Health Insurance Risk Assessment PDF

Health Insurance Risk assessment  Insurance companies use a methodology called risk assessment to calculate premium rates for policyholders. Using software that computes a predetermined algorithm, insurance underwriters gauge the risk that you may file a claim against your policy. T...

Health Insurance Risk assessment  Insurance companies use a methodology called risk assessment to calculate premium rates for policyholders. Using software that computes a predetermined algorithm, insurance underwriters gauge the risk that you may file a claim against your policy. These algorithms are based on key indicators about policy holder and then measured against a set of available data to calculate the risk. Insurance underwriters carefully balance the insurance company’s profitability with that of policy holder potential need to use the policy.  Insurance underwriters seek to protect both policyholders and the companies that back these policies. Using verified research data helps underwriters evaluate an insurer’s potential exposure to claims that could result in expensive payouts. Economic forecasting, wage and industry trending and market stability assessments all are part of the data that is ultimately used to calculate the insurance premium.  If there are criteria present that tends to result in more payouts, insurer payments increases. For example, smoking is a high-risk behavior because it is known that smokers are likelier to need hospitalization. Health insurance companies may charge smokers more because there is a statistical likelihood that the policy owner will cost them money. If such risk are not analyzed, insurer will experience the surge in excess payout  Risk Assessment ….in Private sector, Health Insurance is an essential component in order: To arrive at risk proportionate premiums based on the equivalence principle (= congruence (similarity) of performance and counter- performance. To develop a profitable portfolio which supports competitiveness of the standard insurance premium.  Equivalence Principal : Equivalence Principal is the basic concept to define premiums and premium reserves. …For instance for the future or past payments due are calculated by equivalence insurance principle.  The amount of insurance premiums charged by the insurance companies is determined by statistics and mathematical calculations done by the underwriting department of the insurance company. The level of insurance premium charged to a customer depends on statistical data that exists about life history, age and health.. Insurance underwriters are professionals who evaluate and analyze the risks involved in insuring people and assets. Insurance underwriters establish pricing for accepted insurable risks. The term underwriting means receiving remuneration for the willingness to pay a potential risk. In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.  DEFINITION: Medical underwriting is a process used by insurance companies to evaluate whether to accept an applicant for health coverage and/or to determine the premium rate for the policy. Medical underwriting has historically been widely used in the individual market in most states.  Medical underwriting is a health insurance term referring to the use of medical or health information in the evaluation of an applicant for coverage, typically for life or health insurance. As part of the underwriting process, an individual's health information may be used in making two decisions: whether to offer or deny coverage and what premium rate to set for the policy. Medical underwriting refers to the process by which a life or health insurer uses an applicant's medical history to decide whether they can offer them a policy, and whether the policy will include pre-existing condition exclusions and/or a premium that's higher than the standard rate.  The two most common methods of medical underwriting are known as Moratorium underwriting, a relatively simple process, and Full medical underwriting, a more in-depth analysis of a client's health information.  It is the process in which underwriter takes the notice of the health conditions of the person who is applying for the insurance, keeping in mind certain factors like health condition, age, nature of work, and geographical zone. After looking at all the factors, underwriter suggest whether policy should be given to the person and, if so, what will be the premium. Individual Underwriting  Individual Underwriting … Different types and aspects Risks in health insurance business Objective risks as – Age and Sex, Profession, Health status, Family history Moral hazard as – Over-cautious behaviour and treatment, non- disclosure of pre-existing conditions, submission of invoices for uninsured persons, attempts to influence doctors, hospitals, socio-economic class etc.  General exclusion of pre-existing conditions. “Point of claim underwriting” Medical Underwriting “Qualified assessment at point of application”  Advantages of Qualified Medical Underwriting For the policyholder For the Insurer Fair underwriting process Less administrative work in Full protection the event of a claim Prompter payment in the Risk-adequate premium event of claims: (reduces Better portfolio point of claims underwriting performance to nondisclosure cases) Less “negative press”  Group Underwriting Group Underwriting Why do we differentiate between individual and group underwriting ?  