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PORTABILITY OF HEALTH INSURANCE

*Dr. D. Shreedevi
*Associate Professor, Apollo Institute of Hospital Administration, Apollo Health City,
Jubilee Hills, Hyderabad 500096. (M) 9441885258 (O) 040-23543269
e-mail dsridevi72@yahoo.com
e-mail dsridevi93@gmail.com

Abstract
The insurance industry today functions in a highly competitive environment, with
increasing private participation and an expanding product portfolio. In this changing landscape,
insurers have to invent ways to offer more value than ever before. The present study identifies
the determinants of awareness of health insurance portability. The variables like age, gender,
occupation, income, education, type of policy, etc. are examined as determinants. For the
purpose of the data collection, structured questionnaire was designed. The study found that 36%
of the respondents are aware of health insurance portability, whereas 64% of the respondents are
not aware of it. It was also found that there is an association between education and occupation
with that of awareness of health insurance portability. The major reasons for portability are
delay in claims settlement, poor customer services and mis-selling. Study also finds that
portability on health insurance has not become as popular as in other sectors. It is also found that
29 policy holders who are not satisfied with their current insurer 21 of them are aware of health
insurance portability. Among aware customers, majority of them are not willing to port to other
insurer, because of difficult porting procedure.
The study concludes that the awareness for portability on health insurance is low among
policyholders. It is also inferred that the porting procedure itself is so cumbersome that it
indirectly discourages the policyholder to use portability on health insurance.
Key Words: Awareness, Association, Determinants, Health insurance, IRDA, Portability

Introduction
Everyone likes a healthy smooth, secured, happy and joyful life. But the fact is that the
life is full of risk and uncertainties and it turns on a time. In life, there is always a risk of loss of
health, wealth, near and dear ones, or any other kind of incident, which may results in any kind
of loss. Usually these kinds of incidences are unpleasant, unpredictable and spontaneous, and we
are not prepared for them-neither financially, nor mentally.
Insurance provides defense against such disasters by pooling the risks. Insurance makes
many pay for the losses of the unlucky few. Insurance is conventionally, the most preferred
method of risk sharing. It is used to hedge against the risk of a contingent, uncertain loss.
Insurance may be described as a social device whereby a large group of individuals or companies
through a system of equitable contribution may reduce or eliminate certain measurable risks of
economic cost resulting from the accidental occurrence of disastrous events.
The various components of non- life Insurance or general insurance are fire, marine,
motor, engineering, health and aviation. Chart 1 shows the Insurance industry in India. There are
24 non-life insurance companies operating in India, of which four are under public sector, three
standalone health insurers and the two specialized institutions.
Chart 1

