What is porting Life Insurance?

Porting life insurance refers to the process of transferring an existing life insurance policy from one insurer to another without losing the benefits or coverage. This can be beneficial for policyholders who want to switch to a different insurance provider that offers better terms, lower premiums, or improved coverage options.

Why Life Insurance portability (porting term insurance) is not possible in India?

Porting of life insurance, which refers to the ability to transfer an insurance policy from one insurer to another without losing the benefits or coverage, is not commonly practiced in India for several reasons:

1. Regulatory Framework: The Insurance Regulatory and Development Authority of India (IRDAI) has not established a clear framework for the porting of life insurance policies. Unlike health insurance, where portability is allowed, life insurance policies have more complex structures that make standardization difficult.
2. Complexity of Policies: Life insurance products often have various features, riders, and benefits that can differ significantly between insurers. This complexity makes it challenging to create a seamless porting process that maintains the same level of coverage and benefits.
3. Underwriting Process: Life insurance involves underwriting based on the insured's health, age, and lifestyle. When porting a policy, the new insurer would need to reassess these factors, which could lead to changes in premiums or coverage, making the process less appealing to policyholders.
4. Loss of Benefits: Many life insurance policies come with accumulated benefits, such as bonuses or loyalty rewards. Porting may result in the loss of these benefits, discouraging policyholders from switching insurers.
5. Market Competition: The Indian life insurance market is highly competitive, with numerous products available. Insurers may be reluctant to allow porting as it could lead to a loss of customers and revenue, prompting them to create more attractive products instead.
6. Consumer Awareness: There is a general lack of awareness among consumers regarding the concept of porting life insurance. Many policyholders may not even consider switching insurers, leading to a lower demand for such a feature.
7. Administrative Challenges: The administrative burden of managing the porting process, including the transfer of policy documents, claims history, and other relevant information, can be significant for both insurers and policyholders.

In summary, while the concept of life insurance porting could offer flexibility to consumers, the regulatory, structural, and practical challenges in the Indian insurance market currently make it a difficult proposition.

What can you do to change/switch the Term insurer/ policy?

While it is not suggested to change the Term Insurance policy, unless you have a strong reasons like trust, policy restrictions, want to reduce the term coverage, found a better term plan etc.  It is better to wait till the end the of the policy year instead of renewing you can cancel the policy and buy a new term plan. 

Thanks,

Honvest Team