What Is Morbidity Rate? How Morbidity Rate Is Used to Price Insurance

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What Is a Morbidity Rate?

Morbidity Rate (illness rate) is the measure of illness that will occur in any given population. The morbidity rate takes into account how often an illness appears in a population of people, this may be divided and categorized by age, group, ethnic background, geographical location or other factors. Morbidity rate is a statistic. Morbidity rates are used by insurance companies to determine premiums based on perceived risk. The morbidity rate will tell you how often a disease appears in a given population, or how common it is.

Morbidity Incidence Rate vs. Morbidity Prevalence Rate

Morbidity rates may be looked at in terms of the morbidity incidence rate or the morbidity prevalence rate:

  • Morbidity incidence rate shows how many new cases or new people are becoming ill with a given illness, injury or disease in a given population. 
  • Morbidity prevalence rate is the measure of how many people in a given population are sick with a disease or illness.

What Kinds of Insurance Use Morbidity Rates?

Not all insurance policies will use morbidity rate to calculate the premiums, for example, you would not use a morbidity rate in home or car insurance because it is not relative to the type of insurance. Your likelihood of getting a disease will not impact the "risk". 

The Morbidity Rate is very important in health-related insurance, for example in:

How Morbidity Rate Is Used to Price Insurance

Health insurance, life insurance, long-term care insurance, and critical illness insurance among others, may use morbidity rate when reviewing an application for insurance. If the incidence in a given population in high for certain illnesses which they are offering insurance for, they may have higher premiums if you are in a group that has a higher incidence. Morbidity incidence will help predict the probability of being diagnosed with a disease using statistics during a specific time frame. Morbidity prevalence rates will help predict a person's likelihood of having a disease.

If you are part of a population that statistically has lower morbidity rates in certain diseases or illness that may affect your insurance, then the insurance company may charge less because you are less likely to make claims for that particular illness. The actuaries and underwriters at an insurance company use things like morbidity rates to calculate premiums. Learn more about how insurance premiums are calculated here.

Morbidity Rate vs. Mortality Rate

Morbidity rate is sometimes confused with the term Mortality rate. The morbidity rate looks at the statistics of illness or disease in a human population, whereas the mortality rate looks at the incidence of death in a population.

Example of Morbidity Rate

Morbidity rate can be calculated by taking the number of people in a given population, and identifying what percentage of those people have an incidence of illness. By looking at the statistical data of the given population, the rate of incidence of illness in the given situation can provide a generalized idea for the rate of incidence. For example, if you take a population of children in schools in a certain district and you decide you want to determine the morbidity rate of chicken pox, for example, you would see how many of the children contract chicken pox in the given population over a specified time, or among a certain age group.

Then you could come up with the morbidity rate by comparing the number of cases presented in the given time, vs the total number of people in the population.

This is a very basic example, however, when applied to diseases and illnesses like diabetes, for example, or cancer, the morbidity rate can help insurance companies understand the level of risk for a certain disease to present itself and base the cost of the insurance on the risk. The morbidity rate gives a statistic that helps predict the likelihood of developing or not the illness.

Example of Calculation of Morbidity Rate

Morbidity refers to illness or being affected by an illness. Here is one example of how morbidity rate would be calculated for incidence. Incidence looks at how often the disease will appear in a given time period.

Incidence Morbidity Rate Calculation is the number of new cases in the time period divided by the number of people in the specified population x 100. This gives you the morbidity incidence rate.

There are many different ways to calculate the morbidity rate depending on what kind of morbidity rate you are interested in, the CDC has a list of extensive detailed calculation of Morbidity rate here.