Systematic cost-benefit analysis

“Our system is based on the principles of decision analysis”, Becher explains. "All conceivable options are represented in "decision trees", and linked to associated costs or savings. A special software program evaluates the cost-benefit ratio and determines a threshold for the sum insured beyond which it becomes worthwhile for the insurer to require medical testing." Decision models have already been computed for all commonly used medical tests.

Cost-benefit ratio

The higher the sum insured, the greater the potential savings for the insurer. For any medical condition, the Munich Re model will determine the point at which the cost of medical testing equals the amount potentially saved, also taking into account the return on investment. Testing will only add value for the insurer if the threshold is exceeded.

The computations are based on a large amount of individual data. After all, different prognostic factors must be considered for each medical condition. Parameters such as age, sex, lifestyle and the country a person lives in also play a role. Moreover, in order to appraise the cost and benefits of medical testing systematically, it is necessary to take account of the frequency and mortality of the condition as well as the reliability of the relevant medical procedure and its costs.

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