Post Claim Underwriting
Post claim underwriting is a practice employed by some insurance companies which wait until you file a claim before spending money to determine prior health conditions. Then, after you have a claim, it asserts that no coverage exists. The insurance company performs this after-the-fact evaluation to rid itself of an insured individual it contends should never have received insurance coverage.
This is one way that insurance companies try to avoid paying claims - by reevaluating your policy after you make a claim. In other words, insurance companies take a second look at how and why your policy was issued in the first place. The assumption is that since you are in need of benefits, the insurance company obviously miscalculated how much of a risk you would be, therefore, the policy should never have been issued. The company then cancels/rescinds the policy and returns the premiums that you have paid. This is called "post claim underwriting" - when the insurance company does its risk calculation after you file a claim.
Companies engage in post claims underwriting because it is profitable: less money is spent on investigation (underwriting) and more money is collected in premiums (no reason to turn away premiums from people even if they are not qualified for insurance.) The company takes the premiums, and if the policyholder never files a claim, great! If the policyholder does file a claim, the company denies it on the grounds that they were never qualified to begin with. It is a heads we win, tails you lose proposition for the insurance comapny. And when the company makes a practice of it, and collects premiums from hundreds, thousands, or millions of people who are not qualified for regular coverage, they are making millions in premiums off of customers who do not qualify for coverage and will not be covered if they file a claim, because most do not file claims, and the company just keeps the premiums.
Insurance companies that do this are seriously harming the public
because it allows for people to falsely believe that they have insurance protection. Once the policy
is issued, folks stop seeking additional insurance coverage. Then, once they need benefits, it is generally
too late for them to get any other type of coverage. In other words, they are hung out to dry.
There is no need for companies to engage in this practice. Insurance companies have all the information they need before issuing a policy to avoid this
from happening to people. When you apply for insurance, you have to fill out an application and
disclose all sorts of information about yourself to the insurance company, like your age, your
health history, etc. Based on this information, the insurance company decides if it is going to make
you an offer of insurance and on what terms and for what premium. An insurance company is generally
not required to issue you a policy. The insurance company can place "riders" on your policy which
limit the benefits offered or it can decline to offer you any insurance at all if it feels that you pose
too much of a risk. This determination should all be completed before your insurance policy is ever
issued. If an insurance company believes that you may have pre-existing health conditions that make
you a higher risk than average, then it must investigate those facts before it determines what type
of insurance to offer.
The typical post claim underwriting insurance company is fairly easy to recognize. If at the time
of your application, your insurance company requested no medical exam, asked only if you were in "good health", only allowed for yes or no answers to health question or even asked no health
questions at all, chances are that the insurance company practices post claim underwriting.
If you have already filed a claim, here are some clues as to whether or not your insurance company
is engaging in this type of conduct. First, after you file a claim, the company will ask you to
sign a release for your medical records or it will use a release obtained during the application
process. However it gets them, the insurance company will now begin to review your medical records.
Usually, a long delay occurs between the time you file your claim and the company's answer.
That's because it is now doing the investigation it should have done when you applied for insurance coverage.
It will then find some omission or inconsistency from what was shown on your original application and
deny coverage on the basis of misrepresentation, concealment or fraud in your application. You will
be advised that your policy is being rescinded, the premiums returned, and that there is no coverage
for the claimed loss.