The general insurance industry is estimated to grow by over 18 percent to reach a size of
Rs 100,000 crore by 2015 and Rs. 2,50,000 crore by 2020. The current size of the non-life
industry is Rs. 58,344 crore growing at the rate of 23.16%. In terms of penetration general
insurance in India is 0.60 percent of GDP against the world average of 2.14 percent. The huge
market largely remains untapped in both rural and urban India as 70 percent of the population is
still not touched by insurance companies.
Need for the Study
While the penetration of the health insurance market is still quite small, it is one of the
fastest growing industries in India. IRDA has announced portability on health insurance policies
in the year 2011, but majority of the population in India is unaware of it. When a policyholder
switches from one insurer to another, it is of course a loss to the insurer from which the
policyholder has switched. From insurers point of view, no insurer would invite portability to
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their existing customers. Thus it is important for an insurance company also to know why a
customer ports from one insurer to other. This study focuses on finding out the reasons which
motivates the policyholder for porting the health insurance policies. The outcome of the study
will help the insurers by revealing the critical areas, so that insurers can concentrate more on
those areas to retain their existing customers.
Significance of the Study
The awareness of health insurance itself is very low in India, so it is important to
analyze the prevailing level of awareness among policyholders, what are the determinants of
awareness, and the means by which the policyholders get information about the latest reforms
and updates of insurance markets. Another important aspect of health insurance portability iswhat makes the policy holders switch from one insurer to other. The reason for health insurance
portability indicates what exactly makes the customers unhappy, and what factors attracts the
new customers as well as helps in retaining the existing customers.
Objectives of the study
1. To study the awareness among the policyholders regarding portability.
2. To analyze the determinants of awareness of health insurance portability
3. To examine the reasons for health insurance portability.
Research Methodology
Sample design: A convenient random sample of 100 respondents were chosen
Sources of information: the primary data has been collected through structured questionnaire by
covering the wide range of demographic, economic, and social factors. Secondary data was also
used for the study which was mainly from articles, IRDA website, insurance journals etc.
Scope of the study: The study includes both; the policyholders and the insurer. The study
examines the factors like age, gender, educational status, marital status, income, occupation etc.
to determine the level of awareness.
Tools of Analysis: Simple descriptive statistical tools like, frequencies and percentages was used
for analysis. Chi square test for applied for analyzing the association of attributes like occupation
education, etc. with the awareness of health insurance portability.
Limitations of the study
It does not include the study of the financial impacts of portability of health insurance policy on
the profitability of the insurance company.
Need for Health Insurance
Health insurance is insurance against the risk of incurring medical expenses among
individuals. Health insurance policy is a contract between an insurer and an individual / group in
which the insurer agrees to provide specified health insurance cover at a particular premium
subject to terms and conditions specified in the policy. India is a country where people are not
provided any state run health insurance programs rather people have to shell out money from
their own pockets to buy health insurance policies in India. Health insurance in India has a very
low penetration.
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Types of Health Insurance Coverage


The health insurance coverage can be broadly divided into three categories:
Mediclaim policy: under this type of coverage basic hospitalization expenses are covered.
It includes expenses related to hospitalization and services rendered by doctors and
nursing home.
Long-term care insurance: This category covers expenses related to major surgery or
operations due to serious illness or disease.
Disability income cover: it is aimed at providing for the lost income during the disability
period or during the treatment period.
Indian Health Insurance Industry
The health insurance market in India is unique and has developed a strong growth
potential in the recent years with the entry of many foreign players in the market. The health
insurance market in India was worth INR 5,125 crores with a compounded annual growth rate of
37 percent between 2002 and 2008.
The health insurance market covers very smaller part of the total population (about
10%) in India. Presently, schemes like Voluntary health insurance schemes or private-for-profit
schemes; Employer-based schemes; Insurance offered by NGOs/ community based health
insurance, and Mandatory health insurance schemes or government run schemes (ESIS).
The latest reform in health insurance market in India is the announcement of Portability
of health insurance policies by IRDA. The main objective of IRDA in announcing portability is
to safeguard the interest of the policy holder. Portability in health insurance policy is a step
towards insurance policy holder protection and surety of high quality service by insurers.
Health Insurance Portability
Health Insurance Portability means transfer of the credit gained by the insured for preexisting conditions and time bound exclusions if the policyholder chooses to switch from one
insurer to another insurer or from one plan to another plan of the same insurer, provided that the
previous policy has been maintained without any break. In simple words, portability in health
insurance is similar to portability in mobile numbers, i.e. one can switch from one service
provider to another without changing the mobile number. Similarly, one can switch from one
insurer to another without any loss of waiting period gained and pre-existing condition.
Need for Portability in Health Insurance
Before the announcement of portability on health insurance policies, loyalty of a
customer towards one company was not rewarded by company another in terms of the credits
gained by the customer; especially in the scenario of a highly competitive insurance market. It
was seen that though the customer was not satisfied with his present insurer, he was not
switching to another insurer due to the loss which he will incur in terms of credits gained by him
with the existing insurer. . Health insurance portability gives the flexibility to the customer and
increases the fair competition among companies.
The concept of portability in health insurance in other developed countries like U.S.A.,
U.K. and Canada is not new. Form of portability differs from country to country, and has its
own guidelines. However, for India, health insurance portability is a very new concept, almost
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three years old. The IRDA, vide circular dated February10, 2011, had issued guidelines on
portability of health insurance policies.
Data analysis and Interpretation
The awareness for health insurance portability among respondents is only 36% and it is
very less. The contribution of newspapers is maximum (41.67%) in spreading awareness among
policyholders followed by television (30.56%), friends and colleagues, insurance agents and
internet. Married respondents who are majorly in the age group of 36-45 years are more aware of
insurance portability.
Chi-square test was done and the results showed that there is a significant
association between the education level and occupation of the respondents and their awareness
for portability on health insurance. From the findings it is inferred that though there is not much
difference in the awareness among the individual and the family floater policyholders, individual
policyholders are more aware of portability as compared to family floater policyholders. The
occurrence of porting is more in the individual policyholders as compared to family floater
policyholders.
Out of total 100 respondents 71 respondents are satisfied with their current insurer
whereas 29 respondents were not satisfied. Out of 29 unsatisfied policyholders, only 4 are
willing to port and 17 policyholders, in spite of being unsatisfied, do not want to port, 8 of them
were neutral. The 17 policyholders /respondents who are not willing to switch from their current
insurer, 13 are not porting due to the complicated porting procedure and only 4 of them due to
other reasons. Though policyholders are not satisfied with their current insurer, they are reluctant
to port due to complicated porting procedure. The reasons for porting are shown in the following
chart.

