31. Underwriting Flashcards
Define underwriting
Process of considering an insurance risk. It’s main purpose is to manage risk. It includes assessing if risk is acceptable and, if so, setting appropriate premium and terms and conditions of cover. May also include assessing risk in context of other risks in portfolio.
How can underwriting be used to manage risk?
- Protect company from anti-selection.
- Identify substandard health risks for whome special terms must be quoted.
- For substandard risks, uw will identify most suitable approach and level for special terms to be offered
- Adequate risk classification within uw process will ensure risks are rated fairly
- Ensure actual mortality experience doesn’t depart too far from that assumed in pricing.
- Financial underwriting helps reduce risk of over-insurance
List and define the 4 types of underwriting
Medical:
Medical assessment of applicant’s health
Lifestyle:
Assessing influence of sporting and hazardous leisure pursuits on risk and extent to which lifestyle will influence possibility of contracting diseases
Financial:
Assessing financial situation of applicant
Claims:
UW at claims stage
What type of underwriting can be done at claims stage?
- Check if claim is not fraudulent
- Details declared at initial underwriting are correct
- Non-disclosure
- Check if subject to exclusion
What are the sources that can be used to get medical evidence?
- Questions on proposal form completed by applicant
- Reports from medical doctors that applicant consulted
- Medical exam carried out by medical professional
- Specialist medical test
List some items that might be on proposal form
- Height and weight
- Smoking and drinking habits
- Current health and treatment details
- Personal medical history
- Family medical history
- Occupation and potentially dangerous pastimes
What other factors could affect mortality and health besides medical state?
- Occupation
- Leisure pursuits
- Normal country of residence and health care system
- Socio-economic factors
Why is financial underwriting carried out?
- Detect over-insurance
- Detect if someone is trying to commit fraud
- Affordability
What decisions can be taken after underwriting?
- Accept at standard rates
- Decline
- Defer
- Special terms
- Alternative policy
List some common special terms that can be offered
- Addition to premium
- Reduction in benefit
- Exclusion clause
List some sommon exclusions
- Alcohol and drug abuse
- Self-inflicted injury
- War or civil commotion
- Failure to follow appropriate medical advice
- Claims may not be paid if claimant is resident outside of agreed location
Explain claims underwriting for IP
- Request infor to substantiate claim and check its consistent with info from application
- Check benefit against salary to ensure incentive to RTW
- If approved, claims counsellor will:
- provide advice to help ccope with disability
- give insurer likely duration of illness
- Monitor claim with visits and meducak certification
Which IP policy conditions encourage RTW?
- Early notification of illness»_space; offer rehabilitation services
- Rehab services in claim
- Restrictions on maximum benefit payable
- Linked claims period
- Proportionate benefit if claimant returns to work part time
- For long term illness, may revert to less stringent disability definition
Describe how claims underwriting works in general
- Role: ensure only valid claims are paid and rest are rejected
- Check:
- Valid evidence e.g. death certificate
- Cause of claim not excluded
- No evidence of non disclosure
- Premiums paid
- If claim seems suspicious, get more info e.g. from medical reposrts
- Check aggregation of covers
- If over-insurance supected, gather more info on financial status (e.g. income)
