Assessing the Risk 5

8/3/2019 Assessing the Risk 5

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Assessing The RiskAssessing The RiskChapterChapter -- 55


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Assessing the RiskAssessing the Risk

Basic Principles of Medical InsuranceBasic Principles of Medical Insurance

Underwriting principlesUnderwriting principles

Rating factors relating to medical insuranceRating factors relating to medical insurance

UnderwritingUnderwriting other types of health insuranceother types of health insurance


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UnderwritingUnderwriting

Insurer assessment for pre existingconditions ,Insurer assessment for pre existingconditions ,

Application of exclusion &,Application of exclusion &,

Application of conditions.Application of conditions.Policyholder , dependentsPolicyholder , dependents -- Member .Member .

PrePre--existingconditions (Cover)existingconditions (Cover) PremiumPremium

Loading.Loading.


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Basic Principles of MedicalBasic Principles of Medical

InsuranceInsurancePoolingof RiskPoolingof RiskPremium payment accordingtoPremium payment accordingto

age.age.

Treat Fairly to all MembersTreat Fairly to all Members Ill / Good health .Ill / Good health .Exclusion of preExclusion of pre--existingmedical conditions fromexistingmedical conditions from

benefit paymentbenefit payment Before policy purchase.Before policy purchase.

Premium (Increase)Premium (Increase) Higher Frequency & Cost.Higher Frequency & Cost.


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InsuranceInsurance

Mortality RiskMortality Risk( Life assurance)( Life assurance) Statistical termStatistical term

for probable life expectancy of a member.for probable life expectancy of a member.

Morbidity RiskMorbidity Risk(Medical insurance)(Medical insurance) StatisticalStatistical

term for insuredsunspecifiedmedical treatmentterm for insuredsunspecifiedmedical treatmentcost.cost.


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InsuranceInsuranceMorbidity RiskMorbidity Riskisused to estimate :isused to estimate :

Probability of occurrence of certain MedicalProbability of occurrence of certain Medical

Conditions,Conditions, Frequency with which these conditionsmayFrequency with which these conditionsmay

affect a member duringtheir expected life.affect a member duringtheir expected life.


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Underwriting PrinciplesUnderwriting Principles

Commercial Objectives :Commercial Objectives :

Affordable Premium with Cost effectiveness.Affordable Premium with Cost effectiveness.

Insurer limit the riskby :Insurer limit the riskby : Determination ofPotential Risk,Determination ofPotential Risk,

The terms, conditions, benefits & price of theThe terms, conditions, benefits & price of the

productproduct New Business.New Business.


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Why is Underwriting required ?Why is Underwriting required ?

All membersshouldbe treatedEquitably.All membersshouldbe treatedEquitably.

Large CorporationsLarge Corporations -- ClaimsExperience (Prem.)ClaimsExperience (Prem.)Terms & Conditions are set at the Level which :Terms & Conditions are set at the Level which :

Accurately reflects the degree of riskposed; &Accurately reflects the degree of riskposed; &

Remains Cost effective for the insurer.Remains Cost effective for the insurer.


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Methods of Underwritings :Methods of Underwritings :

Comprehensive Cover with some exclusions.Comprehensive Cover with some exclusions.

Important ExclusionsImportant Exclusions PrePre--existingConditions, Chronic Conditions;existingConditions, Chronic Conditions;

Consultations with a GP, SelfInflictedInjuries;Consultations with a GP, SelfInflictedInjuries;

Routine dentistry, Optical Cover,Routine dentistry, Optical Cover, Cosmetic Surgery, Geriatric Care,Cosmetic Surgery, Geriatric Care,


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Accident & Emergency treatmentAccident & Emergency treatment somesomepolicies cover,policies cover,

HumanImmunodeficiency VirusHumanImmunodeficiency Virus HIV,HIV,

AcquiredImmunodeficiencysyndromeAcquiredImmunodeficiencysyndrome AIDS,AIDS,

Normal Pregnancy & Childbirth,Normal Pregnancy & Childbirth,

Mental & Addictive illnesses (ComprehensiveMental & Addictive illnesses (Comprehensive

Policies cover these)Policies cover these) Drugs / Alcohol,Drugs / Alcohol, Overseas Cover / Emergency RepatriationOverseas Cover / Emergency Repatriation

(Comprehensive Policies cover these).(Comprehensive Policies cover these).


