What is Underwriting in insurance?
When you are healthy, you certainly can get insured easily or even don’t see the necessity of purchasing insurance. However, life is unpredictable. If you have suffered from a serious illness or undergone surgery, insurance companies have the right to reject your application, even after your recovery.
The Kaiser Family Foundation in the United States estimated that nearly 30% of Americans who apply for individual health insurance would fail the underwriting process due to their health conditions.
So, what is underwriting? Bowtie will explain in the following sections.
What is Underwriting in insurance?
Before applying for medical insurance or VHIS, insurance companies will perform underwriting on each insured person, understand their health status through asking different questions, and then decide whether to accept their application or not.
When purchasing insurance from a traditional insurance company, the insurance agent will ask you questions about the health of the insured person. Even if the questions are somewhat personal, you must answer them honestly. The agent will then submit your answers to the “Underwriting Department” and wait for the results.
With virtual insurance companies, insured persons can complete the underwriting process online, which avoids awkward situations (no need to answer personal questions face-to-face).
Why do insurance companies need to conduct underwriting?
To answer that, we must first explain how health insurance works.
Insurance companies gather premiums from policyholders to establish an “insurance pool”. From which, the Insured will receive reimbursement when filing a claim.
Under this procedure, insurance companies could assess the risk by underwriting, then determine the coverage and premiums for a particular policy according to the health conditions of different clients to ensure the “insurance pool” can provide sufficient protection.
Therefore, both insurance companies and policyholders / the insured persons benefit as well. Proper risk management by insurance companies ensures that the insured persons receive the protection they deserve.
When is Underwriting required?
Generally, insurance companies conduct “underwriting” during the following times:
- When the policyholder applies for a plan
- When renewing an existing policy
- When an existing client adds new family members or coverage to their policies
- When reducing insurance deductibles or increasing coverage
However, the underwriting process for Voluntary Health Insurance Scheme (VHIS) differs slightly from general health insurance:
- Since VHIS offers “guaranteed renewal”, re-underwriting is not required during policy renewal, which eliminates the worry of losing existing coverage due to illness.
- Under the design of VHIS, policyholders can reduce deductibles at a specified age without re-underwriting, allowing a more flexible insurance planning throughout different life stages without fear of losing coverage..
💫Taking Bowtie Pink as an example, as long as the policy has already been effective for 2 years or more, the insured person can apply for a reduction or cancellation of the deductibles without re-underwriting. They should apply for reduction at least 30 days before their 55th, 60th, 65th, 70th, 75th, or 80th birthday or the policy renewal date that follows.
On a side note, all Bowtie products come with guaranteed renewal!
How long does it take to get the result of underwriting?
In traditional insurance companies, it usually takes about three weeks from the time the agent asks you underwriting questions to the time you receive the results. If a physical examination is required, it may take even longer.
For cases in virtual insurance companies, policyholders can complete the underwriting process online. For example, purchasing VHIS will only takes 10 minutes on Bowtie’s portal, with no medical examination required*, and can receive a personalized quote within 5 minutes!
Moreover, Bowtie’s customers do not need to provide any personal information before completing the underwriting process (or health declaration). Even if you cannot get a quote due to your health status, Bowtie’s underwriting process will not leave any record of “insurance rejection.”
- *Exceptions apply to individuals aged 65 and above applying for Bowtie Pink VHIS.
What happens after underwriting?
There are 5 possible outcomes of underwriting:
- Application approved
- Additional premium loading – meaning that you will be required to pay an extra premium for application acceptance
- Additional “exclusions” – meaning that insurance companies will not cover certain health issues related to a specific illness or organ
- Pending for further review until the insured person’s health condition improves, such as a past history of anal fistula
- Rejected application
Things to note in underwriting
- In any case, it is important to truthfully declare your health condition during underwriting. Otherwise, even if you are successfully insured, once the insurance company discovers a dishonest declaration, future claims may be affected and ultimately result in loss.
- Loadings and Exclusions can vary
- If you have arranged for a check-up or surgery when applying for insurance, please declare it truthfully. Although loadings and exclusion items may have been added to the policy at that time. Some insurance companies allow re-examination of the policy when you are recovered or showed non-fatal symptoms. Loadings or Exclusions may be reduced or removed.
🎀Real Case from Bowtie
A customer declared that he had “Anal Fistula” and has scheduled for surgery when purchasing the policy. Therefore, Bowtie added an exclusion (no coverage for Anal Fistula) to the policy. He then requested a review from Bowtie after the surgery and recovery.
After re-underwriting, we removed the exclusions.
Of course, not person in every circumstance could enjoy a reduction in loading or exclusions. Want to know whether your case applies?
Life is unpredictable, and so is your body condition. Going through the underwriting process smoothly today doesn’t mean it works the same way in the future.
Bowtie recommends that everyone should get themselves insured when they are healthy! If you apply for VHIS when you are healthy with no symptoms, not only you can ensure lifelong insurance protection, but also secure standard premiums’ coverage (without adding loading or exclusions).