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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Underwriting practices and renewal rates

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: You refer to complaints and trends in Health Insurance and go on to explain that Golden Rule is in and Assurant (Time) is out. What about the fact that Golden Rule underwrites their policies at time of claim rather than at issue? What are the Golden Rules history of rate increases, where they low ball rates the first year and them make it up in subsequent years?

A: True, a drop in complaints does not necessarily mean that the underlying insurance is any better. But underwriting practices and renewal rates may not be as important to health insurance buyers as insurance agents would like to believe. Some people (apparently including members of the Insurance Commissioners' association) believe that complaint histories and trend ratios are useful data to collect. Previous columns explained why I really do not think this raw data is meaningful to consumers except in the few instances where the experience was so overwhelmingly skewed. (The example I cited was that complaints about Mega Life outnumbered complaints about all other health insurance combined during 2000-2003). Underwriting practices and tiered renewal pricing are important issues to health insurance agents but there is no real indication that these are seriously considered by insurance buyers. Market data shows that the overwhelming primary purchase consideration is price alone, not value. And since the average life of an average individual health insurance policy is less than 13-16 months (depending on whose data is used), I am not sure that renewal rates are really important to consumers. Granted, health insurance agents disagree. OnlineAdviser has already weighed in against the practice of tiered renewal rating and has been politically active to discourage the practice. Still, many health insurance companies continue to use this practice.


More resources:

Trends in Insurance Complaints