Similarly in the world of personal finance, first there was Internet banking, then online trading and the latest in the bandwagon, OTC or over-the-counter insurance. Companies like Reliance Life Insurance and Birla Sun Life Insurance have already launched this product, while others like SBI Life Insurance are planning to come out with it soon.
How it works
The bottom-line: you get an insurance policy, instantly. All you need to do is fill up a one-page form and voila, you are the owner of an insurance policy. No long forms and medical tests. All it takes is a few minutes. Like microwave popcorn. But alas, haste makes waste.
Read the fine print
When you sign this one-page proposal form, you are actually signing a declaration of your good health. You are telling the insurance company that you are healthy, that you have no pre-existing illnesses and that you are worthy of being insured. In your haste, if you give incorrect details or conceal information, remember that the chances of a claim rejection are high.
In fact, numbers from IRDA’s grievance cell have an insightful story to tell. Of about 4,500 complaints it received a few years back, 15 to 17 per cent were related to rejection of claims, due to non-disclosure of pre-existing illness at the time of taking the policy. But this is not just a local phenomenon. According to studies recently conducted in the UK, almost 15 per cent of total claims made on critical illnesses were declined. Of these, 26 per cent had not made true and fair disclosures when they bought the policy.
OTC insurance, a good bet?
“It may seem like an alluring method to buy a policy. But buying it through the conventional mode is the best way,” says financial domain trainer PV Subramanyam. 47-year-old Milind had applied for a unit-linked insurance policy through the conventional mode. As mandatory, he had go for a medical test after which he received a letter saying that the insurance premium had been increased from Rs 4 per Rs 1,000 to Rs 12 per Rs 1,000 because his medical reports suggested that he had high blood sugar. Milind was not even aware of his medical health until he underwent the mandatory medical test. Had he applied under the OTC mode, he would have signed off claiming that he was medically fit. If a claim arose, it would have been rejected on grounds of non-disclosure.
What if you disclose your illness?
'If a person is already suffering from any illnesses mentioned in our health questionnaire, such case would be underwritten in normal course after conducting the required medical tests wherever necessary,' says P Nandagopal, President and Chief Executive Officer, Reliance Life Insurance Company Limited.
Subramanyam adds, “It is quite likely that premiums of these policies would be much higher compared to other insurance plans mainly because the company is taking a high risk in insuring your life without any medical check-up”.
A few questions you will be asked while buying OTC insurance:
- Are you currently taking any medication or drugs other than minor conditions (for example: colds and flu) either prescribed or not prescribed by a doctor or have you suffered from any illness, disorder, disability or injury during the past five years which has required any form of medical or specialised examination (including chest X-rays, gynecological investigations, pap smera or blood tests) consultation, hospitalisation or surgery?
- Do you suffer from any medical ailments e.g. diabetes, high blood pressure, cancer, respiratory disease (including asthma), kidney or liver disease, stroke, any blood disorder, heart problem, hepatitis B or C. tuberculosis, psychiatric disorder, paralysis and coma, HIV/AIDS or a related infection?
- Do you have any form of physical impairment, disability, handicap or defect?
- Is any surgery planned or are you currently aware that you need to seek medical advice within the near future? (Other than for medical examination that may arise from this application)?
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