Deductibles

How do low deductibles help?

The customer:

  1. Annual premium payments are reduced.
  2. Deductibles only save the customer money if there are no claims.
  3. Additional costs if there are claims when deductible is applied.
  4. No incentive for customers to choose cheaper hospitals because their deductible stays the same regardless of where they are treated.

The insurance company:

  1. Deductibles eliminate small nuisance claims.
  2. Deductibles reduce the overall volume of claims serviced each year.
  3. Deductibles reduce premium income from each customer. Because of this, deductibles are the enemy of the insurance company.
  4. Deductibles do not help to control claims expenses.
  5. Deductibles are a double-edged sword that in addition to reducing your income, do not help reduce expenses. Customers have no incentive to reduce medical costs because they have the same expense whether they are treated at a cheaper hospital or very expensive hospital. Because of this, customers will tend to go to the most expensive hospitals.

 

How do very high deductibles (10,000 USD or higher) help?

The customer:

  1. Customers that are already insured with a low-limit health policy will be interested in this type of policy because they are able to increase their level of cover.
  2. High deductible reduces premium to a minimal affordable amount each year.
  3. Customers already have an insurance to cover their normal health claims.

The insurance company:

  1. High deductibles will attract many customers because of the very low premium.
  2. The majority of customers with high deductibles will not claim on your insurance because they already have another health insurance.
  3. You will build up a large volume of customers with almost no claims.

 

Basically, there are 2 situations concerning a deductible:

       1. If there are no claims, both the insurance company and the policy-holder benefit.

       2. If there are any claims, both lose.

Please send a message with your comments on this subject.