Supplemental health products have experienced consistent market growth over the years, most noticeably since the implementation of the Patient Protection and Affordable Care Act (ACA). This growth has been especially strong for hospital indemnity, critical illness, and accident products. There has been a significant increase in the number of insurance companies selling these products. Small companies in this market need to understand the unique challenges these products present in order to compete effectively.
Understanding the market landscape and the assumptions that are required in order to develop premium rates for supplemental health products is important. Three areas that create rate challenges for insurers in supplemental health markets are (1) states with high minimum loss ratio requirements, (2) ongoing monitoring requirements, and (3) the need for rate flexibility. Insurers also need to be aware of the volatile regulatory environment and need to consider issues regarding product flexibility and distribution.