Page 333 - Ebook health insurance IC27

Sashi Publications

Section 9
Underwriting Medical Insurance

Introduction
Underwriting enables an insurance company to provide its services to insured persons
and to make a profit. It acts as a "filter" or "sieve" and as such the insurer's experience
will vary greatly according to the degree and efficiency of its underwriting process. Poor
underwriting makes the company vulnerable to financial loss caused by adverse selection.

Definition
Underwriting is defined as the process of selecting, classifying, evaluating, assuming
risks and rating of applicants for insurance. Applicants who meet the underwriting
standards are insured at standard rates. If the underwriting standards are not met, the
insurance is denied, or an extra premium must be paid.

Individual versus group underwriting
In individual insurance, all applicants must be evaluated separately (one-at-a-time
underwriting). Individual underwritinginvolves theassessment ofindividual's health status,
occupation, hobbies, and other pertinent information that may result in:
(i) pre-existing limitations;
(ii) exclusions of benefits;
(iii) waiting period before benefits become effective;
(iv) higher premiums; or
(v) refusal to offer coverage

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