HDFC Ergo Discontinues 4 Health Insurance Plans – Steps to Take if Your Policy is Withdrawn

Abhay Kapoor, 45, was surprised when he saw a mail in his inbox from HDFC Ergo stating that his health insurance plan “My Health Suraksha” is being withdrawn from the market and he has an option to migrate to “Optima Restore”. Abhay immediately dialed up his agent and was informed that the policy has been withdrawn by the insurer and alternative plans are offered. 

Abhay mentioned that he had no problem in migrating to a new policy but he found that the premium has increased by 50% in the new policy. Of Course the new policy comes with loaded features and so the rise in premium. Abhay was told that he could enjoy the benefits of the old policy till its expiry date after which he should either choose to migrate to a new policy or port to another company. Not only HDFC Ergo, many insurance companies such as United India, Chola MS, and New India etc.

Most of you might have faced this situation or might face such situations in the future. In this article we discuss why insurance companies withdraw their products and how to respond if your health insurance policy is withdrawn.

Why do Insurance Companies Withdraw Insurance Plans From the Market?

Insurance companies launch new insurance products every now and then depending on various factors such as the acceptance of the product, regulations from IRDA, and improvements in the existing products etc. Insurance companies could only discontinue their offerings after obtaining permission from the insurance regulator.

Here are few reasons why insurance companies disconnect their existing products when new products are launched:-

• The first reason is that insurance companies keep making consistent improvements to their products based on the market requirements and feedback from the underwriters and customers. 
• There is always pressure to make the health insurance portfolio profitable and this could be achieved by launching new plans with loaded benefits and charging premiums. 
• Regulatory requirements such as inclusion of mental illnesses, treatments for HIV/ AIDS, COVID-19 pandemics etc. would also lead to new product development. 
• Loss making policies are usually discontinued as instructed by the Insurance Regulatory and Development Authority of India. 
• Another reason is cross-subsidization. Reduction of premiums in group health insurance plans are to be offset with the increased premiums in retail plans. 
• Rising medical inflation and claim settlement expenses of the insurance companies. 

What Options Does a Policyholder Have in Case Their Policy is Withdrawn?

When you find yourself in a situation such as Abhay, you would technically have 4 better options that are discussed below:- 

1. Migration: The first best thing to do is to migrate to a new product offered by the insurer. Insurance companies would recommend a similar product to the discontinued product and one may choose to migrate to that plan. There might be an option to migrate to a different product but it varies from one company to another. 
   
   In case of migration, people find that their premiums have increased and this increase is anywhere between 50-100% of their last paid premiums. Even though it is bound to increase your premium, migration is the best choice a policyholder has as the policy would not be discontinued and all the benefits accrued could be carried forward in case of migration. 

2. Porting: The other best option is to port your health insurance policy to a new insurance company. But porting could be done only if you have applied at least 45 days prior to the policy renewal date. In case of porting, the option to accept the risk vests with the insurer and the insurer may or may not accept your porting request. 
   
   If your porting request is accepted, you need to select a health insurance plan that has the features required by you and this means that you are technically taking a new policy in a different company. However, you need to spend an extra amount when you are porting your discontinued policy to a different insurance company as the new policy comes with loaded features and is priced at par with other insurance products in the market. 
   
   There are certain risks that are associated with portability which are mentioned below:- 

• If the portability application is not submitted at least before 45 days, the chances of porting your policy comes down. 
• If there is a delay in the porting process, you may end up lapsing your policy and thereby losing your accrued benefits. 
• Medical checkup may be required and based on the result, porting requests may even be declined. 
• No guarantee that your porting request would be accepted by the insurer as the acceptability is based on their internal underwriting conditions. 

3. Ask for Premium Reduction: The other option you have is to migrate to a new policy and ask for reduction of sum insured. This would reduce your overall premium payable under the policy. This is not good advice as the sum insured reduction may come back to bite you at the time of claim settlement. 
   
   You may choose to reduce your sum insured and save a part of the premium to be paid. In addition, you can purchase a super top-up policy that serves as a complementary to your regular policy. Super top-up policy’s deductible limit could be set in such a way that it equals the sum insured in your regular health policy to extract maximum benefit from a super top-up policy. 

4. Discontinue the Policy: The last option you have in case your health insurance policy is withdrawn by the insurance company is to discontinue your existing policy with that insurance company and purchase a new health insurance policy from another company. But, you would lose all your benefits if you choose to discontinue your health insurance policy. 
   
   Discontinuity means you would stand to lose all the accumulated benefits under the health insurance policy such as no claim bonus, waiting periods, etc. Discontinuity should be done only when you have taken another regular health insurance plan that is much better than the plan you wish to discontinue.

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