Health and Care Insurance Practice
Health and Care Insurance Practice
This domain tests morbidity-based products, provider arrangements, pricing and reserving for health and care risks. It covers private medical insurance, critical illness, disability and long-term care.
Core rules and concepts
- Health claims depend on incidence, diagnosis, treatment cost, provider tariffs and claiming behaviour.
- Community rating pools risk; experience rating reflects group claims. Adverse selection and moral hazard affect both.
- Waiting periods, pre-existing condition exclusions and deductibles control anti-selection but create disclosure risk.
- Reserves include unexpired risk, outstanding claims and incurred-but-not-reported claims; long-term care needs morbidity improvement and longevity assumptions.
Worked example
A group medical policy expects annual claims of INR 12,000 per member, expenses of INR 2,000 and a risk margin of INR 1,500. An expense load of 15% of premium applies. Solve 0.85P = 12,000 + 2,000 + 1,500 = 15,500, so P = 18,235. Check whether provider inflation and utilisation trend are already in the claim estimate.
Traps
Ignoring claim inflation and utilisation trend, pricing only on last year's loss ratio, confusing morbidity with mortality, and treating exclusions as eliminating adverse selection. Also overlooking regulatory benefit mandates.