What is underwriting and how it impacts your health insurance plan?

Underwriting is the process through which an insurance company uses medical information to evaluate the risk of insuring an individual. The insurer also assesses whether providing health coverage to that particular individual would be profitable for the company or not.

Following these steps, the insurance company decides the cost of the policy and sets a premium amount. In simple terms, medical underwriting is the process of assessing risk to determine the premium.

Read through the following sections to know the meaning of underwriting in detail and how it can impact your health insurance plan.

The above plans and premiums are for AED 1,000,000 Sum insured for 1 Adult of 30 Years for Dubai city.

How does medical underwriting work?

During health insurance underwriting, your insurance company seeks to understand your medical condition as much as possible. Therefore, they would want to talk about specific details, such as your lifestyle, medical history, and demographics, among others. Find about them below:

Medical history

This is the most important question that an insurer asks. It helps them understand how frequently you are likely to file claims. You will also have to provide a few additional details, such as treatment dates, diagnostics, consultation details, and more.

Height and weight

This is specifically asked to determine your BMI. You will have to pay a higher premium if you do not meet the ideal body mass index.

Medical history of family

Your family's medical conditions play a crucial role in your genetics. Thus, this question is asked to ensure whether you carry the risk of catching a similar condition or not.

Lifestyle

If you smoke or drink heavily and regularly, consider disclosing this detail to your insurer during the medical underwriting process.

Occupation

Some jobs tend to put the applicant at high risk for catching several diseases. Thus, details about your job are necessary to determine the premium amount.

After considering all these questions, if you are considered a high-risk individual, the company might decide to charge you a higher premium and set various limitations. Moreover, you might even have to face rejection, depending on the insurer.

This entire process is conducted by professionals who work in accordance with the insurance company. Underwriters are trained in determining the associated risks and the ways to prevent them. Then, they review specific areas to know how much actual risk a person carries. That said, the basic work of an underwriter typically relies on actuarial analysis.

Impact of medical underwriting on different health insurance plans

Health underwriting affects insurance plans in different ways. These products can be classified into different types depending on their pricing methodology.

Having said that, you can avail the following types of insurance products in UAE:

Indexed price

This type of health insurance requires the insurance company to sell the product within a specific price range. The DHA in Dubai and HAAD in Abu Dhabi regulate these insurance products. Insurance companies typically underwrite these projects beforehand for a certain set of benefits and set the premium at a specific price range.

Community rating

In this type of plan, an insurer offers a health insurance policy with a predefined table of benefits. It is also set within a specific population or territory at the exact price, without medical underwriting, irrespective of an individual's health conditions. These products are pre-underwritten and follow all guidelines set by the insurance company. A few examples of community rating insurance plans are SME health insurance products.

Group tailor-made

They are also called experience-based rating schemes. This is because, in this case, the insurer sets the insurance cost depending on the requirements of a group and past claim history. A company evaluates the risk of insuring based on the nature of industry/business, group size, demography, existing ToB, claims loss ratio and other factors.

It is crucial for you to understand medical underwriting guidelines before proceeding with the purchase of a health insurance plan. Also, know that an underwriter is different from an insurance agent. The primary job of insurance agents is to approach the insurer with your case and negotiate on your behalf. On the other hand, an underwriter protects insurance companies by assessing the associated risks. However, you can discuss an underwriter's decision with your agent for further negotiation.

Medical underwriting is a long and vast process that requires time. Thus, your prime duty is to bear with the process and have patience. If you are found as a risky individual, note that your premium amount can go up. This can take a toll on your daily finances. To reduce this, you can follow some tips and tricks to reduce your health insurance premium.