The inadequate coverage is the most prominent reason followed by mis-selling and poor
customer service for customer dissatisfaction and also for portability.
Advantages and Disadvantages of Portability
Advantages:
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When switching from the existing insurer to a new one, the policyholder is entitled to
Sum Assured and cumulative bonus also forms a part of health insurance portability and
he will be entitled to the same.
While moving on to a new insurer the customer will get a waiver on the thirty days of
waiting period in which no cover is provided.
There is portability available for waiting period of pre-existing diseases. This means that
while shifting to a new insurer, the time that the customer has spent with the old insurer
would be taken into consideration.
It is a customer centric initiative that is easy and convenient especially for those who are
having a tough time with their existing insurer.
While planning to switch to a new insurer the customer are surely offered lower or
competitive premiums
Can ensure better claim settlement from all the companies while planning to change
insurer.
Will get access to new, better and upgraded health insurance products.
It enables to move towards better health insurance plans and products as per changing
requirements and needs.
Health insurance portability has triggered a strong will to retain existing customers in all
competitors thus paving way for better customer service and more customer centric
products at disposal.
It has come as a boon for all who fall under the head of group insurance policy of the
organization. The customer can freely change job and switch his existing policy that is
under the banner of the current organization without much hassle and without losing on
to the accrued benefits.
As a lot of information is shared across the insurers there is a lot of transparency created
with the onset of health insurance portability.
Are not charged anything extra when policyholder opts for portability. They need to pay
only the premium.

Disadvantages:

Can opt for health insurance portability only when the policy is due for renewal.
Different health insurance companies have different polices and features, so there is a
need to opt for the new insurer very carefully.
If customer wishes to switch to group medical claim then it becomes mandatory for him
to first move it to the same company and then only after a span of one year will he be
entitled to switch to some other company.
May be charged loading charges on the premiums for the pre-existing disease policy
while switching to a new insurer.
In case of shifting the group insurance policies to individual policies the customer may
lose on to maternity benefits which are not included in individual policy.

