Mistakes people make when porting a health insurance policy

Kerala-based Ajit Kumar (53) did the same despite having no issues with his existing insurer. A call from the online insurance broking platform Policybazaar nudged him to port the policy. 

“I had HDFC Ergo Optima Secure for the last 10-11 years, during which I never made a claim, but my premium had increased significantly. The Policybazaar customer care representative told me I can port to a newer product with better features,” Kumar said. 

He regretted his decision. Kumar’s HDFC Ergo policy had a base sum insured of ₹10 lakh and a no-claim bonus of another ₹10 lakh. The Policybazaar customer care told him that his no-claim bonus, waiting period, and other benefits would continue under the new policy, Niva Bupa ReAssure. “It did not happen. I lost my no-claim bonus. I paid three premiums in one go. I also bought a super top-up plan from Policybazaar, but the post-policy service experience was pathetic,” Kumar added.

Policybazaar said customer trust and transparency were its top priorities. “This incident does not reflect the standards we uphold or the quality of service we are committed to providing. We took prompt corrective action in this case and have been assisting Ajit.” 

“Portability processes have now become more efficient with the introduction of Insurance Information Bureau (IIB) data, allowing insurers to fetch customers’ previous policy details. Additionally, there has been a lot of digitisation in the last couple of years, making the port process seamless. We continue to ensure that we consistently meet the expectations and trust of our valued customers,” it added. 

So, what went wrong with Kumar’s policy? 

He was unaware that the no-claim bonus and waiting period benefits are not carried forward in all cases. There are terms and conditions. 

The ‘continuity’ conundrum 

The Insurance Regulatory and Development Authority (IRDIA) allows seamless portability with continuity benefits. “The policyholder is entitled to transfer the credits gained to the extent of the sum insured, no-claim bonus, specific waiting periods, waiting period for pre-existing disease, moratorium period, etc. from the existing insurer to the acquiring insurer in the previous policy,” said IRDAI in its Master Circular on Health Insurance Business earlier this year. 

To simplify, waiting periods for pre-existing diseases and specific waiting periods apply only up to the base sum insured and the no-claim bonus in the previous policy. Let’s say your previous policy, for which you exhausted all waiting periods, had a base sum insured of ₹10 lakh and nil no-claim bonus. If the new policy has a base sum insured of ₹20 lakh, the waiting period credit will be available only up to ₹10 lakh. The additional base sum insured of ₹10 lakh will have fresh waiting periods. 

It means if a diabetic person gets treated for diabetes and the claim stands at ₹15 lakh, his insurer will cover him for ₹10 lakh even as the new policy has a base sum insured of ₹20 lakh. If the treatment is for a non-pre-existing disease, it will be covered up to ₹20 lakh.

In the same example, if the policyholder had ₹10 lakh no-claim bonus along with ₹10 lakh base sum insured and the new policy had ₹20 lakh base sum insured, the waiting period benefits will be applicable up to the entire ₹20 lakh. However, if the policyholder opts for ₹10 lakh base sum insured in the new policy, the waiting period benefit will be limited to ₹10 lakh. The ₹10 lakh bonus will lapse. 

In other words, the no-claim bonus amount is not carried forward. The policyholder receives the waiting period benefit on a higher amount if the sum insured in the new policy is equal to the base sum insured + no-claim bonus of the previous policy. 

“Ideally, one should opt for a higher sum insured in the new policy if the old policy has accrued no-claim bonus,” said Siddharth Singhal, business head of insurance at Policybazaar.

This is where Kumar erred. His previous policy had a base sum insured of ₹10 lakh with ₹10 lakh no-claim bonus. He opted for ₹10 lakh base sum insured in the new policy, thinking he would get the same combination. But the no-claim bonus did not reflect in his new policy. The customer care representative told him it would reflect after a year. In 2023, the new insurer added only ₹5 lakh no-claim bonus. 

“They did not correct me when I opted for ₹10 lakh base sum insured. Money was not an issue. I paid three premiums in one go. I would have easily paid a premium for the ₹20 lakh policy. I ported the plan to get better coverage, but the opposite happened,” he said. 

When to port your policy

You should not port your policy unless it is absolutely necessary. “If porting is done on an agent’s recommendation, ensure that porting details are captured in the insurance policy’s proposal form. Many times, agents sell fresh policies to earn higher commissions,” said Nishant Batra, co-founder and chief goal planner at Holistic Wealth, a Gurugram-based financial planning firm.

Batra warned people with a complicated health history to not port the policy for a lower premium, as it may backfire. 

Moreover, in portability cases, the new insurer treats you like a fresh policyholder. If you file a claim soon after porting the policy, it may look at your claim with suspicion. 

Highlighting situations when one should port, Batra said, do it to upgrade your policy to have features such as ‘no room rent’ and ‘no room type limit’ or if policyholders of your existing insurers are facing issues in claims or to get the policy mapped from ‘direct’ to a ‘qualified and experienced agent’. 

To be sure, buying a health plan from an experienced agent is better than getting it directly from the insurance company. There is hardly any cost difference between the two. 

If you have to port your policy, do it at least 45 days before the renewal date of your existing policy but not earlier than 60 days. You don’t have to inform your existing insurer. Contact the new insurer to fill out the portability and proposal form. Insurers cannot levy charges for portability, but loading in premium is possible as per the new insurer’s underwriting guidelines. 

It is important to disclose full health history at the time of porting. “If there is a fresh medical history, most insurers do not apply any fresh waiting period. However, some of them may load the premium or exclude the disease altogether as per the criticality of the condition,” said Singhal of Policybazaar.