SUPPORTS THE DECISION OF INSURANCE COMPANY WHILE UNDERWRITING INDIVIDUAL HEALTH RISKS

Policyholder’s degree of health risk could be classified as normal as or better than normal or high or bad. This article provides an evaluation of policyholder’s degree of risk for the individual health insurance coverage. We examine the relationship between Policyholder’s degree of individual health risk and the effect of his demographic factors. A quantitative model is proposed to support decision-underwriting of insurerby segmenting the health insurance underwriting portfolio to four risk groups or clusters which are different and mutually exclusive (low-risk, normal risk, high risk, bad risk) based on some demographic factors affecting the degree of risk  which are all internally homogenous and different from the other groups, using cluster analysis. The likelihood of the insured to risk groups has been estimated using polynomial logistic regression analysis, and the degree of risk most likely has been determined in order to take appropriate underwriting decision. This study was based on experience of one insurance company in Saudi Arabia, and gets using a random sample for detailed data on individual health insurance during the period 2013-2015. We found a relationship between the degree of health risk and policyholder’s demographic factors. Using this result we were able to calculate the probabilities of affiliation of the insured for various degrees of risk.