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Title: Circular
Reference No.: IRDA/HLT/MISC/CIR/259/12/2011
Date: 01/12/2011
Clarifications on Portability Circular dated- 9th September 2011 Ref- IRDA, Dec 2011
To,
All Non life Insurers, 1st December 2011
Re: Clarifications on Portability Circular dated: 9th September 2011 Ref: IRDA/HLT/MISC/CIR/209/09/2011
In the context of portability, certain clarifications were sought by different insurers and this circular is issued clarifying the questions raised.
Question 1: All insurance policies are required to obtain F&U clearance of IRDA; any changes in the terms and conditions or other features can only be done with the specific approval of the IRDA. In this context, certain insurers have asked the question that porting in and porting out of policies is not a condition which has been incorporated in the policies which there are extant F&U clearances. In such a situation, is it necessary for porting in and porting out conditionalities to be specifically once again filed and cleared?
Clarification 1: It is hereby clarified that the facility of porting, within the terms of circular dated 9th September, 2011, has been mandated as a measure in the interest of all policyholders. Such measures will have an overriding effect and its implementation will not require any fresh F&U clearance. Changes of any other features, however, not related to portability will continue to be governed by the F&U regulations.
Question 2: Portability can be opted by the insured only at the time of renewal by making request for portability at least 45 days prior to policy renewal date. There is no option to seek portability during the currency of a policy and the porting Insurer is not bound to accept any such request from the insured.
Clarification 2: YES
Question 3: Portability Guidelines allow acceptance of short period premium of at least one month in case the portability request has not been disposed of by the new insurer. It has to be subject to the condition that in case there is any claim during this period, the claim will be accepted and Insurer can ask for the balance premium for remaining part of the policy year since the pricing is based on premium for full policy year and not month to month or short term premium. In such cases, the insured would be liable to pay the premium for the balance period and continue with existing insurer for one more policy year.
Clarification 3: YES
Question 4: As the product pricing is done on the basis of waiting periods provided for in the policy terms, any credit or waiver of the same pursuant to portability would require loading. Hence, Insurer can apply loadings on all policies porting-in, wherever credit is being claimed for PEDs or other waiting periods, in proportion to the credit claimed. Further, Insurers are allowed to impose disease based loading depending upon the outcome of medical underwriting at the time of porting. Insurers may keep IRDA informed of the loading structure.
Clarification 4: Product pricing has already factored in the restriction on claims imposed by PED conditions. As such, no additional loading on account of portability is permissible.
Question 5: In case the existing insurer after repeated follow ups does not provide the required information/data within the specified timeframe in respect of a particular portability request, the porting insurer has the right to deny porting to the insured by citing the said reasons.
Clarification 5: The matter may be escalated to IRDA before denial. If the insurer fails to provide the required information/data within a specified timeframe in respect of a particular porting request, it shall be viewed as violation of the direction issued by the Authority and shall be subject to penal provisions under the Insurance Act, 1938.
Question 6: Certain insurers have sought clarification whether commissions may be paid to the intermediaries on the acceptance of a ported policy.
Clarification 6: As portability is an option given directly to the insured, there is no role of an intermediary and, hence, no commission shall be payable to any intermediary in the year of porting.
(J. Hari Narayan)
Chairman
