Underwriting is the process of assessing the risk linked with providing health insurance coverage. An expression generally used by life insurers, underwriting ensures that the price of the cover is proportionate to the risks an individual face.
The underwriting procedure involves an inspection and analysis of an individual’s medical and prescription history. The medical information assists in determining how risky an individual is and thus how much he should pay for insurance. It helps the insurer to decide the amount of premium to be charged according to an individual’s risk class.
Breaking down “Underwriting”
Insurance companies want to recognize in-depth about a potential policyholder before approving the applicant for health insurance. The medical history, lifestyle, demographics, and other factors that are influenced by an individual’s medical needs are all under high scrutiny!
Some companies call and undertake a medical interview. Others request a MIB(Medical Information Bureau) report of documented medical procedures and prescriptions that the applicant has undergone in the last two years. MIB’s services alert the company about the medical conditions and avocations that could be essential to an individual’s health or life expectancy.
If an individual is distinguished as a high-risk prospect, the insurer may charge higher insurance premium and/or also set some limits or exclusions to the amount of coverage the policy offers or the high-risk prospect maybe be denied coverage entirely.
Assessing the benefits of Underwriting
- Protects existing policyholders from people purchasing health insurance for medical treatment without being invested in the company.
- Protects policyholders from rate increases from overuse of benefits by sick members.
- Underwriting ensures prompter payments in the event of claims.
- An individual can save up to 30-60% by choosing a plan that underwrites policyholders.
- Health Insurance companies that underwrite tend to maintain affordable premiums and less rate increases.
Underwriting Health Insurance!
Underwritten health insurance is basically purchased to safeguard an individual’s future financial security against financial hardships concerned with illness, disability, and other such unexpected events.
It keeps people who are sick or need medical treatment from purchasing healthcare policies and using up the benefits that others have invested in. Underwriting obligates individuals with pre-existing conditions to invest in their health insurance for a full 365 days before the health insurance policy will be obligated to provide coverage for that condition.