Market insight from year-end 2020 SFCRs: Sample of life insurers based in Luxembourg
Gross written premiums in our sample of Luxembourg-based life insurers decreased 20% in 2020.
In many healthcare systems and health insurance markets around the world where risk rating is not allowed, risk equalisation is used to enhance consumer protection and market stability. Its aim is to compensate for the risk profiles of different groups of the population such that the additional medical expenses associated with high-risk members are shared amongst healthcare providers or insurance companies. This is generally achieved by the transfer of payments through a risk equalisation pool, or similar mechanism. In this paper we have set out a 'how-to' guide to risk equalisation, or risk adjustment.