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Is Portability From Life Insurance Group Plan to Individual Plan Possible ?

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November 04, 2016
A sudden mishap or accident makes us realize that life is uncertain. Though nothing can compensate the emotional loss of any unfortunate event, it is possible to offset the financial losses incurred. For this purpose, it is recommended to avail of an insurance plan. Such a policy provides financial security and protection in case of an unfortunate event.


Types of life insurance plans in India

 

There are two major types of insurance plans, namely individual insurance plans and group insurance plans. Most salaried individuals are covered under a group insurance plan provided by their employer. The employees in a single company are covered under the same group policy and enjoy the same benefits. The major advantage of group plans is that they are available at subsidized rates due to the presence of a larger number of individuals.

Group plans, however, have their set of disadvantages. Members of the group plan have a little or no control over their individual coverage. They, therefore, do not have an option to customize their insurance policy as per their individual needs. Besides, the employee ceases to enjoy the benefits in case he decides to leave the job. Many individuals, therefore, seek to port their group plan to an individual insurance plan.

 

Is life insurance portability allowed in India?

 

The question arises whether portability from group insurance plan to individual plan is possible. Currently, there are no provisions that allow migrating from a group life insurance plan to an individual plan. However, the good news is that the Insurance Regulatory and Development Authority of India (IRDA), the statutory agency governing the insurance sector in India is considering a proposal to allow portability from one life insurance plan to another. This means that individuals who are covered under an existing life insurance policy may switch to another insurance provider without surrendering their existing policy.

Under the current IRDA rules, only health insurance plans may be ported from one insurance provider to another. A transfer of life insurance policy is not allowed. Hence, if an individual wishes to discontinue the current life insurance policy before it reaches maturity, a surrender charge needs to be paid. This charge can be as high as 70% of the premiums paid during the entire policy term. If life insurance portability from one insurer to another is permitted, it will save policyholders the cost of surrender while switching their policies.

Though the discussions are in the nascent stage, it is expected that such a move is likely to happen once the insurance industry is completely digitized. It is said that this portability option will help in curbing the mis-selling of insurance in the country.

Mr. Amitabh Chaudhry, the MD and CEO of HDFC Standard Life Insurance Co. Ltd., said that such portability may be possible for certain life insurance plans, which have similar charges and structure. He also said that such a move will require quite many changes in the underwriting policies. Besides, the rates for several policies may have to be standardized, he added.

As of present date, the situation is status quo. Policyholders need to wait for the IRDA to review the proposal that will allow porting from one life insurance policy to another.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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