
Perhaps that is why I was intrigued by a recent
feature that discussed a little known exclusion on most policies called:
Co-related Exclusions.
Essentially it describes why an event that would
normally be a covered casualty is excluded if it happens to more people at once
than the actuaries expected in their calculations for risk. An example would be a policy that has
coverage for water damage, but excludes flood damage if your residence is one
of several that were flooded during a hurricane. Or if your house was one of several damaged
in a forest fire. Or if your residence
in Syria, Gaza or even Israel was included in damage resulting from a conflict.

Modern insurance can trace its origins to the Great Fire of London in 1666, which
destroyed 15,000 homes. It became
apparent that such a societal catastrophic loss was more than any individual
could bear, and ass the city rebuilt, there arose a commercial solution for individual
loss. Through time there are seven basic
tenets for insurability, one of which is: limited risk of catastrophically
large losses. In London, that meant that
any future reoccurrence of such a fire would be excluded from individual
coverage and would be borne by the government.

One of the major criticisms of federal support for natural
catastrophes is that some states seem to have them more frequently than
others. Although California has few
earthquakes of relevance, Montana has even fewer, and both states are prone to devastating
fires.
There is some correlation between FEMA and dental
insurance.
Dental insurance is not really insurance as much as it
is a discount service. Although
actuaries do base premium on frequency and cost of service, the population
needs are less a factor in establishing premiums that are Exclusions and Limitations
of the policy. Dental insurance did not
exist prior to the labor shortage following WWII. In an effort to control inflation, the
federal government allowed employers to offer benefits, such as health (including
dental) as incentives to work for their company. Gradually, the benefit packages have morphed
until dental is now greatly funded by the individual, and limitations have
expanded to keep the premiums affordable.
For instance, it is estimated that more than ¾ of the
adult population has active periodontal disease, but limitations limit this
risk by more than half, either by frequency (no more than two cleanings a year)
or by cost of the patient’s share. There
is no medical counterpart to these limitations and exclusions. If you have coverage for a broken bone, you
have coverage for a broken bone.
We are beginning to see complications from the
Affordable Care Act, where on the Essential Health Benefit of Children’s Dental
Health we have an annual maximum allowable cost to the patient and no allowable
exclusions. The actuaries are finding it
difficult to transition from traditional coverage to the new format and keep
premiums affordable. There are huge
differences from state to state on what are the covered benefits. The differences can be explained as each
state dealing with what should be allowed as Co-related coverage
exclusions. If the patient wants m ore
coverage, they should pay more premium.
This is unlikely to happen.
My next Post will continue with health. I’ll explain why you should be familiar with
the words EPIC and Axiom, and what effect they may have on you in the near
future. I hope to see you then.
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