Insurance Uderwriting and Claims

Meaning of underwriting :

generally, underwriting is the total sum of the step taken to consider whether to accept a particular risk or not and when accepted at what rate of premium, terms, and conditions.

The decision on the above issues will require basic knowledge of all relevant facts about the risks so as to make an informed decision.

However, underwriters are well-trained scholars in the field of insurance who evaluate and analyze risks that may likely occur and set out the possible ways of resolving them.

These scholars are well-grounded in risk management and assessment, They use their skills and experiences to consider whether to insure or not, but if they are to ensure at what cost or condition.

In a Life Insurance:

One of the most basic principles of life insurance is that the premium paid by each insured life is sufficient to cover the risk which he brings to the life insurance fund.

In order to implement this, a mortality table is used to calculate the standard premium rate applicable to average lives, that is, where the potential risk is unlikely to be heavier than that in the mortality table.

Each risk is assessed individually by the underwriters and if it appears that the mortality is no heavier than the mortality rate used in the premium calculation, the proposal is accepted at the standard rate premium, as the risk is average.

Factor that Militates Underwriting in Life Insurance

The relevant underwriting factors are as follows
Age, Sex, health conditions of the proposer, occupation, address, family history, and type of policy needed.

Age: Age is the most considered factor in the underwriting life insurance business. In life policy because of the increase in the mortality table, risk or death in the case of older persons, most insurance companies have a maximum issue age for new applications.

Also, age in non-life policy is an underwriting factor, in motor insurance policy age limit has an effect on premium payments likewise other policies of insurance.

Sex: The sex consideration of a successful applicant is important in underwriting, Usually, men and women are subject to different health and mortality risks, e.g for women as a class, they live longer, but certain medical conditions occur more frequently than for men vice versa. However, a man is more prone to become injured or killed by an accident.

Medical History or physical condition of the proposer: this factor will help to determine the applicant’s current health conditions and the likelihood of future health conditions, e.g diabetes in the family may suggest that the applicant may be prone to having these conditions.

Height and Weight: The mortality risk increases among people who are overweight, based on their height and are { slightly higher weight are usually permitted as age increases }, extremes in either direction are undesirable.

Name and Address: This is another important factor considered in underwriting, this information is required for identification and policy preparation purposes. Disclosure of any overseas address requires special underwritings consideration.

Reasons for Underwritings:

These are the major reasons for underwriting in insurance
a. To evaluate and access the type of risk to be accepted

b. To reduce to the barest minimum the impact of the potential loss
.
c. To remove the uninsurance risk from the pool

d. To consider if the capital base of the company withstands such risk at its occurrance.

e. To check if the risk is acceptable or not and if acceptable under what terms and conditions.

Importance of Underwriting in Life Insurance and General Insurance

The following are the importance of underwriting in a life insurance contract:
1. Underwriters helps to identify the actual policyholders

2. To ensure that the name of the benefactor is the actual name

3. To enable the insurer to charge an adequate premium

4. To make sure that insurable interest exists in the case of insurance of another person

5. They help to evaluate and review information to ascertain the risk.

Summary:

Insurance underwriting is one of the major bases for risk evaluation and analysis, It is the total step taken to know whether to accept a particular risk or not.

We also considered age, sex, height and weight, occupation, and address as one of the factors that are considered before underwriting in life insurance.

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