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Health Insurance and the Role of Underwriters and Actuaries


Underwriting is essential with many prominent medical insurance plans. Insurance underwriting is about the process used by an insurance company to find out whether the prospective client is eligible or not to receive the coverage with them.

What is the role of Actuaries?

Many companies hire actuaries. An insurance actuary is a professional who is engaged in finding the financial risk to the company when it comes to insuring clients. Actuaries need to explain very minutely about the way the company operates.

They need to have exceptional analytical skills so that they can judge and estimate the risk value, as their profession requires evaluating the chances of loss. Actuaries study and conclude after deeming that various events would occur and prove to be potential risks. Their objective is to find out the costs that would come out if any risk does occur.

The Process of Underwriting

The actuary of the company provides guidelines, which are then used by the insurance company to assess whether or not a person should be taken on board for insurance cover and at what rate. Then comes the role of the underwriters who have to find out whether or not the person should be accepted when it comes to insurance cover.

Underwriters work in the company and have to calculate the risk posed by the individual and then find out the best premium rate as well as to chalk out policies that cover such risks. They need to find out a way wherein they are neither too liberal nor too conservative. If an underwriter is very conservative, then the insurance company ends up losing business.

Risk Evaluation is the Basis for Arriving at Medical Premiums

Many insurance companies provide coverage and premium rates proportionate to the risks. Such companies are of the opinion that there should be a premium for people having minimal risk as opposed to one who is more at risk when it comes to health. The premium rates are based on three categories- high health cost risk, moderate health cost risk, and minimal health cost risk. Hence, a person who smokes would be in the high-risk category and would have to pay a higher premium.

The underwriter has the onus of having good judgment so that he or she can make the best possible decisions. They have to ensure that losses are minimized for the insurance company. Hence, if you are not provided coverage or are giving a higher premium for your insurance policy, then that is because various factors were into play during your application review.

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