atans1

Medishield: Totful tots on loss ratio to determine premiums

In Financial competency on 14/07/2014 at 5:26 am

With regards to the use of  incurred loss ratio to determine the level of premiums, I don’t like it for a few reasons:

  • A lot of premiums is collected upfront and Medishield ends up having a lot of money to invest, which might not be its core expertise.
  • It is not easy to determine future liabilities and brings another uncertainty to the calculation of the loss ratio.
  • With Medishield Life going to be a compulsory scheme, there is even less of a need to collect too much surplus as it is possible to adjust the premiums accordingly whenever overall claims go on a sustained uptrend. As a nationwide scheme, the pool is also huge and total claims will be less volatile and predictable.
  • Private health insurance that has a smaller pool will have claims that are more volatile and cannot easily raise their premiums without the risk of their customers leaving and making their pool even smaller.

http://www.martinlee.sg/medishield-reserves-loss-ratio/

From an honest financial planner. Feel safe to buy second-hand car from him. Smart guy too. Given that he has a masters in engr from NUS, I once asked him why was he wasting his time selling insurance. Never got a gd reply.

Check out his other articles explaining Medishield. Under insurance, healthcare.

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