Classified Insurance
Categories: Insurance
You want to buy an insurance policy…but you’re not allowed to tell anyone. Is that insurance policy…classified?
In the insurance industry, some policy providers end up with customers they’d rather not have. Whether it’s the $750,000 life insurance policy for the 55-year-old whose blood has the density of butter, or the homeowner policy on the house that's tottering on the edge of a cliff, these are substandard policies that keep providers up at night because of the risk.
These policies are known as classified insurance. It's likely that, before these policies were underwritten, the policyholders were healthy, happy, and lived in a very safe area.
For example, before the 55-year-old butter drinker got his policy, he could run a six-minute mile, he ate nothing but chicken and salad, and he never smoked cigarettes. But years later, he started drinking gravy, smoking Camels, and eating pork knuckles for breakfast.
When a policyholder’s risk threat increases, a company thinks they are more likely to file a claim and be involved in a negative event. But it's not limited to existing policyholders. A cigarette smoker can obtain life insurance; however, their risk profile will drive up the cost of premiums and likely fuel the life insurance company to deny any claims tied to heart disease or lung cancer.
