16+8+7.5+9.

5 = 41

2011185 – Health Assessment 1

You are writing way too much

Question 1 3+13 = 16
a)
A critical illness product with tiered benefits pays out benefits linked to the severity of the
disease. The payment of benefits may be linked to less severe disease progression than
standard CI insurance. There may be multiple claims under a policy until the full sum insured
has been reached ensuring that policyholders receive benefits at different stages. Premiums do
not typically reduce with any proportionate payment. This product is more comprehensive
than standard CI insurance and the benefits may more closely match the needs of the
policyholder. Since the payment benefit is linked to the severity of the disease it means that
the policyholder may receive a partial benefit even if they have a milder form of the covered MAX 3
illness (benefit also increases as the disease progresses – providing more comprehensive
rpt
coverage). It also ensures that the benefits closely match the needs of the policyholder,
reducing the incentive for anti-selection and exaggeration of symptoms at the claims stage.
Notes: In some cases, a policy on a parent may include a rider benefit to provide similar cover
for the policyholder's children. A claim in respect of a child would not terminate the policy,
and the cost of adding this cover is usually small compared to its perceived value.

b)
Needs addressed:
The main needs addressed by introducing a tiered benefit product:
• may be a closer fit to medical distress and financial needs. True but rpt from a
• may be deemed more comprehensive and fairer.

The proposal to introduce tiered benefits in a critical illness product addresses the need for
benefits that more closely match the needs of the policyholder. By offering benefits at levels Most of this
of disease progression that would not have triggered payment under a more standard CI a rpt from a
insurance contract, the product becomes more comprehensive. The payments, part or whole,
more closely match financial need reducing the incentive for anti-selection and for
‘exaggeration’ of symptoms at the claims stage. This means that policyholders are less likely
to select against the insurer by choosing a standard contract to maximize the benefits they
will receive if they do fall ill.

In addition to addressing the need for benefits that more closely match the needs of the
policyholder, the proposal to introduce tiered benefits in a critical illness product also
addresses the need for a more competitive product offering. None of the insurer's competitors
is currently offering a tiered benefits critical illness product, so introducing this product
would give the insurer a unique selling point and a competitive advantage in the market.

The proposal to introduce tiered benefits in a critical illness product also addresses the need
for a more comprehensive product offering. By offering benefits at levels of disease
progression that would not have triggered payment under a more standard CI insurance
contract, the product becomes more comprehensive and provides greater coverage to
policyholders. This can help to attract more customers and increase the insurer's market share.

Note: the needs include the need for benefits that more closely match the needs of the policyholder,
the need for a more competitive product offering, and the need for a more comprehensive product
offering. (2)

Impact on policyholders:
 2011185 – Health Assessment 1

There may be both a positive and negative impact on the policyholder. On the positive,
policyholders would have access to a more comprehensive product that offers benefits at
levels of disease progression that would not have triggered payment under a more standard CI
rpt!!! insurance contract. This means that policyholders would be more likely to receive benefits
that more closely match their financial needs, reducing the incentive for anti-selection and for
‘exaggeration’ of symptoms at the claims stage. Additionally, policyholders would have the
option to choose between a tiered benefit CI contract and a standard CI contract, which would
give them more flexibility and control over their coverage.
On the other hand, policyholders may find it difficult to understand the additional stages of
disease that trigger benefit that are both legally and medically objective while being
understandable to the consumer. The benefits may also be priced higher than standard CI
insurance, which could make the product less affordable for some policyholders.
Policyholders may find it difficult to compare the benefits and premiums of a tiered benefit
CI contract with those of a standard CI contract, which could make it harder for them to make
an informed decision about which product to choose.

Policyholders may feel more satisfied with their coverage and more likely to renew their
policies if they have access to a product that more closely matches their needs. This could
lead to increased customer loyalty and retention for the insurer.

