Page 216 - IC38 GENERAL INSURANCE

F. Underwriting process

Once the required information is received, the underwriter decides the terms of
the policy. The common forms used for underwriting health insurance business
are as below:

1. Medical underwriting

Medical underwriting is a process in which medical reports are called for from
the proposer to determine the health status of an individual applying for health
insurance policy. The health information collected is then evaluated by the
insurers to determine whether to offer coverage, up to what limit and on what
conditions and exclusions. Thus medical underwriting can determine the
acceptance or declining of a risk and also the terms of cover.

However, medical underwriting involves high costs in terms of receiving and
examining medical reports. Also, when insurers use a high degree of medical
underwriting, they are blamed for „cream-skimming‟ (accepting only the best
kind of risk and denying others). It also causes frustration among prospective
clients and reduces the number of people willing to insure with those insurers as
they do not want to provide the requisite information and detail and to undergo
the required tests.

Health status and age are important underwriting considerations for individual
health insurance. Also current health status, personal and family medical
history enable an underwriter to determine presence of any pre-existing
diseases or conditions and eventually the probability of future health problems
that may require hospitalization or surgical intervention.

Further proposal forms are designed in a manner to elicit information about
past treatments taken, hospitalizations and surgeries undergone. This helps an
underwriter to evaluate the possibility of recurrence of an earlier ailment, its
impact on current or future health status or future complications. Some
diseases for which the proposer is taking medicines only may soon require
hospitalization any time soon or recur.

Example

Medical conditions like hypertension, overweight/obesity and raised sugar levels
have a high probability of future hospitalization for diseases of the heart,
kidney and the nervous system. So, these conditions should be carefully
considered while assessing the risk for medical underwriting.

Since adverse changes in health status generally occur post 40 years, mainly due
to normal ageing process, insurers do not require any medical examination or
tests of the proposer earlier than the age of 45 years (some insurers could raise
this requirement to 50 or 55 years too). Medical underwriting guidelines may
also require a signed declaration of the proposer‟s health status by his/her
family physician.

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