPOs. Besides, the promoters of insurance companies would be permitted to offload their stake in the company. However, the size of the public issue by life insurance companies will be decided by Irda.

The IPO guidelines for the sector had been hanging fire for three years. According to Ernst & Young partner Ashvin Parekh, the first major change in the sector was a complete change in the product composition. “We almost saw the death of Ulip products and an emergence of traditional products in the life insurance business. Life insurance had to be sold by insurers with assured returns. The Life Insurance Industry is groping to find products which would sell in the market place,” he said.

The direction of the regulations may not perhaps be substantially arguable but what was certainly hurting is the speed with which the changes were being made, he added.

Besides, the regulator allowed health insurance portability, doing away with the third party insurance pool.

Health insurance portability is another long-pending reform fructified during the year. If not satisfied with the services of the existing health insurer, you can change the company without losing policy benefits. The policy will also help people shifting from one part of the country to another. For want of such a facility they were put to disadvantage due to lack of their insurers' offices at new locations.

Also, in case of change of jobs, policy holders lose health insurance cover as they could not change their insurer. The new facility will also help those policy holders who stick to one insurer throughout life for fear of losing the cover for pre-existing diseases.

"Though health insurance portability saw slow take off in 2011, we expect more impact in 2012," Max Bupa Health Insurance CFO Neeraj Basur.

"We anticipate customer centricity to take center stage in 2012. This will reflect in services offered by various health insurance players, be it claim servicing, TAT or the overall relationship with the insurer," Basur said.

There was cheer for general insurance companies as Irda decided to scrap the common pool (Indian Motor Third Party Pool System) used by insurers to settle accident claims, from April 1. The dismantling is being done as part of reforms and the scrapping of the fund pool system will lead to a rise in motor insurance premium. The pool was formed in early 2007 to ensure availability of cover for commercial vehicles that had been refused third-party insurance.

Third-party insurance cover protects the vehicle owner from any financial liability in case of damage to life or property in an accident to the third person. Major public and private sector insurance players have been demanding abolition of the third party insurance pool, saying that the arrangement for sharing claims was denting their profits.

Another prominent highlight was issuance of norms for bancassurance. The draft guidelines have suggested that banks continue to tie up with one insurance company in the life, non-life and health insurance spaces but only in a specified number of states. Under this, insurance companies will be allowed to partner with different banks and NBFCs in different states for selling their products.

However, according to the draft norms, banks and non-banking finance companies (NBFCs) will not be allowed to sell products of competing insurers in a particular state.