On the other hand, if policyholders do not fully understand the additional stages of disease
that trigger benefit, they may be more likely to make mistakes when choosing a product or
submitting a claim. This could lead to frustration and dissatisfaction with the product and the
insurer, which could lead to policy cancellations and loss of revenue for the insurer.

Policyholders may be more likely to select against the insurer by choosing a standard CI
contract to maximize the benefits they will receive if they do fall ill. This could lead to
adverse selection and higher claims costs for the insurer, which could ultimately lead to
higher premiums for all policyholders.

Note: with this type of product, there is potential for a higher degree of claims dispute as well.

Product design implications

Firstly, the insurer would need to design the benefit levels and the claim triggers at each level.
This would require a thorough understanding of the medical and legal definitions of different
stages of disease progression, as well as an understanding of the financial needs of
policyholders at each stage. The insurer would also need to ensure that the benefit levels and
claim triggers are understandable to the consumer, which could require extensive consumer
testing and feedback.

The insurer would then need to price the product appropriately. This would require a thorough
understanding of the claims experience for different stages of disease progression, as well as
an understanding of the competitive landscape and the pricing strategies of other insurers.But no one else offers this product
The insurer would also need to ensure that the product is priced in a way that is both
affordable for policyholders and profitable for the insurer.

The insurer would need to underwrite the product appropriately. This would require a
thorough understanding of the medical and financial risks associated with different stages of
disease progression, as well as an understanding of the anti-selection risks associated with
(6.5)
 2011185 – Health Assessment 1

These statements offering a tiered benefit CI product. The insurer would also need to ensure that the
are quite generic.
Apply to a tiered CI underwriting process is transparent and fair to policyholders. The insurer would need to
ensure that the product complies with relevant regulations. This would require a thorough
understanding of the regulatory environment in which the product will be sold, as well as an
understanding of the regulatory requirements for product design and pricing.

One potential implication is that the insurer may need to invest in new technology or data
analytics capabilities to better understand the claims experience for different stages of disease
progression. This could require significant investment in data collection, analysis, and
reporting, as well as the development of new models and algorithms to predict claims
experience. But why are the data requirements so onerous for this product type?

Another is that the insurer may need to develop new marketing and sales strategies to
promote the product to policyholders. This could require significant investment in
advertising, public relations, and other marketing activities, as well as the development of
new sales channels and partnerships with distributors. Why would we need new sales channels

The insurer may need to develop new training and education programs for its employees and
distributors to ensure that they understand the product and can explain it to policyholders.
This could require significant investment in training materials, online courses, and other
educational resources, as well as the development of new certification programs and other
incentives to encourage employees and distributors to learn about the product.
In the case of tiered benefits critical illness (CI) insurance, the coverage amount is linked to
the severity of the disease. However, designing such a product presents challenges in
determining benefit levels and claim triggers for each tier. Additionally, pricing the benefits
becomes a significant concern, and underwriting (both at the outset and during the claims
process) requires careful consideration. Why??

Difficulties arise in defining objective and understandable stages of disease that trigger
benefits while being legally and medically sound. Flaws in these definitions may lead to an
increase in claims even if the probabilities were initially anticipated, especially in cases where
disputes favour the policyholder.

Pricing the benefits becomes complicated due to the scarcity of relevant statistics for the
New product in the market so this is a bit of an understatement
current definitions and limited historical insured experience. The evolving nature of the
product, with the addition of more diseases over time, makes it challenging to gather
True of any CI. Relate
to the specifics of this sufficient data for accurate pricing. As a result, uncertainties may force actuaries to include
question
significant margins in their assumptions, leading to a potentially unaffordable product. The
lack of abundant relevant data as the product evolves further adds to the complexity of
pricing and leaves the policyholder with a confusing picture of coverage. The
With this design the risk is of disputed claim amounts
interconnectedness of various illnesses may give rise to more disallowed claims and customer
dissatisfaction, leading actuaries to consider excluding guarantees and seeking support from
knowledgeable reinsurers, resulting in an expensive and less marketable product.

