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There is good news coming almost every day for the consumers on the insurance front. A long standing demand that health insurance and car insurance policies should be portable will soon become a reality.
What is Insurance Portability?
It is something very similar to what is being worked out in the Telecom Sector. You have a mobile phone number from Airtel – you should be able to go to Vodafone without giving up your existing number. Simply put, it allows a consumer to shift from one insurance company to another insurance company and avail the same benefits at no extra cost or may be a marginal fee to handle the transaction. The details of insurance portability are still being worked out and guidelines from IRDA, the insurance sector regulator in India, will be in force very soon.
So far the lack of standard products was a huge barrier for insurance portability. If you are not satisfied with the services of a particular company, you cannot just shift to another company as the new company might not have an identical policy. This prevents us from carrying over benefits like No-Claim Bonus to the new company. It can be a huge factor as you no-claim bonus can be as high as 25% to 30% in some cases and you would lose all benefits once you shift to a new company.
Insurance portability is very useful for health insurance and motor insurance policies as they are 1 or 2 year policies and hence are not long term in nature. It would be unfair and tough to expect the same for life insurance policies.
Currently the regulator has kick-started the process and it would take some time before we see the final version of insurance portability. If the insurance industry does the same before the telecom industry, it will be a truly wonderful gesture from our insurance regulator.