Why Switching Health Insurer May Not Be Such A Great Idea

By | April 20, 2016

IP SG - health insuranceAre you considering switching your current Integrated Shield Plan (IP) to another insurer’s? Or know of a friend or family member who is planning to do so? Please do them a favour and tell them to read this blog post before making that move.

Let us look at some reasons why people switch to another health insurance plan:

1. Premiums of the other insurer’s Integrated Shield plan is cheaper

If so, what are the premium differences in the short term and longer term? Short term differences may not be significant as premiums are usually lower when we are younger. What we need to pay attention to are the future premiums, especially during our retirement years. Most insurers increase their premiums substantially after age 50. Add up all the premiums from now till say age 85 and you will arrive at the total premiums of your existing plan and the one you intend to switch to. You’ll then be able to tell the potential savings you will get.

How about the riders that are available with the new insurer? How do they measure up compared to your existing one?

2. Better scope of coverage

While the benefits of the main plan of IPs are more or less similar, there could be benefits specific to certain insurer that the others do not have or are of a lower limit. To warrant the switch, in my opinion, the benefit(s) must be important enough to the insured that he or she can not do without.

Did the insurance agent show a comparison against the other 4 (and soon 5 from 1 May 2016) insurers in the market that offer health insurance? If the agent is from a tied company, then this is beyond their ability.

There is a big difference between tied agents and a financial planner from an IFA company. A tied agent can represent only one single company’s products (hence the term ‘tied’) whereas the latter has access to ‘best of breed’ solutions from across the market, and comparative analysis ensures that consumers get the most cost effective option to meet their needs.

Besides selling the good points of the plan, are the disadvantages of switching explained? This is documented in the ‘Know Your Client’ form as well as the application form. Once the forms are authorised by you, it is deemed that you have full knowledge of the down side of switching and that you are entirely responsible for your own decision.

What about underwriting? Did the insurance agent explain this clearly to you?

A big no no to switching is when you have already developed a health condition, be it chronic or acute. Switching to a new plan would subject you to underwriting (other than Aviva’s moratorium underwriting) and you may not be given the same favourable outcome.

There are 3 underwriting outcomes:

  • Accept
  • Decline or
  • Counter offer wth exclusion.

There is strictly no premium loading here. Axa Shield, being the new kid on the block, offers ‘temporary exclusion’, subject to terms and conditions.

3. In the pink of health i.e. no pre-existing health conditions

In my opinion, this is a grey area. What happens if, after switching and within 3 months, you are diagnosed with pancreatic cancer that did not give any symptoms at all? Will the new insurer cover the hospitalisation claim? Or will it be declined because the condition obviously did not just occur in the past 3 months and hence, deemed as pre-existing?

Can the person who propose the switch guarantee that this will not happen? Answer is no. Therefore, you switch at your own risk.

4. Free gift at insurance company road show

This is, by far, the worst reason to switch to a different health insurer. I know it sounds silly but people do that. And needless to say, impulse decisions are often made at road shows. The ‘pai seh to say no’ attitude does not operate well here. How about weighing the value of the gift versus the benefits you would be forgoing?

A final thought: Hospitalization bills can be humungous. They can make or break your bank account. Do not be penny wise, pound foolish. When in doubt about switching, seek professional help from an independent financial planner who can point you in the right direction.

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