Underwriters face the prospect of more potential claims being brought forward, which
increases the significance of pre-existing conditions and material non-disclosure.
Consequently, initial underwriting processes may need to become more stringent, incurring
additional time and costs. Claims managers also encounter more complex claims forms and
considerable pressure from policyholders (and possibly insurance advisers and general
practitioners) to upgrade to higher benefit levels. (5)
 2011185 – Health Assessment 1

Additional policy design implications:

• stricter effective underwriting and claims control to protect against anti‐selection and
rpt
nondisclosure.
• More than usual care in policy wording (0)
• Since data is scarce, large margins and/or co‐operation of a reinsurer might be needed.
MAX 13

Question 2 5+3 = 8
a)
Advantages:
• Unit-linked products offer greater flexibility in terms of investment options and policy
features. Policyholders can choose from a range of investment funds and can switch
between funds as their needs and circumstances change. They can also choose from a
range of policy features, such as CI, LTC, and IP cover, and can customize their
No, what type of a product it is would be designed
policies to meet their specific needs. by the insurerbut the degree of savings vs protection
would be at the insured's discretion
• Unit-linked products also offer greater transparency in terms of charges and fees.
Policyholders can see exactly how much they are paying in charges and fees and can
compare the costs of different investment funds and policy features. This can help to
build trust and confidence in the product and the insurer.
• They also have a potential for higher returns than conventional products, as
policyholders can benefit from the performance of the underlying investment funds.
This can be particularly attractive to policyholders who are looking to maximize their
returns over the long term.
• Unit-linked products may offer tax benefits to policyholders since they’re structured
as investment products rather than insurance products. This can make them more
attractive to policyholders who are looking to minimize their tax liabilities.
• They may encourage higher levels of policyholder engagement, as policyholders have
more control over their investments and can see the impact of their investment
decisions on the value of their policy. This can help to build stronger relationships
between policyholders and insurers and can lead to higher levels of customer
satisfaction and loyalty.
• The product may offer opportunities for insurers to cross-sell other products and
services, such as investment advice, financial planning, and wealth management. This
can help to increase revenue and profitability for insurers and can help to build
stronger relationships with policyholders.
• Greater opportunities for insurers to innovate and differentiate their products from
those of their competitors. Insurers can develop new investment funds and policy
features that meet the changing needs of policyholders.Although this is a bit iffy - is offering a new investment choice
really innovation
• Greater opportunities for policyholders to diversify their investments and reduce their
overall investment risk. They can invest in a range of different funds and asset classes
and can switch between funds as their needs and circumstances change. (Reduce
market volatility) Again iffy. To the extent that your unit-linked product is a savings product eg a prefunded LTCI, yes.

Disadvantages:
• Unit-linked products carry investment risk, as the value of the policy is linked to the
performance of the underlying investment funds. If funds perform poorly –
policyholders receive less than expected or lose money.
MAX 5
 2011185 – Health Assessment 1

• Unit-linked products can be more complex than conventional products since it

involves a range of investment options and policy features. (Difficult for
policyholders to understand and make decisions)
• Unit-linked products are more expensive due to additional charges like fund
management charges, policy administration charges, and risk charges. These charges
can make the product less attractive to cost conscious policyholders.
• Potential for mis-selling which can lead to policyholders investing in funds that are
not suitable for their needs or purchasing policy features that they do not need or
understand.
• They may create conflicts of interest for insurers, as they may be incentivized to
promote certain investment funds or policy features that are more profitable for the
insurer, rather than those that are best for the policyholder. (Lead do reputational
damage)
• Subject to more complex regulatory requirements than conventional products since
there’s a range of investment options and policy features that may be subject to
different regulatory regimes. (Increase the risk of fines and penalties)
• Unit-linked products may be more susceptible to mismanagement than conventional
products, as they involve a range of investment options that require careful monitoring
and oversight.

