Post-claim underwriting:An Unfair Insurance Practice
Attorney
(866) 735-1102 Ext 645
Some health insurance companies regularly engage in an unfair practice of post-claim underwriting.
Underwriting, is a practice of conducting an investigation in order to determine if an insurance company is willing to incur the risk of issuing an insurance policy. With respect to health insurance, underwriting includes such activities as obtaining and reading the insurance applicant's medical records so that the insurance company can understand the medical condition, past and present, of the applicant. If the medical records reveal that the applicant is a bad insurance risk, the insurance company can legally decline to issue the insurance. The underwriting process is a necessary aspect of the insurance business.
Some health insurance companies side step the underwriting process and do not do a thorough job of underwriting. That is, they do not thoroughly check the medical records of their applicants. Some companies wait until after a significant health claim is made before they even begin the underwriting process. When a claim comes in, these insurance companies then, for the first time examine the medical records they could have examined before they issued the policy. After the claim is filed the insurance company then searches the records with a fine-tooth comb to see if there is anything in the medical records that was not disclosed in the initial application. If the insurance company finds a condition that was not previously reported, even a totally insignificant condition, these companies will deny the claim by "rescinding" the insurance policy, giving the premiums back to the insured, and refuse to pay anything on the claim.
This practice creates a "heads I win, tails you loose" situation for the insurance company.
This practice is unfair to the insured who naturally assumes that they and their family are protected by a valid insurance policy. After all, they did give the insurance company medical releases for them to obtain all the medical records they wished to obtain. Furthermore, the insured filled out the application as accurately as they could even though they may have unintentionally left off certain details from the application.
Consumers should learn how to recognize post claims underwriting.
The insurance company should not be allowed to process applications, accept premiums, bind coverage, issue policies, and then use information it had access to but ignored prior to issuing a policy, as a basis to later deny claims. With this unfair procedure, if there is no claim, the insurance company simply pockets the money without bearing any of the risk. If there is a claim, the company returns the premiums paid to the insured and rescinds the policy thereby accepting no liability for the loss.
The harm to the insured is that they never really have any insurance, although they paid the premiums and are entitled to assume that they have insurance when the insurance company issues them a policy. The underwriting process is a part of what the policy holder pays for. With post-claim underwriting, the policy holder does not get the underwriting---until it is too late to obtain coverage from another company.
An insurance consumer group, United Policyholders recently went to bat for an insured who was victim of the post-claims underwriting practice. In the case of Hailey v. CA. Physicions Service dba Blue Shield of CA. United Policyholders filed an amicus brief in support of the policy holder. In the brief it attacks the unfair post-claim underwriting practice.
United Policyholders is the only national consumer organization that is 100 percent dedicated to helping policyholders and educating the public, courts and elected officials on insurance issues and consumer rights.
In North Carolina, there is an insurance regulation which prohibits post claims underwriting, at least in some limited circumstances. However the regulation is loosely worded and there is no case law in North Carolina law or statutes which deal specifically with post-claims underwriting practices. There are several harsh cases, however in which insurance companies have been allowed to rescind health insurance policies when there were misstatements or incomplete answers in the application for health insurance.
It will take litigation brought by insurance company victims before this unfair practice is stopped in North Carolina.
If you have been a victim of post claims underwriting, you should fight the insurance company. Your claim could make a big difference, not only for you but for the public as a whole.
For more information on this subject, please refer to the section on Car and Motorcycle Accidents.