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Different Underwriting Style & ApproachesDifferent Underwriting Style & Approaches

Underwritingamonginsurersdependsupon :Underwritingamonginsurersdependsupon :

Market Experience,Market Experience, Data base of target customersData base of target customers Banks / SuperBanks / Super

markets,markets,

Competitive position in the marketCompetitive position in the market MarketMarketCompetition.Competition.


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33 Main Underwriting Style :Main Underwriting Style :

Exclusion of all PreExclusion of all Pre--existingMedical conditions,existingMedical conditions,

Full Medical Underwriting,Full Medical Underwriting,

Moratoriumunderwriting.Moratoriumunderwriting.


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Exclusion of all PreExclusion of all Pre--existing Medicalexisting Medical

ConditionsConditions

Most medical policies,Most medical policies,

General Basic Exclusion,General Basic Exclusion,

Canbe waivedby the Underwriter.Canbe waivedby the Underwriter.


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Full Medical UnderwritingFull Medical Underwriting

UnderwriterUnderwriter -- Previousmedical history & CurrentPreviousmedical history & Current

state of health.state of health.Underwriter decisions:Underwriter decisions:

Cover onstandard term with no exclusions,Cover onstandard term with no exclusions,

Exclusions for specifiedmedical conditions &Exclusions for specifiedmedical conditions &any associatedmedical conditions,any associatedmedical conditions,


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Exclusion of above cover with a provisoExclusion of above cover with a proviso

(Clause)(Clause) InsurersDecision (Review),InsurersDecision (Review),

Offer standard terms with higher premium.Offer standard terms with higher premium.


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Moratorium underwritingMoratorium underwriting(Point of Claim(Point of ClaimUnderwriting) :Underwriting) :

Medical conditions after the date policy come intoMedical conditions after the date policy come into

force are coveredunless related to preforce are coveredunless related to pre--existingexisting

Condition.Condition.

Less costly for insurerLess costly for insurer Administratively.Administratively.

Easysales process (direct selling)Easysales process (direct selling) No medicalNo medical

history.history.


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Onus on insurerOnus on insurer Customer understand policyCustomer understand policy

(Help lines)(Help lines) Misunderstanding(disputes) / MisMisunderstanding(disputes) / Mis -- sellingselling

Suspension of insurers rightSuspension of insurers right MedicalMedical

Information,Information, Retain right for informationRetain right for information Claim,Claim,


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Lesssecure policy (Members)Lesssecure policy (Members) doesn't knowdoesn't know

about benefits.about benefits.

Excludedbenefits for medical condition prior toExcludedbenefits for medical condition prior tothe policystart datethe policystart date up to 5 years.up to 5 years.

Currently Moratoriumunderwriter provide detailsCurrently Moratoriumunderwriter provide details

about operations of the policyabout operations of the policy -- Leaflet.Leaflet.


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Rolling MoratoriumRolling Moratorium Qualifyingperiod (vary).Qualifyingperiod (vary).

Medical history disregarded MHDMedical history disregarded MHD LargeLarge

group schemes (pregroup schemes (pre--existingmedical conditionsexistingmedical conditionsare covered).are covered).

Avoidance of AntiAvoidance of Anti--selectionselection InsuredknowsInsuredknows

about the risk.about the risk.


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Continued Personal Medical ExclusionsContinued Personal Medical Exclusions

CPMECPME

Apply to group policies.Apply to group policies.Attract newbusinessAttract newbusiness Reasonable Claim history.Reasonable Claim history.

Policy transfer with exclusions to a newInsurer.Policy transfer with exclusions to a newInsurer.

No imposition ofnew exclusion.No imposition ofnew exclusion.