Effect of portability on Insurer


Health Insurance Portability is excellent initiative that is beneficial to customers. Customers
can switch from one insurer to other if they are not satisfied by their insurer. Health insurance
portability lets customer carry particular benefits (waiting period) to the next insurer. Henceforth
customer can choose health insurer of his own choice without much ado. However, Health
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Insurance Portability directly affects insurers since they are the ones who will be initiating
changes and upgrading products and services. The following events could unfold because of
Health Insurance portability:
More Competition

With customers having the choice to switch, insurers will certainly notch up everything.
To get more market share more competition will ensue leading to product innovation as
well as improved services.
Customer Engagement

Apart from products, major differentiating factor would be services. The insurers will
improve and set new benchmarks in services to pull customers to their brand. More
customer relationship building activities will be implemented.
Logistics

Since customer can switch to new insurer, a lot of data would be shared between insurers.
The process is complicated since data everywhere is not centralized. However in long
term, health insurance portability would lead to more transparency.
Unethical Practices
Health insurance portability could also mean more frauds and unprofessional conduct. An
insurance agent might not tell all coverage while driving customer to switch product.
New products
New innovative products might come with more benefits and pricing would be
competitive. Product features, brand image and claims ratio will be deciding factors in
premium variation.

Terms and Conditions Need to be Fulfilled for Portability


One can port the policy only at the time of renewal. That is, with the new insurance
company there will be new insurance period
Apart from the waiting period credit, all other terms and conditions of the new policy
including the premium are at the discretion of the new insurance company
At least 45days before policy renewal is due; customer has to write to
his/her old
Insurance company requesting a shift,
Mention company to which customer want to shift the policy,
Renew his/her policy without a break (there is a 30 day grace period, if porting is
under process)
Discussion
The announcement of portability on health insurance in October 2011 was a major reform
in the Indian health insurance industry. It allowed the policyholders to switch their policies to
other insurer in case of any dissatisfaction towards the current insurer without the loss of waiting
period gained and exclusions for pre-existing conditions. Though it has been almost 3 years of
the announcement of health insurance portability, the awareness of it is very low among the
target population.
At first sight portability seems to be very attractive from the point of view of a
policyholder, but in reality, it is not so. One cannot port a policy as and he wish. The regulator,
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i.e., the Insurance Regulatory and Development Authority (IRDA), has given insurers the right to
accept or reject port-in requests . This implies that if the other insurer finds the application
unfavorable, it can decline the request, and one will have to stick with the insurer.
All portability proposals are treated as new and put through the underwriting guidelines
afresh. The underwriter has the right to reject any proposal. Underwriting involves measuring
risk exposure and determining the premium that needs to be charged to insure that. The
application may also be rejected on grounds of insufficient information, delay in submitting
documents and poor claim history. As all insurers wish to insure the persons who are young and
with low health risk, thus the insurers put lot of clauses and restrictions, which is indirectly not
encouraging portability.
To sum up it can be said that health insurance portability is not transferring the old policy to a
new insurer but buying a new policy without the waiting period clause. It can be said that
insurers have made porting difficult. Most policyholders who are aware of health insurance
portability, and are willing to do so, tend to have a claim history. And, no insurer is willing to
take a customer with a claim history in the past three to five years. Additionally, insurers don't
believe portability will be profitable on the back of additional waiting periods and exclusions not
applying. They blame the past regulator for not approving proposals which would have made
porting profitable. As a result, no health insurer has publicized portability.
Suggestions and Recommendations
Based on the findings of the study, the following recommendations emerge
Government and private organizations should take initiatives to spread awareness for
portability on health insurance among policyholders. Television, articles, social media,
and other mediums useful for public communication should be utilized to do so.
The procedure for porting must be simplified further for a better and meaningful use of
portability.
Policyholder should be free to port his/her policy throughout the year at any point of time
instead of only at the time of the renewal of the policy.
Conclusions
The study was conducted with the objectives of finding out the awareness for portability among
the policyholders in India, and also to find out the determinants of awareness of portability, and
to study the perception of policyholders towards the porting procedure. Based on the results of
the study it is concluded that

Even
after
three years of announcement of portability on health insurance by IRDA, the awareness
for portability on health insurance is very low among the policyholders.

Policyholders
who are aware of portability and are not satisfied with their insurer are also not willing to
port from their current insurer due to complicated porting procedure.
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