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What affects the price of premium

There are 5 basic determinants of premium pricing

1. Risk Profile of Applicant

Premium is priced to reflect the risk under taken by the insurer. The main risk here being the age. As one ages, the chances of health deteriorating is higher and thus, likelihood of more claims. For that reason, premium is age-related. Other factors that some insurers consider are gender, occupation, lifestyle habits, BMI (Body Mass Index), etc. Different insurers have different levels of premium based on 1-year, 5-year, or 10-year period. It is important to analyze how your premium will affect you as you grow older. Below table shows an example of how premium increases with age (5-year period).

Age Band Standard Plan (In-patient) US$ % increase
30 - 34 $1,549  
35 - 39 $1,704 10.01
40 - 44 $1,958 14.91
45 - 49 $2,199 12.31
50 - 54 $2,797 27.19
55 - 60 $3,606 28.92
60 - 64 $4,944 37.10
65 - 69 $7,603 53.78
70 - 74* $8,664 13.96
75 - 79* $9,977 15.15
80+* $11,272 12.98

Note:
Goodhealth 2010 rate, Major Medical, Nil excess, Area 4 (China, Singapore, Japan, Australia, New Zealand, the Caribbean, Russia and the rest of the world, excluding USA)
* Applicable to renewals only

Most insurers will place an age ceiling for new applicants, varying from 60 to 80. This is due to the difficulty in determining the risk factor which ultimately determines the premium. Should the applicant be accepted despite being over the age ceiling, most insurers would have offered the policy on special terms and with a significant loading.

2. Level of Coverage

Generally, there are 2 categories of coverage: Standard and comprehensive. Premium for comprehensive cover is higher compared to standard cover.

Standard Plan

The standard plan satisfies the main objective of an expat medical insurance and that is to cover in-patient (an insured person who stays in a hospital bed and is admitted for one or more nights solely to receive treatment), day-patient (an insured person who is admitted to a hospital bed but does not need to stay overnight) and emergency treatments. To read more about what is covered under standard plan, please click here.

Comprehensive Plan

The comprehensive plan covers additional out-patient (an insured person who receives treatment at a recognized medical facility, but is not admitted to a hospital bed as an in-patient or day-patient) treatment.

Many insurers provide different modules, which you can add on, such as medical evacuation and repatriation, dental, optical and maternity coverage. Premium increases with the number of add ons.

Graph below shows how premium increases with age between standard and comprehensive plans.

Graph

Note:
Goodhealth 2010 rate (US$), Major Medical vs Foundation, Nil excess, Area 4 (China, Singapore, Japan, Australia, New Zealand, the Caribbean, Russia and the rest of the world, excluding USA)
* Applicable to renewals only

3. Options

An option allows you to have more control over your premium by selecting your level of benefit, these options may include:

  • the option to co-pay

  • annual deductibles

  • grade of hospital accommodation

  • choice of network of hospitals

  • option of medical evacuation

  • choice of area of coverage

4. Loading charge

A loading charge covers an insurer’s administration costs and profit. An insurer will negotiate directly with its medical provider regarding rates and payment terms. Usually, an insurer with large number of subscribers will have better leverage in negotiating better rates and payment terms with their medical providers and in turn, less loading charge.

5. Medical Inflation

In most cases, your insurance will automatically be renewed at the end of the contract period. At renewal, you will notice that your premium is adjusted, and normally with an increase that is more than the rate of general inflation. Most insurers have to adjust their premium annually to remain profitable due to medical inflation which is largely caused by claims increase and rising medical cost especially in the area of cancer. New drugs being developed, new technologies, new methods of diagnosis, etc.

Also See:

8 Tips to reduce premium

How is premium priced