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Group vs. Individual UnderwritingGroup vs. Individual Underwriting

Individual PoliciesIndividual Policies Strict level ofunderwriting,Strict level ofunderwriting,

Riskof anti selection exist.Riskof anti selection exist.Group PoliciesGroup Policies Premium paidby employer,Premium paidby employer,

minimal antiminimal anti--selection risk, cover everymemberselection risk, cover everymember


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Group Policies premiumGroup Policies premium(Claim plus basis) =(Claim plus basis) =

Last years claimLast years claim ++

An allowance for medical inflation & otherAn allowance for medical inflation & otherincreased costs for the coming year +increased costs for the coming year +

An administration chargeAn administration charge ++

Insurance premium tax.Insurance premium tax.Employer know about the poor risk.Employer know about the poor risk.


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Consumer Protection LawConsumer Protection Law

Access to Medical Reports Act 1988 AndAccess to Medical Reports Act 1988 And

Access to Health Records Act 1990Access to Health Records Act 1990Application formApplication form ((declaration of confidentialdeclaration of confidential

information of customers)information of customers) -- Statement.Statement.

Disclosure ofmaterial factDisclosure ofmaterial factPolicy Nullify.Policy Nullify.


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Customer written consent (Insurer obtain)Customer written consent (Insurer obtain)

Contact to GP.Contact to GP.

ParagraphParagraph Understandingof policy rulesbyUnderstandingof policy rulesbyCustomers.Customers.


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General Factors for Assessment of MedicalGeneral Factors for Assessment of Medical

History of a Customer :History of a Customer :

Age & Gender,Age & Gender,

Start date, Duration & Severity of an illness,Start date, Duration & Severity of an illness,

Frequency ofsymptomsFrequency ofsymptoms recurringnature,recurringnature,

Nature & Effectiveness of any received treatment,Nature & Effectiveness of any received treatment,

Present state of healthPresent state of health Better/OK (Ambiguous) .Better/OK (Ambiguous) .

Exclusionshouldbe properly worded.Exclusionshouldbe properly worded.


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Problems faced by underwriters :Problems faced by underwriters :

Claims experience effected by :Claims experience effected by :

Product innovationProduct innovation Technological advancementTechnological advancement

Customers expectationsCustomers expectations Medical profession &Medical profession &

Insurance market.Insurance market.


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Changes in Claims Experience originate :Changes in Claims Experience originate :

Availability of wider range ofmedical techniquesAvailability of wider range ofmedical techniques

& procedures,& procedures, Experimental TreatmentExperimental Treatment Patient ondeath beds,Patient ondeath beds,

AgeingPopulationAgeingPopulation Increasedneed for care,Increasedneed for care,

Changinghealth RiskChanginghealth Risk Aids / T.B return,Aids / T.B return,

New Medical technologyNew Medical technology -- Expensive claimsExpensive claims(Surgery inmother womb),(Surgery inmother womb),


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Rating Factors relating to MedicalRating Factors relating to Medical

InsuranceInsurance

Medical Insurance Rating Factors :Medical Insurance Rating Factors :

AgeAge Bands (5/10 years), Differ betweenBands (5/10 years), Differ between

Insurers,Insurers, Marital statusMarital status single / married / with family,single / married / with family,

Smoker / Non SmokerSmoker / Non Smoker Different Treatment,Different Treatment,

Per PersonPricePer PersonPrice accordingto pool,accordingto pool, Post codePost code Area of the city (Facilities providedArea of the city (Facilities provided

by Govt.),by Govt.),


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InsuranceInsurance

Previous ClaimsExperiencePrevious ClaimsExperience Group healthcareGroup healthcare

insurance products,insurance products,

Hospital Accommodation & Banding,Hospital Accommodation & Banding, ExcessExcess Affect premium.Affect premium.

Alternative ofExcess is CoAlternative ofExcess is Co--payment.payment.


