Risk selection

Under risk selection refers to the procedure of insurers to select insurable risks for certain fairness criteria. In order for the risk balance to be successful in the collective , the insured risks must be as similar ( homogeneous ) as possible .

Risk concept

In the insurance industry, the insured object or the insured person is called a risk , in contrast to the general term risk , which describes the possibility of deviation as a whole or specifically only unfavorable deviations from the expected result. Risk selection describes the active influence on the selection of the risks to be insured by the insurer.

Goal of risk selection

Risk selection is a business policy measure, in particular a risk policy measure, to improve risk balancing in the collective and thus ultimately to increase the security and profit expectations of the insurer. In particular, high risks that fall out of the scope should be avoided (avoidance of adverse selection ). High risks in particular will try to obtain insurance at a price that is not in line with the risk and must therefore be avoided through active measures. But risks that are too cheap also reduce this homogeneity and thus the reliability of the risk compensation and thus cause unnecessarily high fluctuations in the result. A high volatility of the results is punished by the capital market with high capital costs . The insurer will therefore try to combine particularly favorable risks into homogeneous groups with a more favorable risk structure by making correspondingly cheaper offers.

Approach to risk selection

First, the existing risk must be determined as part of the risk assessment. As far as possible, this is done individually or otherwise based on risk-relevant characteristics such as age, gender, occupation and, in the case of vehicles, type class. In the case of insurance policies without an obligation to contract , the risk is accepted or rejected on this basis. If necessary, the acceptance can also take place under certain conditions (risk exclusions, additional contribution) which have the effect that the risk modified in this way is now sufficiently homogeneous to the collective. In the case of insurances with mandatory contracting, especially in social security , an attempt can be made to concentrate advertising and other measures to gain new business on people who have particularly risk-favorable characteristics.

Statutory health insurance

The statutory health insurance is particularly affected by the risk of adverse selection, because it is not allowed here by government regulations to require risikoabgestufte posts or reject people. Since there are groups (characterized in particular by age, gender, occupation or place of residence) that pose particularly high risks, health insurers that have a particularly large number of members in these groups are particularly affected.

For this reason, compensation systems have been created in many health insurance systems. In Germany , for example, the risk structure compensation (in Switzerland risk compensation) ensures that health insurers with a good risk structure pay compensation payments to insurers with a poor risk structure. This is to prevent the incentives for risk selection as far as possible. However, these risk equalization systems usually only partially map the risk structure, which means that it is still worthwhile for insurers to carry out a certain, legally permissible risk selection. For example, advertising is only aimed at groups that have a predominantly low risk, e.g. B. young people.

literature

Friedrich Breyer, Peter Zweifel, Mathias Kifmann: Health Economics. 5. revised Edition, Chapter 7: Risk selection in the health insurance competition, Springer: Berlin, Heidelberg, 2005, ISBN 978-3-540-22816-5
Konstantin Beck: Risk health insurance - risk management in a regulated health insurance market, Haupt: Bern, Stuttgart, Vienna, 2004, ISBN 978-3-258-06771-1