Underwriter's Decision Making in Health Insurance Application Approval
What factors does an underwriter consider when approving an application for health insurance?
An underwriter will consider which of the following conditions in making their decision to approve an application for health insurance?
a) Applicant's race
b) Applicant's marital status
c) Applicant's medical history
d) Applicant's educational background
Final answer: When approving an application for health insurance, an underwriter will consider the applicant's medical history as it is a key indicator of future healthcare needs and potential insurance costs.
Factors Considered by Underwriters in Health Insurance Application Approval
When assessing an application for health insurance, underwriters take into account various factors to determine the risk and potential cost associated with providing coverage. Among the conditions considered, the applicant's medical history plays a crucial role in the decision-making process.
An underwriter considering an application for health insurance will primarily be interested in factors that can help assess the risk and potential cost associated with providing coverage. The most relevant of the options provided is the applicant's medical history. This is because a person's past and current health conditions are strong indicators of their potential need for future medical care, which directly impacts the risk an insurer would take in offering them insurance.
The other factors mentioned—applicant's race, marital status, and educational background—are generally not considered by underwriters for health insurance because they do not directly relate to the risk of health expenses. Indeed, using race as a factor in the underwriting process would be both unethical and illegal, as it constitutes discrimination.
Furthermore, the medical history is especially relevant due to the phenomenon of adverse selection, which occurs when those with underlying health issues are more likely to seek insurance coverage than healthier individuals, potentially leading to higher costs for the insurer if not managed correctly.