Medical

How the Insurance Industry Deals with Problems of Risk Pooling and Risk Sharing

As stated above, risks are uncertain and there is a difference in their nature, uncontrollable or accidental. Generally, risks are regarded as occurrences that bring about only loss. Another feature of risk is the degree of controllability. Risks are not self-invited and their impact is difficult to control, once they occur. But there are certain types of risks which can be improved, i.e., their incidence can be reduced by pre-planning. In some cases, they can also be prevented by anticipating their behaviour based upon past experience. Basically, risk is fortuitous, something that is not planned, deliberate or will fulfil but something which may or may not happen.Risk pooling and Risk Sharing are related to health insurance which is also called as medical insurance. This insurance covers all types of disability, loss of income, medical expense and accidental death. It can be defined as “any form of insurance whose payment is contingent on the insured incurring additional expenses or losing income because of incapability or loss of good health (ICFAI Centre for Management Research (ICMR), 2003).” In medical insurance, benefits become payable on disability as a result of accident or sickness. Health insurance can address the problems related to rising medical expenses. A health insurance policy can be used as an accumulation plan.Risk Pools are especially related to health insurance where special programs are created by state legislatures with an aim to provide a kind of safety net for people who are “medically uninsurable (naschip.org).” “Medically uninsurable” here means people who do have a pre-existing health ailment and are denied insurance coverage or who are eligible to access only private insurance coverage that has got too many restrictions and at the same time is extremely expensive.The concept of risk pooling works because of the “law of Large numbers

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