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InsuranceInsurance

Underwriter determine medical InsuranceUnderwriter determine medical Insurance

Premium :Premium :

Hospital chargesHospital charges InIn--Patient, Out patient,D

ayPatient, Out patient,D

ayCases,Cases,

Average length ofstay,Average length ofstay,

Classification of operationClassification of operation Minor / Major,Minor / Major,

Administration Costs & Expenses,Administration Costs & Expenses,

Regulatory costs,Regulatory costs,


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InsuranceInsurance

Capital & Solvency Costs,Capital & Solvency Costs,

Contingency ( to cover fraud etc.),Contingency ( to cover fraud etc.),

Medical Inflation ,Medical Inflation ,

Any additional benefitsAny additional benefits Home nursing/ CashHome nursing/ Cashbenefits,benefits,

Underwriting, Claims & Product design,Underwriting, Claims & Product design,

Age of the Insured (s) & Profit,Age of the Insured (s) & Profit,

Sales & MarketingCosts.Sales & MarketingCosts.


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InsuranceInsurance

Loyalty SchemesLoyalty Schemes

Ways to renew the ExistingPoliciesWays to renew the ExistingPolicies

Good ServicesGood Services keyElement,keyElement,Competitive Premium,Competitive Premium,

Competitive Benefits,Competitive Benefits,

Easy Renewal Process.Easy Renewal Process.


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InsuranceInsurance

Loyalty Scheme IntroducedbyInsurers :Loyalty Scheme IntroducedbyInsurers :

A Loyalty Bonus paid after the First YearA Loyalty Bonus paid after the First Year 5%5%

D

iscount after the First year,D

iscount after the First year, Profit SharingProfit Sharing Large Group Schemes (Claims),Large Group Schemes (Claims),

Member get member SchemesMember get member Schemes Introduction ofIntroduction of

a new customer by existing customer (Casha new customer by existing customer (Cashbonus etc.),bonus etc.),

No Claim Bonus (NCB)No Claim Bonus (NCB) Premium Reduction.Premium Reduction.


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Underwriting Other Types ofUnderwriting Other Types of

Healthcare InsuranceHealthcare Insurance

Different Product types applydifferent styles ofDifferent Product types applydifferent styles of

Underwriting:Underwriting:

HealthCash PlanHealthCash PlanAll preAll pre--existingconditions excluded,existingconditions excluded,

PrePre--existingConditions ClaimPaymentexistingConditions ClaimPayment --

Conditions wassome years ago (Practice vary).Conditions wassome years ago (Practice vary).


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Dental PlansDental Plans

Capitation planCapitation plan Full Dental Checkup atFull Dental Checkup at

Commencement.Commencement. RiskRatingRiskRating Capitation payment (patient),Capitation payment (patient),

Pre agreed treatmentPre agreed treatment -- excluded ,excluded ,

PrePre--existingConditions CoverexistingConditions Cover larger schemes,larger schemes,


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Major MedexMajor Medex

All preAll pre--existingconditionsexistingconditions Excluded,Excluded, Moratorium approach mayuse.Moratorium approach mayuse.

Sickness & Accident InsuranceSickness & Accident InsuranceAll preAll pre--existingconditionsexistingconditions Excluded.Excluded.


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Payment Protection InsurancePayment Protection Insurance

All preAll pre--existingconditionsexistingconditions Excluded.Excluded.

LongLong--termCare insurancetermCare insurance UnderwritingUnderwriting Like Life policies,Like Life policies,

ExclusionExclusion Specific conditions (Cancer),Specific conditions (Cancer),

RatingRatingExtra premium Charge.Extra premium Charge.


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Income Protection InsuranceIncome Protection Insurance

UnderwritingUnderwriting Like Life policies,Like Life policies,

ExclusionExclusion Specific conditions (Cancer),Specific conditions (Cancer), High Risk,High Risk,

Medical Evidence RequiredMedical Evidence Required GP ReportGP Report

(Higher benefits).(Higher benefits).


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Critical Illness InsuranceCritical Illness Insurance

UnderwritingUnderwriting Like Life policies,Like Life policies,

ExclusionExclusion Specific conditions (Cancer),Specific conditions (Cancer), RatingRatingExtra premium Charge.Extra premium Charge.


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The EndThe End

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Assessing the Risk 5