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Predictive Medical Information and Underwriting

Published online by Cambridge University Press:  01 January 2021

John H. Dodge
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Extract

Predictive medical information is used by underwriters to assess the future risk of a claim in medically based insurance products such as health, life, and disability insurance. Medical underwriting involves the science of evaluating medical information to determine the risk for groups of individuals with various medical conditions. In disability insurance, this involves an evaluation of medical information to predict the risk of becoming disabled.

Before discussing medical underwriting, an understanding of certain terms used by disability insurance companies and the products that are available is required. The first is the definition of disability. The Americans with Disabilities Act (ADA) defines disability as the following:

A physical or mental impairment that substantially limits one or more of the major life activities; or has a record of such an impairment; or is regarded as having such an impairment even when no impairment exists, no substantial limitation results from the impairment, or the impairment is only substantially limiting because of the attitudes of others.

Type
Special Supplement
Information
Journal of Law, Medicine & Ethics , Volume 35 , Issue S2 , Summer 2007 , pp. 36 - 39
Copyright
Copyright © American Society of Law, Medicine and Ethics 2007

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References

Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101–12213 (2000).Google Scholar
Provident Life and Accident Insurance Company, Individual Income Protection Insurance (2001): at 10.Google Scholar
Individual business disability insurance includes business overhead, buy/sell, and key person insurance. Business overhead reimburses the business for the insured individual's share of the expenses. Buy/sell provides the funding for the purchase of an individual's share of a business if disabled. Key person pays a benefit to the employer to hire a replacement for a key employee in the event of that individual becoming disabled.Google Scholar
Group disability policies may have an option elected by the employee to purchase an increased amount of coverage. Some employees will apply for coverage after the open enrollment period ends (late enrollees). The amount of optional coverage and the entire amount of coverage for late enrollees are typically medically underwritten. Individual policies may be offered to groups of people (e.g., all the partners in a law firm) with a set amount of coverage guaranteed to be issued on a standard basis. This is done when the group is large enough and has other characteristics so that it has the risk dynamics of group disability insurance. The guaranteed amount is not medically underwritten, but any additional coverage applied for is medically underwritten.Google Scholar
Optional benefit riders include cost of living adjustment (COLA) and future insurability option (FIO). COLA provides protection against inflation. It can be linked to the federal consumer price index or be a percentage determined at the time the policy is issued. FIO provides the ability to purchase additional insurance in the future without medical underwriting at that time.Google Scholar
Individual disability insurance policies have generally been non-cancelable contracts. These contracts cannot have their premium increased. Some policies are issued on a guaranteed renewable basis, and there is the possibility of increasing the premium.Google Scholar
This is the concept that underwriters have one chance to assess the risk correctly. If an applicant disagrees with the underwriter's decision, s/he may appeal and provide additional information supporting a different assessment of the risk associated with the particular medical disorder. Companies also have a policy change area that receives requests to alter policies by actions such as decreasing the premium or removing exclusion riders. This request may be based on a clinical improvement in the condition or advances in medical knowledge.Google Scholar
UNUM Life Insurance Company of America, Group Longterm Income Protection Insurance (2001): LTD-BEN 7.Google Scholar