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INS II Underwriting

Life insurance underwriting involves evaluating insurance applications to assess risk and decide whether to offer coverage and under what terms. The process aims to group applicants with similar risk levels and prevent those at higher risk from unfairly increasing premiums. Underwriters consider factors like age, health, occupation, lifestyle, and family history to make acceptance, pricing, and counteroffer decisions that balance insurer profits and policyholder equity.

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Shilpa Duttaroy
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155 views

INS II Underwriting

Life insurance underwriting involves evaluating insurance applications to assess risk and decide whether to offer coverage and under what terms. The process aims to group applicants with similar risk levels and prevent those at higher risk from unfairly increasing premiums. Underwriters consider factors like age, health, occupation, lifestyle, and family history to make acceptance, pricing, and counteroffer decisions that balance insurer profits and policyholder equity.

Uploaded by

Shilpa Duttaroy
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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I N S UR A N C E II

Life Insurance Underwriting


Basic Principles, Factors Affecting Underwriting, Concept of Average Risk, Objectives and Process, Underwriting Approaches, Steps & Considerations

Underwriting
Process of making assessment and accepting risks One of the principal operations of any insurer Has critical impact upon performance and profitability Origin of the term: Acceptance by writing names under the wordings of contract

The process of

Underwriting
Evaluating each proposal in terms of the degree of risk it represents Deciding whether to grant insurance cover or not Deciding the terms of insurance

Basic principles of

Underwriting
Laying down of a broad standard for lives to be assured at tabular rates of premium Average lives or average risks representing vast majority of lives Mortality experience of average lives reflected by mortality table (used for determination of premium) Mortality table is based upon insured lives

Purpose of

Underwriting
To prevent anti-selection


Anti-selection is the tendency of people, who suspect or know that they have a more than average chance of experiencing loss, to apply for insurance

To differentiate, classify and promote equity among risks




Applicants who are exposed comparable degrees of risk be placed in the same premium class

Underwriting Process
Field level underwriting


Primary screening by the sales intermediary

Department level underwriting


  

Preliminary review of the application Gathering of additional information, if required Underwriting decision

Underwriting Process
Field level underwriting


Primary screening by the sales intermediary

Department level underwriting


  

Preliminary review of the application Gathering of additional information, if required Underwriting decision

Underwriting Approaches
JUDGEMENT METHOD
  

Subjective in nature Not a standardized process Requires highly skilled personnel

NUMERICAL RATING METHOD




Relative impact of each of the factors is statistically measured and represented by assigning numeric points

Underwriting Decisions
Acceptance with an extra premium


Most common way of dealing with sub-standard risks

Acceptance with a restrictive clause




War risk, First Pregnancy Clause

Change in product category or term




Savings-oriented product, cap on maturity age

Postponement Decline

Factor affecting

Underwriting
       

Age Gender Occupation Build Financial factors Lifestyle and habits Family history Personal history

Data required for

Underwriting


Proposal form declaration made by the proposer Agents report statements made by the field worker Medical examiners report necessitated by large sum assured, advanced age or any adverse features noticed

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