Factors influencing health insurance premium calculation:
Health insurance premium is influenced by many factors such as Age of the prospect, gender, mortality rate, coverage, type of policy etc. Let us understand the factors influencing the health insurance premium:-
- Mortality Rate:
Health insurance premium primarily depends on the mortality rate of the group. In life insurance the premium is subject to change each year while in the health insurance the premium is fixed for a couple of years while some companies change the premium each year. This is due to the mortality rate which is calculated for a range of years in health insurance while in life insurance the mortality rate is subject to change for different age groups. It is well known that the mortality rate is higher in the elders when compared to the youngsters; this is due to the older people contracting diseases and heavily prone to illness. The resistance power among the old people is less compared to the young people. Higher the mortality rate, higher would be the health insurance premium.
Higher Mortality rate = Higher premium
Health insurance premium increases with increase in age of the prospect due to the high mortality ratio which is observed to increase as the age increases. The health insurance calculator takes the mortality ratio into consideration while calculating the health insurance premium. Hence, it is advisable to take a health insurance policy at a very young age to reduce the premium at old age as the health insurance premium calculator displays high premium at old age. The health insurance premium varies with age which is the reason there would be steep increase in the premium as the age increases.
Gender determines the health insurance premium to be paid by the customer. Few insurance companies offer different premiums for men and women, on the basis that the women are more likely to live on an average 5 years more than men which means that they are subject to more chronic disorders when compared to men. Higher your life time, higher the chance of getting contracted with different illness. This results in the higher life insurance premiums to be paid by the women when compared to men.
But it is important to note that most of the deaths occur in women at the time of pregnancy and the insurance companies would not be willing to insure a carrying woman. Due to the complication arising out at the time of delivery or during pregnancy, there are high chances that the mortality ratio can increase in women. Pregnant women are generally avoided by the insurance companies until 6 months after the pregnancy due to the complications that can arise at the time of pregnancy or post pregnancy.
- Health History:
Health history of the prospect also plays an important role in deciding the premium to be charged by the insurance company. Health insurance calculator takes into account of the health history of the prospect and decides on the acceptance of the proposal. Every insurance proposal requires the health history of the prospect to be taken into consideration before deciding on the acceptance of the proposal. Health insurance underwriting process involves getting adequate information from prospect regarding the health history such as pre existing diseases, if the prospect has undergone any treatments or operations, any hereditary diseases etc.
All these factors are considered by the underwriting team of the health insurance company before deciding the health insurance premium. The health insurance premium calculator displays the premium if there are no pre existing conditions or adverse health history. All the other cases with adverse health history and pre existing conditions will be examined by the underwriter to decide on the acceptance of the proposal.
It is very difficult to obtain health insurance policy if you have any pre existing disease such as Cancer or Heart attack or any other illness. Few companies won’t consider the health insurance proposals of customer with Diabetes and High blood pressure as these are the most common diseases which can cause some serious illness such as Heart attacks, Nerve damages etc. It is important to declare the correct medical history in the proposal form, so that the insurance company can take correct decision on the acceptance of the proposal.
Obesity and underweight are the two factors which affect the health insurance premium to be paid by the customer. Being obese can lead to a number of health problems such as Heart attack, diabetes, High BP etc which increase the mortality ratio. Underweight can also lead to contracting many diseases such as Malnutrition, Anaemia and vitamin deficiency disease etc.
Coverage is the sum insured selected by the applicant is the maximum liability of the insurance company in case of hospitalization due to an accident or illness. The sum insured is paid to the policyholder or legal heir in case of death of the policyholder. Sum insured can be increased or decreased by the customer on the Online Portal and the premium can be obtained within a fraction of seconds.
Insurance companies do not decide the sum insured required by the customer as they do in case of life insurance. The sum insured should be selected by the customer at the time of purchasing the policy. There is no calculator which determines the correct sum insured to be selected by the customer as there are different ways in which the customer can get treated. For instance one customer may get treated in a tier 2 city where the cost of heart surgery is Rs.5 Lacs and if the same customer opts to get treated for the same surgery in a tier 1 city the treatment cost would be Rs.10 Lacs. So, all these things should be taken into consideration while deciding the sum insured for a particular period.
The health insurance premium calculator increases the premium if the sum insured is increased, and reduces the premium if the sum insured is decreased. The increase in premium is due to the extra risk that needs to be taken by the insurance company which comes with increased premium. Higher the coverage opted by the customer, higher would be the premium to be paid by the customer.
- Smoking / Drinking:
The premium in the health insurance calculator increases if you have smoking and drinking habits. The health insurance premium calculator is designed to increase the premium or refer your proposal to underwriter in case you have smoking or drinking habits which are considered as risky elements in the health insurance underwriting process. The mortality rate is high in case of people, smoking tobacco and consuming alcohol. Higher mortality rate leads to higher premiums which would be reflected in your health insurance premium calculator.
Consuming tobacco and drinking liquor can cause various diseases such as Cancer, Heart attack, Diabetes etc which in turn increase the chance of death of the prospect. Hence the health insurance premiums for these categories are on the higher side when compared to people without these habits. Smoking and drinking are injurious to not only to your health but also increases your health insurance premium.
- Hobbies / Occupation:
The occupation of the prospect also decides the health insurance premium to be paid. For the purpose of insurance, occupations such as Persons working in Chemical, Fire Crackers, Army and police etc. services are classified as Hazardous and pose a high level of risk for the insurance companies in terms of hospitalization. These occupations have higher chance of hospitalization and thereby higher health insurance premium is charged.
The chances of hospitalization are high in case of people engaged in these occupations as these are hazardous occupations. Hobbies such as Scuba diving, Paragliding also attract special attention of the underwriters as there is high mortality ratio in people having these hobbies. The health insurance premium calculator determines the premium of the prospect based on the hobbies and occupation of the prospect.
- Type of Policy:
One more major factor which determines your health insurance premium using the health insurance premium calculator is the type of health insurance policy opted by you. There are different types of health insurance policies available in the market which differs in the features offered. All the different types of health insurance policies have different premiums but all of them cover the health of the insured against hospitalization.
The premium of the company depends on the service levels also; better the service, higher the premium. It is advisable to opt for the health insurance company which provides better service and extensive coverage at the most affordable premiums. The most important thing to check is the number of cashless hospitals available in your location before deciding on the health insurance policy purchase.
- Claim History of Insurance Companies:
The health insurance premium calculator also takes into consideration the claim history of the insurance company or the previous year loss ratio of the insurance company. The loss ratio is calculated as a percentage of the premium received to the claims settled. Higher the claims settled leads to increase in loss ratio which crosses 100%. For instance if the loss ratio of the insurance company is mentioned as 120%, it means that the insurance company paid Rs.120 for every Rs.100 collected as premium.
The claim history of insurance companies’ increases in certain conditions such as; inadequate pricing, Pandemics such as Corona virus which worsen the loss ratio of the insurance companies to a great extent. The recent corona virus pandemic has also increased the loss ratio of the insurance companies as the claims paid are on the record high. If the claim history of insurance company increases, then the health insurance premiums also tend to increase.
Lastly but most importantly, the health insurance premium calculator takes into consideration the co-pay option. If the customer opts for co-pay then the premium to be paid would be reduced as the liability of the insurance company would be reduced in case of hospitalization. Co-pay is the share of claim amount to be borne by the customer in case of hospitalization. For instance if you opt for 20% co-pay at the time of policy purchase and in case of hospitalization the claim amount comes to 1 Lac, then Rs.20k has to be borne by the insured in the form of co-pay.
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