Notes on Non-cancellable Health and Accident Ratemaking

Many of the problems connected with noncancellable ratemaking arise from the indisputable fact that the existence of disability is very often a relative matter not readily susceptible to objective determination. For this reason the insured has a degree of control over the policy that he does not possess in other lines of insurance. Since even a very short period of malingering appreciably increases the cost, particularly for policies with short elimination periods and consequently high claim frequencies, it is imperative that the amount of indemnity payable in event of disability be fixed at a level reasonably below earned income so as to eliminate any temptation to prolong disability. It has been shown, in fact, that loss experience is better on policies with a low absolute benefit as well as on policies with a low benefit in relation to earned income.