b)
• Insurers can generate additional revenue from policyholders who are looking for
comprehensive health coverage. This can help to increase the insurer's profitability
The exp here is odd. If people wanted this they could buy it from the insurer
and market share. separately. How would it follow that a combined product then improves
• Insurer can reduceprofitability
their administrative costs, as they only need to manage one policy
rather than two. This can help to increase efficiency and reduce costs.
• Better management of their risk exposure, as they can balance the risk of critical
Not following. These risks are
correlated to a large degree illness claims with the risk of medical claims. This can help to reduce the insurer's
overall risk and improve their financial stability.
• By offering a more comprehensive and convenient service, policyholders benefit from
a wider range of benefits and services and can manage their health coverage more
easily. This can help to increase customer satisfaction and loyalty.
• Insurers can differentiate themselves from their competitors and meet the changing
Assuming that no one else offers this?
needs and preferences of policyholders. This can help to increase the insurer's
profitability by providing a competitive advantage.
• Insurers can benefit from cross-selling opportunities since policyholders may be more
likely to purchase additional products and services from the same insurer.
• By offering a combined product, insurers can improve their underwriting process.
They can use the same underwriting criteria for both critical illness and medical
claims. This can help to reduce the risk of adverse selection and improve the insurer's
overall risk management.
• Enhance product design as they can develop new innovative features that meet the
changing needs of policyholders.
• Insurers can improve their claims management process, as they can use the same
claims management system for both critical illness and medical claims. This can help
to reduce the risk of errors, delays and improve the insurer's overall customer service.
3
Question 3
a) 2.5+5 = 7.5
 2011185 – Health Assessment 1

•Older people (over 60s) require more medical services and treatments due to age-
related health issues. Thus, offering a tax relief to over 60’s individuals help reduce
the financial burden of healthcare cost specially at a time when these individuals have
a fixed source of income.
• The government can reduce the burden on public healthcare by incentivizing these
individuals to opt for PMI (This helps reduce the strain on public healthcare systems).
Private insurance can provide an alternative option for seniors, freeing up resources in
the public sector to focus on other age groups or critical medical cases.
• The government can encourage them to seek early detection and prevention of health
issues, leading to better overall health outcomes and potential cost savings in the long
run (since the individuals have a financial stake in it).
• The government will be promoting private medical insurance among seniors, and thus
support the private healthcare sector. (Allowing for increased investment in this sector
and resulting in better care for all age groups)
• Providing tax relief on PMI for the over 60s can help bridge the gap between what is
available through public healthcare and what might be necessary for comprehensive
medical care.
• By incentivizing seniors to purchase PMI, the government can stimulate the private
medical insurance industry, leading to economic benefits and increased employment
opportunities.
• Since health-related expenses can be a significant financial burden, especially for
Needed more seniors who may be living on fixed pensions or retirement savings. Tax relief on PMI
on why the govt can ease this burden and provide better stability during retirement. Offering tax relief
may not want to on PMI to the over 60s can help make private healthcare coverage more affordable
extend the benefit and accessible during a time when their income may be limited.
to everyone • By targeting tax relief to the over 60s, the government can address the specific
healthcare challenges faced by this age group.
• Since this age group of individuals are most likely retired and unemployed, they may
not have employer-sponsored health insurance. By providing the tax relief on PMI the
government can encourage these retirees to consider private health insurance options.
• In a way this can help government keep a balance between public and private
healthcare provisions, since they can direct resources to support younger populations
through public healthcare systems while incentivising over 60s to rely on private. (So
as to not burden the public system) 2.5

b)
• Advances in medical science are likely to have a significant impact on claims
experience under PMI. On the one hand, medical advances can lead to more effective
treatments and better health outcomes, which can reduce the incidence and severity of
certain medical conditions and lower the overall cost of claims. For example, new
drugs and therapies for cancer, heart disease, and other chronic conditions can help to
improve survival rates and reduce the need for expensive hospitalizations and
surgeries.
• On the other hand, medical advances can also lead to higher claims costs, as new
treatments and technologies may be more expensive than existing ones. For example,
new drugs and therapies for rare diseases or genetic disorders may be very expensive
and may not be covered by standard PMI policies. These advances in medical science
may lead to the development of new diagnostic tests and screening procedures which
can increase the number of people diagnosed with certain medical conditions and lead
 2011185 – Health Assessment 1

