How insurers price their products

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Many of us are unaware how insurers price their products, but firms aim to ensure that the premiums charged correspond closely with the risk each policyholder represents. This is where the skill of underwriting comes into play. It is the process by which an insurer decides whether or not to accept an application, and if so, under what terms of coverage. Invest editor Lorna Tan highlights eight key factors used in computing health insurance premiums.

The morbidity experience is an essential factor in pricing insurance coverage. It refers to the number of cases of sickness and injury occurring in a given age group.

All things being equal, the morbidity rate for women is higher than that for men. That is why they pay higher premiums than men for most health insurance policies.

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A version of this article appeared in the print edition of The Sunday Times on July 22, 2018, with the headline 'How insurers price their products'. Print Edition | Subscribe