Health Insurance pays medical expenses that are incurred to the insured due to any variation in their health condition. Health insurance Market is considered as an Imperfect Market due to reasons such as information asymmetry, risk selection and moral hazards.
In India, out-of pocket expenses incurred by people on their health are very high as compared to the other countries which resulted in more and more people are choosing health insurance policy nowadays.
Health Insurance Underwriting
Underwriting is the process of risk selection and risk pricing. Underwriting is required to set an appropriate balance between risk and business so that retain the competitiveness of the market and yet give profitability for the insurer. The process of underwriting is completed when the received information is carefully assessed and classified into appropriate risk category.
The core principles of underwriting are:
- Utmost good faith,
- Insurable interest ,
- Contribution and
- Proximate cause
Documents required for Health insurance underwriting are:
- Proposal form,
- Age proof,
- Financial documents,
- Medical reports and
- Sales reports.
Underwriting under health insurance is a process is used by the insurance companies to decide the health position of individuals applying for health insurance policies. Factors which affect a person’s morbidity are age, gender, habits, occupation, and family history, past illness, current health status and place of residence.
Numerical rating method of underwriting is generally used by the insurer to access the risk. Under this method a numerical or percentage assignments are made on each component of the risk.