to higher claims incidence rates. (The impact of advances in medical science on

claims experience under PMI will be complex and will depend on a range of factors
like, the nature of the medical condition, the availability and cost of treatments, and
the effectiveness of preventive measures.)
• So as mentioned, new treatments and technologies may be more expensive than
existing ones. This can lead to higher claims costs for insurers, as they may need to
cover the cost of these treatments for their policyholders. Also, some treatments may
not be covered by standard PMI policies, which can lead to higher out-of-pocket costs
for policyholders.
• Advances in medical science can lead to the development of new diagnostic tests and
screening procedures, which can increase the number of people diagnosed with certain
medical conditions. This can lead to higher claims incidence rates for insurers, as
more people may be seeking treatment for these conditions.rpt
• While medical advances can lead to more effective treatments and better health
outcomes, they can also lead to the development of more severe and complex medical
conditions. For example, new strains of antibiotic-resistant bacteria can be more
difficult and expensive to treat, leading to higher claims costs for insurers.
• Advances in medical science can also lead to the development of new preventive
measures, such as vaccines and screening tests. These measures can help to reduce the
incidence and severity of certain medical conditions, which can lower the overall cost
of claims for insurers. For example, vaccines for HPV and hepatitis B can help to
prevent certain types of cancer, while screening tests for breast and colon cancer can
help to detect these conditions at an earlier stage when they are more treatable.
• Improvements in medical science can lead to changes in the cost of healthcare, which
Going off track here. can impact the premiums that insurers charge for PMI policies (if the premiums are
You were asked about
claims experience lower than more people are covered and hence more people are likely to claim and
converse). For example, if new treatments or technologies become available that are
more expensive than existing ones, insurers may need to increase premiums to cover
these costs. Conversely, if new preventive measures become available that reduce the
incidence and severity of certain medical conditions, insurers may be able to lower
premiums.
• These advances in medical science can also impact the design of PMI policies. For
Even more off track example, if new treatments become available that are not covered by standard
policies, insurers may need to develop new products or riders to cover these
treatments. Similarly, if new preventive measures become available, insurers may
need to adjust their policies to encourage policyholders to take advantage of these
measures.
• They can also impact the way that insurers manage claims. For example, if new
diagnostic tests become available that can detect medical conditions at an earlier
stage, insurers may be able to intervene earlier and prevent more serious and costly
medical events. Similarly, if new treatments become available that are more effective
than existing ones, insurers may need to adjust their claims management processes to
ensure that policyholders receive the most appropriate and cost-effective treatments.
• They can also impact the customer experience of PMI policyholders. For example, if
new treatments become available that are more effective than existing ones,
policyholders may be more satisfied with their coverage and more likely to renew
Off track
their policies. Conversely, if new treatments become available that are not covered by
standard policies, policyholders may be dissatisfied with their coverage and may
switch to other insurers.
 2011185 – Health Assessment 1

