Medical underwriting is a health insurance term.
It refers to the use of medical or health information in the evaluation of an applicant for coverage. As part of the underwriting process, an individual's health information may be used in making two decisions: whether to offer or deny coverage; and what premium rate to set for the policy.
The two most common methods of medical underwriting are known as moratorium underwriting, a relatively simple process, and full medical underwriting, a more in-depth analysis of a client's health information.
From the insurers' point of view, medical underwriting is necessary to prevent people from purchasing health insurance coverage only when they are sick, pregnant or need medical care. This tendency is called "adverse selection," i.e., a system which attracts high utilization users while discouraging low utilizers from participating.
The client is required to fill up a declaration of his health status and insurer typically do not require the client to go for a health screening. The decision of to offer/deny/charge is entirely based on the declaration made by the client. It is a contract of utmost good faith.
The insurer will typically ascertain the accuracy of the disclosures when a claim is filed. If there was indeed a non-disclosure, the insurers reserves the right to deny claim or re-imburse the claims partially. They may also subsequently impose a cover exclusion on the policy or even terminate the policy with refund/no refund.