No-claim bonuses (NCBs) are steadily taking the game away from loyalty benefits in health insurance sweepstakes. With the former, the gains seem to be loaded with a higher health cover by making no claims compared to the one under loyalty benefits offered by various insurers.
On an average, the rise in the sum assured under additional benefits extended by insurers for staying on is 1%. The case with the NCB status, however, is different. A no-claim experience for the fifth consecutive year can fetch you up to 50% additional sum assured of what one would usually start off with.
“The benefits offered under a health policy should be closely watched before taking the cover. No-claim bonuses are good for the customer compared to loyalty benefits offered by an insurance provider. Considering the medical inflation rate, customers will get a better deal under a no-claim bonus,” reasoned Suresh Sadagopan from Ladder7 financial Advisories.
NCBs are claims-free benefits given to policy holders. The real benefit lies in the increment of sum assured in the range of 5-10% for every claim-free year, without a premium hike.
Ramesh Ramani, senior V-P, consumer lines, Tata AIG General Insurance, tempers the mood: “We offer both no claim bonus and loyalty benefits to customers. After taking medical inflation into account, cumulative bonus benefits will not take care of the required health cover fully. Also, it varies from company to company.”
Loyalty benefits, on the other hand, are perks meant for loyal customers or those who have renewed the policy with the same insurer. The benefits include free health check-ups and enhancement of sum assured to a certain percentage. Health insurance companies have recently started offering loyalty benefits to retain clients for a longer time span to not lose out in renewals. “Also, it has been witnessed across the industry that loyalty benefits extended by insurers are not getting fully utilised by customers,” added Ramesh of Tata AIG.
Most players offer loyalty as well as no-claim benefits to those who keep renewing their mediclaims with the same insurer. A few have started offering only loyalty benefits. Mukesh Kumar, head strategic planning, HDFC Ergo, sees a pattern here. “Free and frequent health check-ups are not necessary for people belonging to all age groups. So, people above the age of, say, 45 -50 may benefit from these kinds of arrangements whereas NCBs can be utilised by all, considering the claims experiences.”
In this context, health insurance portability allowed by the Insurance Regulatory and Development Authority (Irda) last October could be a game changer. This lets customers port their insurers without losing accrued benefits like their no-claim bonus and waiting period for pre-existing diseases. With portability, customers get an upper hand in choosing insurers for them. Hence, these loyalty benefits help insurers retain their customers.
How does an NCB actually work?
It’s during the policy period health insurance companies dole out the benefits to the policyholder in case of no claims. Usually, companies provide a cumulative bonus, which is in the form of an increase in the sum insured annually up to the limits prescribed. Usually, the limits are 10%, 20% and so on till 50% in the fifth year and above. Insurers may reduce the discounts or retain the same level of discount if any claim arises. Some companies also provide discounts on the renewal premium in case of no claims.