Pacific Prime analysts have discovered a decreasing likelihood of clients being declined for health insurance in recent years. It is a trend that is directly attributed to the decreasing presence of strict underwriting. While this phenomenon can yield both positive and negative results for the different parties involved, PPI analysts believe the trend to be healthy for the industry overall.
In the last few years, many new insurers have joined the market, and they continue to pop up at a rapid pace. This influx of new insurers has in turn created intensifying competition in the international insurance market. Insurers not only compete with each other on premiums and customer service, but also on whether or not they would accept the client in the first place. In order to attract more clients, an insurer can make their underwriting standards more lenient so that fewer clients are declined. When one insurer becomes known for not declining clients, other insurers feel the pressure of competition and reluctantly follow suit, as to ensure that their client base does not decrease.
Strict underwriting has always been seen as a necessity by insurers in individual plans for a number of reasons. For example, if the number of new clients who intend to receive cover for pre-existing conditions increased, then premiums would become higher for everyone and insurance companies would become less sustainable. However, if the underwriting is too strict and more clients are being declined, then the growth of the client portfolio would slow down and the longevity of the company would be at risk.
Insurance companies have likely been trying to avoid this risk, and thus underwriting has become more lenient and the number of clients being declined for cover has noticeably decreased. At the same time, other underwriting methods have become increasingly common as insurers attempt to offset paying for claims that they previously would have declined.
One of the methods that insurers have been using is the offering of loadings for medical conditions. For example, if a client has a condition that exists before the plan starts, the insurer will put a surcharge onto the premium. This way, the risk is balanced if the client makes a claim regarding their pre-existing condition.
Another method that's becoming increasingly common is the increased offering of moratorium options. With a moratorium, if there has been no treatment within a certain time period, the insurer will consider covering the condition. However, there is a drawback to this in that the claims process tends to be a little slower with moratorium plans.
With underwriting becoming more lenient due to the increased competition in the marketplace, it's the clients who end up benefiting the most in the end. With more clients being accepted and with insurers' client portfolios growing, the future of the market as a whole is positive, at least in the short term. However, PPI analysts are keeping a watchful eye on this trend to see if and when it comes to a standstill and strict underwriting becomes more prevalent again.