What is loading in health insurance plans and how it affects your health premium?

Know more about this condition in your mediclaim plan, how Loading in Health Insurance policies impacts your payable premium and whether it is actually justified

The whole purpose of buying health insurance is to cover any unforeseeable future health risks for you and your family. This is why it does not matter sometimes at what cost health insurance comes to us as long as it covers the cost of a medical emergency for us. However, there are times when a sudden or unexpected spike in the cost of a mediclaim plan can raise questions in our mind. It is important to find answers to those questions.

One such spike in the cost of your health insurance plan may be caused due to what we call loading in insurance policies. What exactly is loading and how it can affect the premium that we pay towards the maintenance of the insurance plan – let us discuss all this and more in this blog.

Loading in Health Insurance – An Overview

In simple words, loading refers to a certain amount added by the insurance company to the premium payable in the health insurance plan of some individuals who are considered “at higher risk” by the company.

Higher risk individuals include those who either have a medical history of illnesses/diseases or who run a family history of health conditions likely to affect them in the future. These individuals could also be those involved in some high-risk or hazardous occupations and therefore run a risk of developing some medical condition owing to the same.

The insurance company, while issuing health insurance to such individuals, would try to cover up the risk element and the subsequent losses arising from it to the company by loading. This means that a certain additional amount would be included in the health insurance premium for these “risky” individuals.

Let us try and better understanding how loading works in health insurance via an example:

Mr. A and Mr. B buy a health insurance plan from the same company at the same time. However, Mr. B is 10 years older than Mr. A and therefore, the insurer would charge a different premium from Mr. B than Mr. A for the same mediclaim policy. This is because Mr. B stands at a higher risk of developing illnesses/diseases as he is aging and therefore in order to cover up the impending loss to the company, it would add an extra premium to the health insurance of Mr. B. This is called loading.

There can be more scenarios where premium loading in health insurance is carried out by insurance companies. Let us look at one more example:

Shyam’s father purchased a health insurance policy from XYZ company 5 years ago at a premium of Rs. 10,000. His father has been paying Rs. 10,000 to the company as annual premium for the last 5 years.

Now, last year, Shyam’s father had to undergo an open heart surgery for which they raised a claim from the insurance company and it was settled too. However, at the time of policy renewal, his father noticed that the premium in his health insurance plan has now been increased to Rs. 15,000.

The company introduced loading in this case to cover up the risk factor involved since Shyam’s father is now viewed as a “risky policyholder” by the insurer.

What is Claim Loading in Health Insurance?

Sometimes insurance companies tend to charge an additional fee or amount in the total premium payable from the policyholder. This is done if the company foresees the insured to be making more claims in the future under their health insurance plan. This is generally the case when a policyholder may have reported a history of pre-existing conditions to the insurer. Or, the applicant may be seen as someone who has a family history of medical conditions and is highly likely to develop them as well in the future.

In such cases, the insurance company perceives these “risky individuals” to make more health insurance claims in the future owing to these health conditions. Hence, to cover up the impending loss due to these risk factors, the insurance company would add a certain amount as fee to the health insurance premium cover of these individuals. This is known as claim loading.

How Loading in Health Insurance Affects Your Premium?

We already understood above that loading makes the total premium payable more for certain high-risk individuals as compared to others. It is also important to note here this increase in premium will generally vary for different policyholders, considering the various factors in each individual case. Based on these factors, the insurance company would decide how much premium to increase for each individual.

Let us look at some of these factors that affect the premium in health insurance plans:

Factors that Impact Loading in Health Insurance	How They Impact the Premium
Pre-existing diseases or health conditions	An individual diagnosed with hypertension, diabetes and such pre-existing health conditions would be required to may more premium than another healthy individual in the same age range
Age of the policyholder	Higher the age of the person, more chances of illnesses and likely hospitalization; hence, higher premium charged
Lifestyle of the applicant	In case the policyholder smokes, consumes alcohol, or chews tobacco, they stand at a higher risk of diseases such as lung and oral cancer; hence, loading can be nearly double for such individuals
Medical history	History of medical procedures/surgeries or a critical illness increases the chances of loading on premium
	Certain lifestyle conditions in an individual such as obesity can also put them at the risk of bearing higher premium cost in their health insurance, again making them more prone to lifestyle diseases like diabetes or hypertension
Hazardous occupations	Professions that put you at higher health risks such as working in a radiology lab also tend to attract higher premiums
Family medical history	History of health conditions running in the family, most commonly like diabetes, heart disease, or hypertension, compel insurers to charge higher premiums from the applicant
Area where the applicant lives	People living in areas with higher chances of illnesses due to the climate or vulnerable to incidents of unrest or violence are also likely to be charged higher premium rates due to the risk involved