Individual business is underwritten according to the individual risk of the insured person Group business is underwritten according to the structure and needs of the insured group Therefore, the following items are relevant for group underwriting:– size of the group – type of the group (voluntary or compulsory) – geographic distribution of employees – industry – sex distribution – age distribution – number of dependants including age and sex distribution – number of dependant children – salaries of insured group – policy holder‘s (employer‘s) administrative facilities  Underwriting supported by IT-systems  A consistent underwriting approach at point of application is one important key to create profitable health insurance business Only an IT-based assessment system can “guarantee” a consistent approach. Preference is clearly a rule based system.  Insurance companies vary, but there are common criteria that underwriters examine when calculating your premium.  Auto insurance Credit history: Good credit indicates that you are responsible and can be trusted to pay your bills on time. Research has also shown that adults with lower credit scores tend to be poorer drivers, making bad credit a risky behavior. The Federal Trade Commission found that regardless of external factors like ethnicity or income level, drivers with lower credit scores mean policyholders who make more claims against insurers. This undisputable data plays a significant role in the price of your premium.  Age: Younger drivers have been proven to be more accident-prone than experienced drivers. Consequently, it is a blanket rule that drivers are charged higher premiums until age 25. If you believe that you are a low-risk driver in spite of your age, it is up to you to demonstrate this in order to take advantage of discounts offered by insurers. Students with good grades, for example, are often offered a discount to offset the high premium. Discounts may also be offered to teens at age 21 if the driver has maintained a clean driving record.  Address: City dwellers pay more for insurance because there are more people in cities, raising the likelihood of theft, accidents or vandalism. In fact, which city you call home may also affect your premium rates.  Driving record: Your personal driving record strongly impacts your premium. If you have a history of speeding tickets, accidents or a DUI charge, the loss potential for your insurer is greater. The best indicator of future behavior is seen in the past; if you have a poor driving record you will pay high auto insurance premiums in addition to fines and fees. When you have maintained a good driving record long enough for your insurer to safely risk lowering your premium, you may be rewarded with “good- driver discount rates.”  Marriage status: Married drivers are considered more likely to drive with loved ones in the passenger seat; fewer accidents are reported in this group, perhaps because of a reluctance to take needless risks when children and family members are in their cars. A study in New Zealand proved that never-married drivers are twice as likely to file a claim for collision, making single drivers a high-risk group regardless of their safety measures.  Gender: Insurance premiums for men are skewed higher. While the practice may seem unfair, the Insurance Institute for Highway Safety conducts annual statistical analysis of various criteria among drivers. In 2010 men drove more miles on average than their female counterparts, automatically raising the likelihood of collision. Men were also shown to drive under the influence, speed or refuse to wear seat belts.  Prior coverage: Driving without insurance is considered irresponsible and so it results in higher premiums. Automobile insurance is required by every state. While you cannot be penalized for driving an uninsured vehicle after the fact, insurance underwriters correctly view this as illegal. Prior law-breaking is also a statistical indicator that poor decisions may be made again, such as reckless driving in this scenario. You must show proof of prior insurance to avoid being cast in this high-risk group.  Auto insurance companies weigh these factors and others including your occupation, military service or your education level to determine your premium payment. Your ethnicity, religion or income cannot be used against you.  Life Insurance A life insurance policy is insurance that pays out to your beneficiaries upon your death. A life insurance underwriter will examine your lifestyle to determine your life expectancy. High-risk criteria for life insurance policies include bad credit, which is statistically aligned with accident-prone behavior. Your family health history and personal health status also weigh heavily as future indicators of cost for the insurance company.  Age and gender also come into statistical play, along with dangerous hobbies like skydiving, mountain climbing or motorcycle riding. All can significantly increase your premiums. Military service members may have a war clause added to a life insurance policy in the event of death in combat. Military branches offer life insurance to soldiers who are unable to obtain private insurance.  Personal Information. full name, date of birth, zip code, phone and/or email address where you can be reached, and, possibly, your Social Security Number.  Medical History: Insurance companies will likely want to know about any and all of your significant hospitalizations, ongoing medications, surgeries, and recurring or chronic illnesses or diseases. This determines not only the parameters of your potential coverage, but also speaks to the possibility of a “pre-existing condition,” which may result in the insurance companies denying coverage. To this end, insurance adjusters may also ask for the company name, as well as start/end dates for your previous health insurance policies.  Budget It is likely that the adjuster will ask you for your ideal budget so that they can help you find affordable coverage.  Monthly Premium. : There is fairly simple logic that determines your monthly premium payment. Generally speaking, the lower your deductible is, the higher your monthly premium payment will be, and vice versa. Ratings/Reviews.  Thank you & All the best