Page 181 - Ebook health insurance IC27

Sashi Publications

Insurance companies use the actuaries' guidelines in order to determine if a person
should be accepted for coverage and at what rate.

Underwriters calculate an individuals risk, establish appropriate premium rates, and
write policies that cover this risk. They have to be careful not to be too conservative or
too liberal. Insurance companies could lose business if the underwriter is too conservative.

Or they could cause the company to lose money in claims if they are too liberal. Some
of the factors underwriters consider are a client's medical history, height and weight,
age, medications they are taking, operations they have had, and if they are still under a
doctor's care.

Some insurance companies offer levels of coverage and rates depending on the risk that
they believe they would be taking to insure the individual. These companies believe that
the cost of covering expenses of someone with minimal health care needs should not be
unfairly offset by someone whose health can be predicted to require costly care.

The premium rates are often determined in three categories: minimal health cost risk,
moderate health cost risk, or high health cost risk. As an example, a person who uses
tobacco would be considered a high risk for health care, and would pay a much
higher premium than a person who would be considered a minimal or moderate risk.
If the loss would be too great, the provider would decline coverage; or they may offer
coverage with a rate higher than a person with a minimal or moderate underwriting
risk.

Role of actuaries are to
 analyse the expenses

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