Three years ago, Mumbai-based Ashish Shah bought a family floater health cover for Rs 5 lakh. This year, he was in for a shock when his insurer decided to raise the premium from Rs 5,415 to Rs 26,719 despite the fact that he had made no claims. 

But Shah did not want to let go of the policy because he had completed three years, the period after which specific diseases, such as hernia, cataract, dysfunctional uterine bleeding, are covered. He was also just one year short of getting a cover for other pre-existing conditions. What was Shah to do?

He needn’t have worried. With health insurance portability likely to come into effect from 1 July this year, there may be respite for people like Shah. Portability allows you to carry over the pre-existing disease (PED) benefits in your previous policy to the new service provider.

This was one of the biggest deterrents for switching because the customer had to serve the waiting period all over again and PED claims were covered only after a waiting period of 2-4 years. However, Irda has waived this condition, making for a smooth shift to a new insurer provided the previous policy has been maintained without a break.

When to move

You can look for a new insurer not only because of a sudden jump in premium but because a job shift has landed you in a place where the coverage of the existing insurer is inadequate. “People shifting from one place to another face problems due to lack of policy servicing at the new location,” states Irda. Service standards, network of hospitals, lack of coverage in areas such as dental treatment, maternity benefits, etc, could also prompt you to shift.

Portability can be carried out only at the time of renewing a policy, not at any time during the year. However, it is advisable to approach the new insurer at least 45-60 days before the renewal date in order to ensure a smooth transition. Says Sanjay Datta, head of customer service, ICICI Lombard General Insurance Company: “A smooth sharing of data between insurance companies is a must to facilitate portability. For this, the industry wants to move to an IT-based platform for exchange of information regarding waiting period, existing claims, etc. The glitch is that all insurance companies don’t have data that is online and in a standardised format.”

If you don’t start the procedure well in advance, there is a chance that you could go coverless for a certain period. “To avoid such a situation, one can look at a short-term extension of the policy. Besides, a 60-day period is given before a break in cover is considered,” says Arun Mehrotra, head, retail underwriting & product development, Iffco Tokio General Insurance .

Insurance companies have been advised by Irda to acknowledge all applications for portability within three working days. Also, the previous insurer has been advised to share the policyholder’s claim history with their counterparts within seven working days

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RIL buys Bharti stake in Axa joint ventures
Posted by:V.K. sharma, June - 13 - 2011

BS Reporter / Mumbai June 11, 2011, 0:50 IST

Mukesh forays into insurance. Reliance Industries on Friday took yet another step of building a financial services empire by agreeing to buy out the Bharti Group from its insurance joint ventures with French insurer Axa.

Sunil Mittals’ Bharti held 74 per cent stake in the insurance ventures, with AXA the balance 26 per cent – the maximum permissible foreign direct investment (FDI) in the Indian insurance space. The acquisition price was not disclosed by both the companies.

According to the proposed deal, which will need clearances from insurance regulator Irda and Competition Commission of India, RIL and its associate Reliance Industrial Infrastructure (RIIL) will have 57 per cent and 17 per cent, respectively, while AXA will continue to have 26 per cent.

Once the FDI limit is raised, AXA will have the option of picking up another 24 per cent from Reliance. “The proposed agreement contemplates an option by which AXA would acquire from RIL and RIIL up to 24 per cent shareholding in both the insurance companies. Upon exercise of such option, RIL will effectively own 45 per cent, RIIL will have 5 per cent and AXA the balance 50 per cent in both the insurance companies,” a communication from RIL said.

The Insurance Amendment Bill, which is awaiting Parliament’s nod for a long time, has proposed a maximum of 49 per cent stake, but RIL sources said the 50 per cent stakeholding proposed for Axa is only an enabling provision and will obviously be bound by the rules of the day.

Bharti on the other hand said the financial services businesses did not fit into the company’s long-term growth plans. “Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad,” Bharti said in a statement.

Insurance will be the second major sector in which RIL Chairman Mukesh Ambani will directly compete with his younger brother Anil Ambani who owns Reliance Life and Reliance General. RIL’s entry into the insurance sector became possible after the termination of a non-compete clause which was signed during the demerger of Reliance Group in 2005. Reliance Life had recently roped in Japanese insurer Nippon Life by selling 26 per cent stake for Rs 3,062 crore.

Although the companies did not share the deal value, insurance experts said the valuation of the life insurance deal would be much lower than the Reliance-Nippon deal due to Bharti-AXA’s lackluster performance. “It will be surprising if RIL paid a premium to acquire the stake,” said an insurance analyst.

The first year premium of Bharti AXA Life Insurance has dropped 17 per cent to Rs 362 crore in 2010-11. However, gross premium of the general insurance company increased 77 per cent to Rs 550 crore in 2010-11.

Punjab National Bank, the country’s second largest bank, was also in talks with Bharti Axa for its insurance foray. Sources said the bank is now negotiating with two other insurance companies for a paoosible partnership or acquisition.

In March, RIL debuted in the financial services sector by entering into a joint venture with the D.E. Shaw Group, a global investment and technology development firm. The partnership with DE Shaw led to RIL directly competing with Anil Ambani’s Reliance Capital in the financial services space.

When contacted, J Hari Narayan, chairman, Insurance Regulatory and Development Authority, said “We are yet to get any formal application from the company. Getting a nod from the regulator will depend on if the acquirer company is found fit to operate in the sector,” he said.

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