No such thing as free accident cover

Credit card holders expecting to be covered by the free insurance promised to them at the time of acquiring their card may be in for a rude shock. The biggest credit card issuers in the country have quietly withdrawn the free personal accident cover that aims to compensate cardholders for events such as what happened on Tuesday.

The major issuers of credit cards — ICICI Bank (5.1m cards), Citi (2.9m cards), and StanChart (1.8m) — have withdrawn the free personal accident insurance, which was until recently available with most of their cards. With profitability being affected due to the ‘free for life’ card schemes, issuers withdrew their free insurance covers on these cards.

Banks that continue to offer personal accident cover like HDFC Bank, SBI Card and HSBC say that the policies they have purchased from insurance companies do not cover the risk of terrorist attacks.

HDFC Bank and SBI Card both have around 2.8m cards while HSBC has around 1.6m cards. According to bank officials, their policies do not cover terrorist acts and acts of God which according to them is mentioned in the terms and conditions. Insurance official say that this cover is available for those who are willing to pay for it.

HDFC Bank offers an insurance of Rs 2 lakh on its free silver card and Rs 3 lakh on its gold credit card. HSBC offers Rs 1.5 lakh on its classic card and Rs 4 lakhs on its gold card while SBI Card offers Rs 2 lakh for its gold card holders. According to a senior officials of one of the issuers who have stopped offering insurance on cards, “The annual fees of credit cards have gone away. Free insurance facility has been a cost for the bank. More customer specific propositions are being offered like discounts, free air miles or free petrol depending on card to card.”

Around 40% of the credit cards in India are inactive as many customers hold multiple cards. Also of the active card base, only around 25% of the customers revolve their credit. These users are the most coveted customers for the credit card issuers. Banks also have started offering credit shield to these customers — in case of death, insurance would cover the remaining outstanding liability on the cards.