Co-Insurance and how it Works

We often see co-insurance clauses in our policies. Have you ever understood what it is? Co-insurance is one of the terminologies in insurance industry which are often misunderstood and misinterpreted. Of course, you can ask your insurance agent to better explain what it is.

For our readers, Axis Capital, with a group of insurance and reinsurance companies scattered around globe from Bermuda to Singapore, Australia, United Kingdom and more than ten states in the US of A, has summarized the definition of Co-insurance in layman’s terms.

Co-insurance, in a sense, is the amount you have to share for the cost of your insurance. It is often computed in percentage. For instance, a man’s health insurance covers 85% of his hospital dues. The remaining 15% of the fee is your coinsurance.

For that, you’d think you have figured it all out until you stumble upon the term, “deductible”. This in itself is a little bit similar with co-insurance and is often mistaken for the other and/or interchanged.

Deductible is the amount you have to pay before your insurance begins to pay. Blue cross has provided this best example: Let’s say your plan’s deductible is $1,500. That means for most services, you’ll pay 100 percent of your medical and pharmacy bills until the amount you pay reaches $1,500. After that, you share the cost with your plan by paying coinsurance and copays.

This time, the term copay is mentioned. Copay is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have copay when you get a prescription filled. If you visit the doctor often, it is best to review a plan with the low copay for office visits and prescriptions.

For property insurance, coinsurance is basically a penalty imposed on the insured by the insurance carrier for under reporting, misinformation, declaring or insuring the value of a property of a business income. The penalty is stated under penalty as well and the amount should be under report.

The coinsurance clauses in developing cities like Jakarta, Indonesia and Singapore can be changed interchangeably with copay as it still more or less defines having to pay in a percentage. In Europe, however, coinsurance refers to the joint assumption of risk between various insurers. In some parts of the United States, when one party fails to pay the required amount in percentage, he is liable to pay both the parts if his arguments are proven to be moot and academic.

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Axis Capital Group Insurance Update: Asian Bi-annual Report

With the great rise in business development and industrial growth in Asia, asset values are generally enabling insurers to pay higher premium for increased protection levels. Not that the risk is higher but people have been slowly realizing the importance of private insurance. Life and non-life insurance have high number of patrons across the continent with the highest of mobile insurance policies provided in Jakarta, Indonesia and Bangkok, Thailand; life insurance in Singapore and health insurance in Seoul, South Korea and Vietnam.

Review of this past 6 months activity shows that regional gross domestic product (GDP) growth is projected to remain solid at 5.4%-5.5% this year and rebound to 5.5% – 5.8% in 2015. Inflation is also expected to remain benign across much of the region, except in India and Indonesia, where monetary policy will remain tight to fend off inflationary pressures.

For the next 6 months remaining of 2015, major developing countries are expected to grow by 5% more. Consequently, the region’s continuing appeal to foreign insurers seeking growth opportunities remains strong.

The opportunity to offer private health insurance in Asia is also expanding, due to rising individual income levels and government budget constraints. In China, the health insurance market is growing strongly as consumers turn to the private sector to fill in the gaps left by inadequate government schemes while everyone waits for the success of Indonesia’s own insurance scheme. India is another promising market for personal health insurance; only 15% of the population is covered by government health insurance and 2.2% by private health insurance.

In this evolving environment, insurance has also expanded to dominate online sources and this method has slowly been integrated to all operations in Asia. However, it would take time for Asians to adapt as there are also a lot of cyber insurance scams which pose as threat to insurer’s data and privacy. Insurers in Asia will need to consider the following adjustments to their service, products and compliance efforts in 2015:

  1. Streamline the value chain via the cloud and traditional business process outsourcing (BPO)
  2. Expand products and services to address the growing needs of the high-net-worth (HNW) market
  3. Adapt product strategies to the changing regulatory environment
  4. Increase compliance to respond to growing sales and consumer protection regulations
  5. Develop capital and Merger and Acquisition (M&A) opportunities
  6. Reposition investment strategies
  7. Enhance data controls and metrics