Pacific Prime has unveiled yet another industry trend, this one regarding the likelihood of clients being declined for health insurance.
PPI analysts have found that the increased competition in recent years has caused strict underwriting to become less prevalent, and as a result, less clients are being declined for health insurance. It is a trend that PPI believes is healthy for the overall industry in the short term.
Insurers have always looked at strict underwriting as a necessity, as covering too many conditions would cause premiums to increase, and business would become less stable. At the same time, however, the increased competition is putting pressure on international insurers, and many are starting to employ less strict underwriting in order to ensure that their client base does not decline. Some insurers, who normally would not have had to use more lenient underwriting to attract customers, are feeling the pressure of competition and are reluctantly following suit.
Insurers are now using other underwriting methods to offset paying for claims that they previously would not have covered. For example, insurers use loadings to balance the risk when a client makes a claim for a pre-existing condition. With a loading, a surcharge will simply be placed on the premium if the client has a condition that exists before they purchase their plan.
Another way insurers offset risk is the use of moratorium underwriting, in which the insurer will cover the condition as long as the client has not sought treatment or medicine within a certain time period. The drawback to moratorium underwriting, however, is that the claims process is often slow.
Pacific Prime analysts view this trend as being positive for the industry as a whole. With less strict underwriting, more clients are able to find coverage, and insurers are able to grow their client portfolios. PPI analysts are curious to see how this trend develops in the future, and whether or not underwriting will become strict again if and when competition slows in the market.
