Why are short term insurance rates falling?

With health care costs rising sharply, why are so many short term medical insurance plans lowering rates? The latest rate reduction was announced at MedSave.com by HPA Inc., the administraors for Secure STM, including the "3x12" 36 month short term medical plan and the new "Secure Lite" lower cost short term medical insurance.

In an inflaionary environment, rate decreases are usually triggered by a drop in medical care utilization. Evaluating utilization trends in health plans is a complicated topic even for those who have access to the best data. We don't; we are just speculating. Just for the sake of discussion, let's assume that utilization has declined in short term medical insurance in recent years. Why would that be?

The easiest explanation is the increase in policy deductible. The median policy deductible selected by buyers increased from $500 a few years ago to $1000 today. The largest increase in policy deductibles chosen is in the $2500 deductible option.

A person who is healthy enough to meet underwriting standards is unlikely to incur substantial medical expenses in excess of $1000 within the 3-4 month average lifespan of a short term medical insurance policy. Of course some do, and they are the reason that insurance is important. But a larger number of people simply do not incur a claim on the policy that exceeds a $1000 deductible.

Another explanation is that people are actually waiting for group insurance to kick in after the STM before going to the doctor. That makes sense and is the behavior we would expect. Perhaps we will eventually find that fewer people are using STM as a substitute for regular health insurance. Those people might have gravitated to limited benefit and other types of low cost health insurance.

Money Today June 26 issue has covered health Insurance

22 pages of well researched information in Money Today is welcomed by us as this shows that Health Insurance is getting the importance ,which it deserves.

The good thing is that we have got lot of response thro emails/phone calls and some of the readers of Money Today have raised very interesting and good questions.

We will like to share with Insurance companies that the most important feature the customers are looking for in Health Insurance is good Service.Price is important feature but it is definitely not the first point at time of decision making.

Large & strong companies should give 90 days notice and then withdraw any product

Recently we were informed by Reliance General that no more Health Insurance proposal under Gold should be accepted.Reason we are made to understand is that they are having heavy losses in this product.

In the case of silver those wishing to have sum assured of Rs 1 lakh will not be accepted by underwriting team.

Those lodging claim during the year whether claim is accepted or not will have difficulty at the time of renewal.They are warned that well in time thay should look for another insurance company.

Insurance intermediaries go on informing clients about various insurance products to clients.It becomes embarrassing to tell a client that now Reliance or such & such Insurance company has stopped accepting this proposal or has withdrawn this product or is not going to renew your policy as you had lodged a claim during the year.

Let us try to create a positive image of Insurance Industry,which is owned by really large & strong companies or corporate houses of the country.Can we expect that whenever they decide to stop any product they should give at least 90 days notice by releasing an ad in the press ?

Comments are invited.