Quality Product Research: Proposed Medical Claims Model

Introduction

One of our themes this year was to review medical insurance ratings. An important part of that process is to revise our medical claims model, to reflect the rising costs that are present in health insurance. We have consulted on claims incidence, most claimed features, and age of uptake of health insurance and average durations already. The feedback from this process has been used to update the medical insurance claims model.

Once again, difficult decisions must be made because a model is a necessary simplification of real life. We simply cannot rate according to all real life outcomes, this would be impossible for any rating house. So, while our model is unable to reflect all the complexities that is medical insurance, our aim is to use logic and reason to capture the value of the benefits being paid more significantly than others, by using claims data provided by reinsurers and insurers, and constructing a reasonable claims scenario which illustrates the scope of coverage for most users.

In our updated model, we assume a policy holder will take out a health insurance policy at age 39 (average age is backed by insurer data), they will hold this policy for 18 years and during this period make approximately $100,000 worth of claims (in reality this could be more or less).

We assign percentages for each feature, for example, Physiotherapy contributes 1% to the total weighting in medical, this equates to $1,000. All the insurers that offer cover of $1,000 or more will have an amount score of 1%, in contrast, if an insurer only offers $300 worth of cover, will have an amount score 0.3%, reflecting their lower sub-limit.

It will be no surprise that non-Pharmac has its own level of complexity, and our model is unable to reflect every circumstance. Our view is that there is a 10% chance in 18 years of a non-Pharmac claim (Incidence) and that it will be paid once completely (100% Frequency). The amount scores are meant to reflect typical claims values, while we understand that significant differences are present between insurers, the relative differences between what each insurer offers is captured. 

A summary of our proposed changes is provided in the attached PowerPoint and to download this, please click here.

If you've attended our roadshow, you may have noticed the introduction of a new infographic called 'Health Cover Benefit Maximums' this will be available to our Researchmonster/Advicemonster subscribers, and is currently in a consultation period. This is where insurers, reinsurers, advisers and external industry members provide us with feedback to ensure we are providing the most accurate information available to our users. If you would like a copy of this document, please reach out to us via email. 

A reminder that our four-factor research considers four features:

Definition x incidence x Amount x Frequency = Insurance Quality Score

For more information on our methodology please click here: why methodology matters 

Your feedback

We value getting your feedback on how these wordings are being applied to claims you may be aware of. Please email us with details of any recent claims to help us update our understanding.

Doreen Dutt, Quality Product Research Limited, researcher@qpresearch.co.nz