Page 43 - Insurance Times September 2021

A Mediclaim policy provides for reimbursement of Through actuarial analysis, an estimate of the risk associated
Hospitalisation/Domiciliary hospitalisation expenses for with providing health coverage to that person is determined
illness/disease suffered or accidental injury sustained during and priced.
the policy period. The liability in respects of all claims admitted
during the period of insurance shall not exceed the sum insured Actuarial components in Health Insurance
for the person as mentioned in the schedule/policy.
Y Sickness/Morbidity rates
The company will pay through TPA named in the schedule of Y Claim costs
the policy to the hospital/nursing home or the insured person Y Administrative costs
reasonable and necessary expenses incurred in respect of
Y Others (Profit, Solvency)
medical/surgical treatment. At present in India 24 TPA's are
servicing.
Main job of an underwriter is to identify pre-existing conditions
that add risk for the insurance companies.
Reimbursement is allowed only when treatment is taken in a
hospital or nursing home which satisfies the certain specified Moreover, for health insurance underwriting point of view,
rules in the policy.
technology can be used to identify customers availing
treatment for various ailments in line with their adherence
Relevant medical expenses incurred during period up to 30
to treatment protocol, Realtime sugar/Blood pressure
days prior to and period of 60 days after hospitalisation are
monitoring and for fitness addicts in line with their level of
treated as part of the claim.
physical activity and endurance.
To be able to assess a particular risk the insurer needs to
identify from the proposal form medical conditions which are The effective application of new underwriting technology and
likely to affect the present health of the propose and the analysis of data would enable to better understand
implications in future. customer's needs preferences and behaviours. Charging of
premium accordingly with the individual's needs and risk
In insurance sector, we usually talk about prudent proposal would be another step towards prudent underwriting
underwriting means identification of good risk and bad risk of health insurance.
for the rating purpose as well as acceptance or denial of risk/
proposal. Thus, analytical models and stimulators will allow
underwriters to understand risk cover and pricing interlinks
Bad risk should be loaded, and good risk must be discounted and eventually more and more risk base pricing model.
as well as bad risk to be denied or good risk to be accepted. Nowadays, many insurance companies are deploying
So, in particular health insurance underwriting involves analytical system to identify risk factors combined with
researching the medical history of a propose for insurance in artificial intelligence.
order to identify risk factors and fixing the price (premium)
accordingly. This will certainly help in going faster and accurate in decision
making at every point of customer journey from 'Point of
So, medical underwriting for high risk proposer may lead to sale' to 'claim settlement'. It will also help in product
exclusion of certain coverages for certain conditions/denial development as per need of customers.
of covering altogether or coverage offered only at a very
high price. Even in such cases, co-payment condition is also Underwriting philosophy of Health insurance for any
implemented for certain conditions. Insurance company would be to achieve growth with profit,
so price should have a margin to take care of following over
Prudent health insurance underwriting includes: and above the pure risk premium arrived at by analysis of ICR
1. Thorough medical history examination (Incurred Claim Ratio):-
1. Procurement cost
2. Demographic profile
2. Medical Inflation
3. Lifestyle
3. Expense of management
4. Other factors like age, family medical history, occupation
etc. 4. Catastrophe reserve

The Insurance Times, September 2021 43