Hospital Indemnity: Senior-Focused Product Observations
Hospital Indemnity (HI) products have grown in popularity within the ancillary market, especially for seniors. We have looked at some aggregate values for HI (and other supplemental health) products in recent blogs, here and here. Let’s dig a little deeper into these valuable and helpful products.
Features of senior-focused Hospital Indemnity products often cited as especially appealing or valuable (by Telos product experts and our clients) include:
Simplified Underwriting
Competitive Commissions
Guaranteed Issue availability
ER and/or Urgent Care benefit
Observation Stay benefit
Per-admission and daily hospitalization benefit
Cancer/Heart Attack/Stroke benefit option
A review of several current top-selling HI products shows that most of these features are not out of the ordinary. This blog will look more closely at the first two on the list.
Simplified Issue Underwriting
HI product applications typically ask if a number of specific conditions are currently present or were recently present, and a “yes” answer for any one of those conditions may disqualify an applicant from coverage. It is a simple approach – there are no lab tests or blood draws, and the applicant will generally know right away whether they are approved for the coverage.
Carriers typically ask about 20-40 conditions, though the “lookback period,” how far back in time an applicant is asked to consider whether each condition was present, varies by condition and carrier.
Filed applications show that these conditions, in addition to others, are present on all HI applications:
AIDS, ARC, or HIV
Alzheimer’s or dementia
Chronic kidney disease or ESRD
Congestive heart failure
Heart attack
Hospitalization
Internal cancer
Malignant melanoma
Receiving home health care
Stroke
Commissions
Typically, commission rates for individual products are “heaped,” with higher percentages paid in the early years the policy is in force and smaller percentages paid later. This pattern is aligned with the amount of time and effort an agent puts into selling the product; it requires more up-front investment to explain the reasons the product is valuable, how the application process works, the benefits available, limitations, etc. After the initial sale there still may be questions to answer or issues to resolve, but those are generally less frequent.
The commission percentages filed for senior-focused HI products (shown in the chart below) follow this pattern – a high proportion of premium is paid as commission in the first year, generally 70% - 75%, though there are some outliers. Commission rates in later years drop off significantly, though they are not zero. It should be noted that these are the initially filed rates, and carriers may tweak these over time or encourage sales through bonuses or other incentives.
For more high-level information about Hospital Indemnity products you can download our free Product Essentials Guide. For additional data on market size and key competitors, our Market Projection Report is available. Both resources can be found in our online store.
Send us a note with your questions and needs, or to find out more!
