Flashcards in Chapter 4 Deck (17)
Define "preferred risk" from a life insurance perspective
individuals demonstrating low mortality risk features that allow that group to be assigned favourable product pricing.
Are preferred risk definitions uniform among companies?
No, since there are competitive and companies aim for differentiation rather than duplication in this category.
What was the purpose of the Framingham study?
identify risk factors for CAD.
paticipants aggreed to be evaluated and studied over a corse of their life time. death certificates were reviewed for accuracy of the study.
This helped provide enough background for the development of a program of credits to be applied to reduce debits associated with ratable disease.
Why did blood testing become more used in 1980's.
d/t the spread of HIV.
This was the catalyst for increased blood testing, which lead to aquire more information about the insurerd.
When did preferred products effectively sweep the inducstry
last 1980's and early 1990's
There are basically two preferred risk stratification models in use today. What are they
one model applies point groupings and the other applies "knock-out" criteria to define different risk calsses.
define point systems.
as hypothetical examples: assumed fewer points mean lower risk. 0-4 super preferred 5-9 preferred and so on. another ex the debit-credit system can be sued to stratify risk.
preferred point systems are similar to the Framignham point system of risk classification
What is the knock-out method?
employed by most.
- uses knockout criteria, which is established as a series of rules whereby the proposed insurered either qualifies for the risk class or is knoecked out of the risk class based upon the rule.
Is there a set number of preferred risk classes universially employed by the insurance industry?
No, the number and size of risk classes not only vary thorughout industry, but also between individual companies can vary the preferred risk classes by products.
The Framingham Study provided convincing evidence that the primary risk factor for the development of CAD include what?
age, sex, BP, CHOL, HDL, DM, LVH, and SM.
they were further weightened by the important through the use of mathematical models that are translated into risk table point scores.
There is a correlation between the risk of developing heart disease and the risk of death, the risks are not the same. What needs to be done?
the scaores need to be modified to reflect mortality instead of morbidities.
What are some additional mortality markers used in the assessment of preferred criteria, apart from those mentioned in the Framignham risk model?
2. Hazordous avocations.
4. drug/alcohol use.
5. peronal medical hx-
6. Family history
How does personal medical hx affect preferred rates?
certain diseases that cause minimally increased mortalkity, perhaps due to long-term expectations of recurrence or progression, have hx been included in the std risk. Ie certain disorders are rated STD but contain enough extra mortality to warrent exclsuion from preferred consideration if the mortality assumptions are tighter.
How does Fx affected preferred rates?
statistically credible predisposition of offpsring develop certain diseases the same as their parents.
- some examples of correlations: CAD, DM, stroke, Kidney disease, and certain cancers.
Note some disorders/cancersc can be sex/age specific.
What are some limitations of preferred risk assessment?
1. most assumptions made are predicted on middle-aged populations statistics and apply to all preferred applications.
What is the advantage of a preferred rate program?
create and reward health individuals with lower premiums.
effective competitis by applying lower-priced products.
Insurance companies do not want to lose their best risks to other carriers.