Page 102 - Ebook health insurance IC27

The Insurance Times

checkups to assess their health risk profile. Such investigation can also provide
indication for the existence of any pre-existing medical conditions.

Drugs, alcohol and tobacco consumption are difficult to detect and are seldom
declared by the proposer. Nondisclosure of these poses a major challenge to the
underwriters. Obesity is another problem which needs to addressed carefully by
the underwriters as they can create major health problems later.

(b) Non- Medical Underwriting - Most proposers for health insurance do not need
medical examination. If the proposers disclose all the material facts completely
and truthfully, and the same is verified by the agent, then the need for medical
examination could have been reduced further.

Even a slight increase in the claims ratio can well be compensated for by the
savings in the costs of medical underwriting and other procuring expenditures due
to increase in inconvenience in completing the proposal forms. Therefore, insurers
usually create a 'medical grid' to indicate at what age and stage should medical
underwriting be done, and non-medical limits are carefully designed to strike an
appropriate balance between business and risk.

(c) Numerical Rating Method - This process is adopted, where numerical or
percentage assessments are made on each components of the risk. Factors like
age, sex, race, occupation, residence, environment, build, habits, personal and
family history are examined and numerically scored based on pre- determined
criteria.

The facts are not easy to ascertain and prejudice may colour the reports.
Nevertheless, the basis of the Numerical system is most logical.

106 Guide for Health Insurance