Why Do Insurance Companies Need Social Security Numbers?

Insurance companies need our social security numbers. Why?

When you are getting new medical insurance, or you are switching to a different plan, there are a few things these medical insurance companies need.

Some of these things are for payment purposes, like your account details. After all, if you are not paying for your insurance then you won’t be entitled to plan.

Other items that are often needed, but their purpose is never really explained.

One of these is your social security number, and every single legitimate medical insurance company you try to purchase a policy from will ask for yours.

But, why? Why do insurance companies need social security numbers, when all they do is track benefits and income? Today, we seek to answer this question, so you are not left in the dark.

What is a Social Security Number?

A social security number, also known as an SSN, is a 9-digit identification number issued by the United States Social Security Administration (SSA).

The SSA uses the numbers to track the earnings, benefits, and other information of U.S. citizens or other residents in America.

You must have a SSN to work in the United States. Only U.S. citizens and permanent residents can get a social security number.

People who need SSNs but aren’t eligible to receive them include people with temporary visas. Including those who have applied for but not yet received permanent residence status.

Most people with an SSN are asked to provide that information when making major financial decisions.

These include opening bank accounts, obtaining government or state benefits, making major purchases – in the thousands of dollars -, obtaining credit, and many more financial pursuits.

It was originally created in 1935 to provide disability and retirement benefits to those in need, but has since grown to encompass a lot of parts of daily life in America.

They were also originally intended to have a number pertaining to the date of birth – either year or month – of the individual, but now instead use a random series of numbers.

This is because identity theft through SSN’s has become increasingly common over the years, mainly due to the fact that they are needed for a number of important financial decisions.

Why Do Insurance Companies Need Your Social Security Number?

Generally, there are 5 main reasons as to why insurance companies need social security numbers. A lot of it has to do with identifying who you are. And whether you are financially able to afford this type of insurance:

Confirming your identity

This is perhaps the most important reason for giving your social security number over to an insurance agency. If they do not get your SSN, then you are susceptible to fraud and identity theft. For example, someone uses your identity to claim the expense of an operation they are having. Your insurance company has no SSN, but all the other information they have been provided by the thief is correct. The claim goes through and you are now paying more for your insurance. As well as higher deductibles for an operation you never had.

MIB Assessments

An MIB is the Medical Information Bureau. They keep a record of all your previous insurance, medical claims, or expenses. This information is tracked through your social security number. It allows insurance companies to catch fraudsters who may be trying to scam you or your insurance firm.

Credit Report Assessments

Your credit report says a lot about your financial habits. Since insurance companies work on monthly or annual payments, they want to know that you pay your debts on time. They can also look at your recent bankruptcies, irregularities, and your general spending. This is to determine the risk level of having you as a client. If you don’t pay back your debts, then you probably won’t be able to purchase a policy.

Prescription Medicine Database Check

This one is a tad upsetting, but it is a reason that insurance companies will want your SSN. The impact that a past, or a current, health condition and the medicine used to treat it on the risk profile and cost of an individual is high for insurance companies. It doesn’t matter if you are in good health now. All they see is the cost of the potential conditions that you may have or had.

Criminal History

Having a criminal history will affect your risk profile, as you are considered more likely to commit fraud with their policy or not pay through other circumstances. It may be unfair, but there isn’t much that can be done about it. If you had a criminal record, they will look up the risks that could influence potential future behavior.

As you can see, there are many reasons as to why an insurance company would need your social security number.

Some of them are indeed relevant, while some just seem invasive.These are the most common factors in the industry, and you may have to prepare yourself for being rejected multiple times.  

What if You Don’t Have a Social Security Number?

Almost all companies need a social security number for an insurance policy. If you have the right to an insurance policy in America, there are some that will take other forms of identification.

In fact, many visa and green card holders can apply for insurance. However it should be noted that there are restrictions put in place for this, normally by the insurance provider.

These are the most common forms of ID used after an SSN: green cards, visas, driving licenses, state IDs, photo but non-driving IDs, a letter of authorization, and individual taxpayer numbers . They are generally accepted by most companies.

Conclusion

Insurance companies need social security numbers. They are trying to protect you from identity fraud and themselves from losing a lot of money through said fraud.

Even though it is a hassle, it will help you in the end to provide an SSN.

Frequently Asked Questions