01/01/2020

Bank mergers to see scores of mediclaim holders’ premium jump 50-300%

Times of India

BENGALURU: Lakhs of mediclaim customers are expected to be the first casualty of the government-proposed merger of 10 banks as premiums for most of the customers of the banks which are being merged are set to increase between 50% and 300% from next year. Senior citizens, who depend on pensions or interest from FDs for monthly income, are expected to be hit the hardest as they would most probably be not able to afford such a steep increase in premiums. The hike in premiums will be much lower for younger customers. 

Currently, most PSBs offer their savings bank and credit card customers health covers through group mediclaim policies which are sourced from their bancasssurance partners. Under current rules by IRDA, the insurance regulator, a bank can have only one bancasssurance partner for each type of insurance, be it life, health or motor. So as the PSBs get merged, their existing bancasssurance tie-ups will also get dissolved. Also since IRDA regulations do not allow for portability of group health plans, customers of the merged banks will either have to buy individual mediclaim policies or will be treated as new customers under the group health cover of their new bank.
 

The first casualty will be 64,500 credit card customers of Vijaya Bank, effective January 1, 2020. From that day they will no longer be covered under the health insurance scheme they have had for the last two decades.

Queries by TOI showed that PSB customers who for years enjoyed group mediclaim at rates of Rs 7,500-12,000, will see their premiums jump to between Rs 22,000 and Rs 75,000, if these policies get converted into individual policies with annual renewal.

Consider this: Vijaya bank has been merged with Bank of Baroda (BoB) on April 1, 2019. BoB’s bancassurance partner is Max Bupa while for Vijaya Bank it is United India Insurance. So all the Vijaya bank customers will now have to move to Max Bupa as new customers. A BoB spokesperson said that since group health portability was not allowed under IRDA, so even if it wanted to migrate the existing policies of Vijaya bank customers with Max Bupa’s mediclaim programme, the same is not possible.

B S Behl, 79, and his wife Shantha Behl, 78, had a mediclaim cover for Rs 5 lakh for the last 20 years for which the annual premium was Rs 12,910. When they approached United Insurance for renewal, they were given a quote of Rs 49,000 if they wanted to continue their existing policy benefits. For Behl's son Sanjay, 51, who was paying the same premium of Rs 12,910 for a policy that included his wife and son, the new rate is Rs 22,000. According to a United India Insurance official, the risk of insured people is lower when one is covering through a large group as the volumes make up for claims incurred. “But for an individual, we have to look at their age group and then price the policy accordingly, which are approved by the regulator.”

IRDAI did not respond to requests for comments.
 
Vijaya Bank customers feel that given the banks and insurers involved are both public sector companies, the government should step in to arrive at a solution for the banks’ customers. “When BoB took over Vijaya Bank, it took over both its assets and liabilities. So today, how can they not honour our genuine demands?,” asked lawyer Ganesh Prasad, who was quoted Rs 75,000 if he wanted to renew his Rs 5 lakh cover for his family of five.
 
Top officials at other PSBs, slotted for merger in the coming year, are also worried. “Our staff is going to face the anger of customers, whom we have had for decades, when they realise what has happened. Its quite unfair since the bank had no role to play in landing in this mess,” said the CEO of one of the ten banks up for merger.
 
However, there’s hope for PSB customers. According to Atul Sahai, CMD, New India Assurance, as a public-sector company, the insurer’s primary focus is to look at policyholders' interests. “This is a peculiar situation that has arisen. But I am sure we (PSUs) can work out a solution,” Sahai said. But to work out a solution, it would take a while, IRDA, insurance and banking sources said.
 
In addition to time, there could be some other hurdles too. According to a National Insurance official, there will be the regulatory hurdle. “Beyond that, to cover the merged entities, we will first have to see the earlier claims experience. And just because more people are covered, doesn't mean the premiums will automatically go down. If this group of people are largely middle-aged or senior citizens our risk/premium will also go up,” the official said.