• New data analytics are also having a significant impact as insurers are increasingly
using data analytics to identify patterns and trends in claims data, which can help
Meant to be them to develop more effective underwriting and pricing strategies. For example,
talking about insurers can use data analytics to identify policyholders who are at high risk of
medical
advancements developing certain medical conditions, and to develop targeted interventions to
prevent or manage these conditions.
• Healthcare providers such as hospitals and clinics are also impacted. For example, if
new treatments become available that are more effective than existing ones, healthcare
You were asked providers may need to invest in new equipment and training to provide these
about the impact
on PMI treatments. Similarly, if new preventive measures become available, healthcare
providers may need to adjust their practices to encourage patients to take advantage of
these measures.
• Changes in frequency of claims made can also be impacted, which would impact the
claims experience. For example, if new preventive measures become available that
reduce the incidence and severity of certain medical conditions, this can lead to a
reduction in claims frequency. Conversely, if new treatments or technologies become
available that are more effective than existing ones, this can lead to an increase in
claims frequency. rpt
• Changes in claim severity can also be impacted, which would impact the claims
experience. For example, if new treatments or technologies become available that are
less invasive and have fewer side effects than existing ones, this can lead to a
reduction in claims severity. Conversely, if new treatments or technologies become
available that are more expensive than existing ones, this can lead to an increase in
claims severity. rpt
• Advances in medical science can also lead to changes in the duration of claims under
PMI policies. For example, if new treatments or technologies become available that
More a reduction in are more effective than existing ones, this can lead to a reduction in the duration of
duration for the episode
of sickness. claims. Conversely, if new treatments or technologies become available that are less
effective than existing ones, this can lead to an increase in the duration of claims.
5
Question 4 2+4+3.5 = 9.5

a)
• Activities of daily living (ADLs) are basic self-care tasks that individuals must
perform on a daily basis, such as bathing, dressing, and eating. The ability to perform
these tasks independently is often used as a measure of an individual's level of frailty.
• Instrumental activities of daily living (IADLs) are more complex tasks that
individuals must perform on a daily basis, such as managing finances, preparing
meals, and using transportation. The ability to perform these tasks independently is
A lot of these
are not functions also often used as a measure of an individual's level of frailty.
• Cognitive function is an individual's ability to think and remember. Declines in
cognitive function is associated with increased frailty.
• Mobility. Decline in mobility is often associated with increased frailty.
• Any Chronic health conditions, such as diabetes, heart disease, and arthritis, can
contribute to an individual's level of frailty.
• The persons social support (network of family, friends, and caregivers). The
availability of social support can impact an individual's level of frailty.
• Individual's dietary intake and nutritional status (Nutrition). Poor nutrition can
contribute to an individual's level of frailty.
 2011185 – Health Assessment 1

• The level of physical discomfort or distress they are in (pain). Chronic pain can
contribute to an individual's level of frailty.
• Their mental health (are they experiencing any sort of depression, anxiety, and other
mental health conditions) since these can contribute to an individual's level of frailty. 2

b) usually more worried about number of claims being higher than anticipated
• Claims inception risk is the risk that a policyholder will make a claim shortly after the
policy is issued.
longer than anticipated
• Claims duration risk refers to the risk that a policyholder will require care for an
extended period of time, resulting in higher claims costs.

To mitigate these risks-

• The insurer can use underwriting to assess the health and risk profile of potential
policyholders before issuing a policy. This can help to reduce claims inception risk by
identifying individuals who are at higher risk of requiring care in the near future.
• The insurer can use a frailty index to determine when policyholders are eligible for
Read the benefits. This can help to reduce claims duration risk by ensuring that benefits are
question only paid to individuals who meet a certain level of frailty.
• Benefit limits are set to cap the amount of benefits that policyholders can receive. This
can help to reduce claims duration risk by limiting the amount of time that
policyholders can receive benefits.
• The risk premium can be adjusted based on the risk profile of the policyholder. This
This isn't really can help to reduce claims inception risk by ensuring that premiums are sufficient to
a mitigation cover the expected claims costs of the policyholder population.
• Reinsurance can be purchased to transfer some of the claim’s risk to another insurer.
This can help to reduce claims duration risk by limiting the number of claims that the
insurer is responsible for paying.
• The insurer can provide care management services to policyholders to help them stay
healthy and independent for as long as possible. This can help to reduce claims
duration risk by delaying the need for care and reducing the duration of care required.
• The insurer can establish provider networks to ensure that policyholders have access
to high-quality care at a reasonable cost. This can help to reduce claims duration risk
by ensuring that policyholders receive appropriate care in a timely manner.
• Moratorium underwriting involves excluding coverage for pre-existing conditions for
I would have a certain period of time after the policy is issued. The insurer can use this as it helps to
saved this point reduce claims inception risk by ensuring that policyholders are not able to make
for c
claims for conditions that they had before the policy was issued.
• The insurer can use waiting periods, which involve delaying the payment of benefits
for a certain period of time after the policy is issued. This can help to reduce claims
duration risk by ensuring that policyholders are not able to receive benefits for a
certain period of time after they become eligible. Until the WP expires they are not eligible to claim
• A care coordination service can be provided by the insurer, to policyholders, to help
them navigate the healthcare system and receive appropriate care. This can help to
reduce claims duration risk by ensuring that policyholders receive timely and
appropriate care, which can help to prevent the need for more extensive care in the
future.
 2011185 – Health Assessment 1

