Chapter 7: Underwriting Flashcards
Risk factor: Physical Condition
This is to protect insurance company from adverse selection
Risk factor: Moral Hazards
Lifestyle and habits
Skydives on a regular basis, dangerous hobbies, excessive drinking/drug use
Risk factor: Occupation
Factory workers may have more risk than an office manager
Other risk factors…
Age, sex, history, avocations
Insurable interest
Exists if the applicant is in a position to suffer a loss from medical expenses or is unable to work
Four classifications of applicants
Standard: average
Preferred: lower rates above standard
Uninsurable: denied coverage
Substandard: higher than average risk, charged higher premiums, or uses riders to exclude specific coverage
Interest for health insurance
Premiums are invested to earn interest
This can reduce premium amounts that would be required by the Policyowner
Benefits
The greater the benefits the higher the premiums
Taxation of Disability Income Insurance
- premiums paid are not tax deductible for an individual
- for an employer when benefits are paid to an employee the premiums are tax deductible
Policy design
- cost containment efforts
- higher deductible will help limit claims and contain costs
- coinsurance helps split cost between insured and insurance company
Mandatory Second Opinions
To reduce unnecessary surgical operations
Insured will pay more out of pocket without second opinion
Can help contain the cost if a group medical plan
Ambulatory Surgery
Outpatient procedures where no overnight hospital stay is necessary
