Cover note: On health insurance | Rethink on group policies

Chances are that when the cover ends, you will be too old to get a policy

The last couple of decades changed our experience with banks. The dreaded bank visits went from queue drudgery, to staffers pursuing you to purchase investments, specifically, insurance.

Banks in India, which were going through an era of significant margin erosion for various reasons, found fee-based business, namely selling financial investments for a commission, an important revenue stream.

Bancassurance tie-ups, where banks acted as agents of insurance companies presented a win-win-win, if you will. Insurers found a single conduit to a mass market base; bankers discovered a lucrative activity without venturing out from their own customer base; and insureds and prospective insureds found themselves much sought after with insurance policies of various sizes and shapes. A bank can sell you an individual policy, or sign you up in a group policy.

Group policies are typically for health insurance. A bank signs you up for a group policy only if you are already an account holder.

This is a pre-requisite of the insurance regulations, that a group policy can be given only to a pre-existing group, account holders of a bank, credit card holders of an issuer, members of a club, students of an institution, employees of a company and so on, and not to a group formed for the express purpose of getting insurance.

Banks have offered such policies for quite some time now and they are attractive for many reasons.

They are easy to buy, with the bank aiding you with all the paperwork. There are no options to agonise over, it’s a one-size-fits-all cover, and this is fine when you are looking to buy a health policy. It’s certainly better than going uncovered!

Buying, renewal and premium payment are all streamlined and there is an element of support when it comes to claims. The real icing on the cake is that you pay significantly less for the same coverage than you would if you bought an independent policy.

The disadvantages are that it’s a set menu. You can pick and choose only to a limited extent, and you don’t have riders, or wide options for increasing coverage. At a certain level, all processes are handled very impersonally, and these days, just by e-mail.

All this brings us to the current trend. Banks are merging, they are regrouping on their basic business and certainly on their fee-based activities. So, group insurances are willy-nilly being disbanded.

Banks do offer to migrate you to an individual cover but, what I hear from the insureds is that their ‘warning’ that the group cover is coming to an end does not sound alarming enough, or the insureds do not act fast enough to migrate or seek other cover independently.

When they do, sticker shock at the premium rates paralyses them into inactivity.

And suddenly, the cover comes to an end and many insureds are too old to get health insurance easily on their own.

I have come across this story repeatedly and so here goes my advice.

Try not to get into such group policies and certainly don’t rely on them as the sole safety net.

Even with health insurance from employers, it is prudent to start an independent cover at a reasonably young age so that you are not left high and dry when you want to change jobs or retire.

This is only more so with group insurance policies as the banking industry in India is changing rapidly.

If at all, use these policies as a backup or plan B if, for some reason, you cannot buy a health policy in time.

But certainly, get your plan A in place before you hit that critical age when health insurance backs away when it sees you coming!

(The writer is a business journalist specialising in insurance & corporate history)

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