No free insurance with credit cards from 1st January 2008 – Credit card holders beware

29 12 2007

If you’ve been banking on the insurance cover that came free with your credit card, its time to evaluate that. Most credit cards offered by banks no longer have a free insurance (life or non-life) cover and many customers may not have read the fine print to realise that they no longer have insurance protection. Take the case of R Rao, a media professional, who recently received his monthly credit card statement from HDFC Bank. Apart from the details of the transactions made in the year, Rao was surprised to see a notification from the bank that effective January 1, 2008 the complimentary insurance covers on his Platinum Plus card will be withdrawn.
   So far, Rao has been depending on a Rs 1 crore cover due to air accident, Rs 5 lakh in case of a rail or road accident and Rs 50,000 for hospitalisation due to accidents. The only facility that continues on his card is a nil loss/stolen card liability cover which he gets after he reports the loss or theft. Rao will now have to seriously evaluate his insurance needs and make sure he’s adequately protected. HDFC Bank like other banks (private and public) started withdrawing the insurance cover benefits sometime in 2006.
   Says Parag Rao, executive vice president, head – cards portfolio and product management, HDFC Bank, “Customers were not viewing this as a value addition. In fact we found that the hassle of filing and settling claims was creating a dissonance among customers. Also customers perceive other benefits like cash back facilities as better value propositions than an insurance cover because a bulk of customers may not be aware of the facility or may never make a claim.”
   The other big reason for banks like HDFC, ICICI, Standard Chartered and even Citibank to withdraw this facility is that at some point in 2006 credit cards started being offered free for life, i.e without any annual charges. A Citibank spokesperson said that most banks withdrew the freebies due to the issue of costs.
   Since the insurance cover offered would be a group cov er, it would be at a subsidised rate and would come with various inclusions and exclusions. The bank would have worked out the annual charges including some amount of the premium. With the annual charge being lifted, the cost of the premium would have to borne by the bank. HDFC Bank’s Rao adds that the bank does look at the option of allowing the customer to pay the premium on their own. However in most cases the covers are inadequate to an individual’s needs or the inclusions and exclusions are so unsuited that continuing the cover does not make sense.
   ICICI Bank, too withdrew the insurance covers on its classic or basic cards last year. However, like some banks, ICICI has continued to offer insurance covers on some its extremely exclusive cards. For instance, on their recently launched Signature Card, which has an annual fee of Rs 25,000, the card holder gets a personal accident cover in case of air accidents worth Rs 3 crore. But the fact is that this card is not free.
   Adds Sharad Mehrotra, product head credit cards, Standard Chartered Bank, “The complimentary insurance cover on non premium cards was discontinued from September 2004. We launched new card products that provide value to customers through other offerings like our Super value Titanium card which offers a 5% cash back on fuel and telecom and a 1% cash back on all other spends, but does not offer an insurance cover.”

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