What Is The Meaning Of Loading In Health Insurance Policies?

Mr. Sarvesh Patel (52-years-old) lives in Ahmedabad with his family. Mr. Patel purchased a health insurance policy from an eminent insurer in India. Mr. Patel was very content regarding his health insurance plan as he always received the best services from the insurance company. The company even honored the claim that Mr. Patel raised for his kidney stone operation.

During the time of his medical insurance renewal in September, Mr. Patel was astonished by the increase in premium. When he enquired his insurer regarding this, then he came to know that this is because of “loading”.

What is Loading in Insurance meaning?

Loading in health insurance is an additional amount that is incorporated into the premium amount to offer coverage to a ‘risky’ person. A risky person is someone who is more susceptible to various health risks and losses for that period. Risk can be due to healthcare history, unsafe times, or a hazardous pastime.

The concept of loading is introduced when an insurer needs to deal with such candidates. Loading compensates for losses that occur due to these risks. Under such conditions, the insured policyholder needs to pay some extra premium against their health policies. The losses that happen during that particular period may be higher than expected.

Mr. Raghav also purchased health insurance, along with his father. Though both policies offer the same coverage and benefits, the premium amounts are different. The premium amount of his father’s policy is much higher than his policy. When he asked the insurer, he found that this is due to their age difference.

Your health insurance premium will increase with your age because there are higher chances of getting ill. You also need to remember that loading is not the same for all.

Factors Influencing Loading in Health Insurance

There are certain factors that can influence loading fee health insurance. Let us have a look at them one by one:

1. Age

The health insurance premium amount depends on your policy coverage, policy term, and the type of policy you purchased. The health risks increase with age and thus, senior people are more susceptible to various diseases. This will automatically increase the premium amount of your health insurance in India.

2. Smoking

Tobacco or nicotine intake is another deciding factor for your premium amount. In health insurance in India, a smoker needs to pay much higher premiums than those who are non-smokers.

3. Medical Condition

The healthcare condition of an individual is also responsible for the loading in health insurance. For example, all promising buyers of a group of age 40 will need to pay an equal amount of premium because the mortality will be the same for the group. But if there is an obese person in the group, then he/she needs to pay a higher premium than the rest of them. Obese people are more prone to develop the risk of organ problems like the brain, heart, and kidney.

Some Add-on Factors that may affect Loading in Health Insurance

Apart from the aforementioned parameters, there are other factors that will influence loading in health insurance. Let’s take a look at these additional factors:

• Obesity

If you are an obese person, then insurance companies will consider you as a “risky individual”. According to them, obese people are prone to diseases such as diabetes, hypertension, etc.  As a result, they may make frequent claims. Thus, insurers often consider loading in the health insurance premium for these people.

• Place

Your health insurance premium also depends on the place where you stay. For certain locations, the premiums are higher because of climate, pollution, scarcity of wholesome food options, and inadequate infrastructure. So, there are high possibilities of more claims coming from these locations as compared to other locations. Thus, the insurance provider reviews your location of residence before deciding your insurance premiums.

• Occupation

If you are associated with a risky profession or your job is affecting your health, then the insurance provider will calculate your premiums after considering loading on the regular premium. They will consider you as a risky buyer.

Is Loading in Health Insurance justified?

In some cases, loading is necessary and justified, but not for all cases. Most Indian health insurance providers have decided on an age limit before and after which a person can’t buy a health insurance policy. The maximum range is between 65-80 years. Most companies can’t evaluate the expenses related to health at a higher age and they often fail to do that.

If the candidate is having some underlying ailments like diabetes, hypertension, or asthma, or has unhealthy lifestyle habits like chewing tobacco or smoking, the health insurers will offer special health insurance plans with significant loading to these applicants. The loading precludes injustice to those applicants who are less susceptible to risks.

This is also advantageous for insurance companies, as loading covers losses higher than predicted because of a ‘risky’ individual.

But loading is inappropriate or unjustified when it is enforced on an individual who has done surgeries like a cataract or a hernia. These surgeries are not delicate and are easier to be performed nowadays because of advanced healthcare treatments. Moreover, future risks or further complications are also negligible here.

What is a Loading Fee in Health Insurance?

The loading fee implies the portion of the premium above the expected amount of healthcare expenses paid by the insurer.

The Bottom Line

The prime objective of loading is that an insured policyholder will pay higher premiums if he/she is a risky individual. The underwriting guidelines are not the same for all insurance companies. So, before making any commitments, read your policy documents and ask your insurer regarding the conditions/percentage of loading in your policy.