• Wellness program can be offered to help individuals improve their health and prevent
need for future care. This will lead to a reduction in claims inception and claims
duration risk by promoting health behaviour and reducing likelihood of illness/injury.
• The insurer can use provider payment models that incentivize providers to deliver
high-quality care in a cost-effective manner. This can help to reduce claims duration
risk by ensuring that policyholders receive appropriate care that is not unnecessarily
expensive.
• The insurer can use fraud detection techniques to identify and prevent fraudulent
claims. Which will help to reduce claims costs and mitigate claims duration risk by
ensuring that benefits are only paid for legitimate claims. 4

c)
The Moratorium Underwriting approach can be a suitable underwriting method for certain
types of insurance policies, like PMI since it provides several advantages.
• It is a simple and straightforward approach that does not require extensive medical
underwriting at the point of acceptance, which can make it easier and faster for
policyholders to obtain coverage.
• It allows policyholders to claim for any condition other than those that were pre-
existing in a defined period before acceptance. This can provide policyholders with
more flexibility and coverage options.
• The exclusion for pre-existing conditions is waived after a period of time (usually two
or three years) if the policyholder receives no further treatment for the condition. This
can provide policyholders with more comprehensive coverage over time.
• It can be a cost-effective approach for insurers, as it reduces the need for extensive
medical underwriting at the point of acceptance. This can help to keep premiums
lower for policyholders.
• It can provide greater transparency for policyholders, as they know that their coverage
will be based on their medical history at the time of claim rather than at the point of
acceptance. This can help to build trust between policyholders and insurers.
• It can help insurers to manage their risk by excluding coverage for pre-existing
conditions for a defined period of time. This can help to reduce the likelihood of
adverse selection and limit claims costs.

There are however some drawbacks with this approach:

• Policyholders may not know exactly what conditions are excluded from coverage
until they make a claim. This can create uncertainty and confusion for policyholders.
• The exclusion for pre-existing conditions can limit the coverage provided by the
policy, particularly in the early years of coverage.
• The Moratorium Underwriting approach may attract policyholders who are more
likely to have pre-existing conditions, which can lead to adverse selection and higher
claims costs.

Note: Moratorium Underwriting can make insurance more accessible to individuals who may have
difficulty obtaining coverage through traditional underwriting approaches. This can include
individuals with pre-existing conditions or those who are older or have a higher risk profile.

The overall suitability of the moratorium underwriting approach depends on the specific
needs and preferences of the policyholders and the insurer and as this approach has some
 16+8+7.5+
2011185 – Health Assessment 1

advantages, such as simplicity, flexibility, and cost-effectiveness, it also has some potential
disadvantages, such as uncertainty, limited coverage, and adverse selection.

If the insurer's policyholders value simplicity, flexibility, and cost-effectiveness, and are
willing to accept the limitations of the Moratorium Underwriting approach, then it may be a
suitable approach to adopt. However, if the insurer's policyholders value greater transparency,
comprehensive coverage, and certainty, then a different underwriting approach may be more
suitable.
3.5