8 - Underwriting considerations Flashcards
What are the four main tasks of an underwriter?
- Assess the risk that a proposal would bring to the common pool
- Decide if the risk is acceptable (and if so how much)
- Determine the scope of cover that could be offered as well as any terms and conditions
- Calculate an equitable premium
What is assessed in the insurance underwriting process once a proposal has been made?
- The underwriting factors and claims experience for that particular type of business (eg a fireworks factory is likely to be more risky than a dog food factory)
- The “average” claim for that particular line of business
- A comparison between that specific proposer and the average for that line of business (eg a fireworks factory with robust health and safety procedures and new, regularly maintained machinery, is likely to present a lower risk than a different factory with old machinery and poor health and safety)
What are the main underwriting factors for motor insurance?
- Make and model
- Usage
- Driver’s age
- Driving record (convictions and claims history)
- Vehicle modifications
- Where the vehicle is stored
- Where the vehicle is located geographically
- Cover required
What are the main underwriting factors for health insurance?
- Age
- Medical history
- Occupation (this is the key one)
- Lifestyle (including personal health)
- Family circumstances
What are the two main underwriting factors for private household insurance?
- Construction materials
- Location
What are the main underwriting factors for private contents insurance?
- Security
- Occupation
- Location
What are the main underwriting factors for private travel insurance?
- Area of travel
- Purpose of visit (including time spent there)
- Whether a group policy is requested
- Pre-existing health conditions
In commercial property insurance, what are the main underwriting factors for fire and special perils insurance?
- Construction materials
- Usage
- Goods stored
- Safety features (eg sprinklers, fire doors, etc)
- Risk controls (maintenance etc)
- Size of building (floors and square footage)
- Location
- Method of heating and lighting
In commercial property insurance, what are the main underwriting factors for theft insurance?
- Location
- Type of business
- Construction of premises
- Security features (alarms, CCTV, etc)
- Moral hazards of proposer
In commercial property insurance, what are the main underwriting factors for glass insurance?
- Location
- Usage
In commercial property insurance, what are the main underwriting factors for money insurance?
- Volume of money handled
- Precautions (in storage and movement, eg safes, how many people accompany in transit, etc)
- How employees are paid (in cash or not)
- Type of business (e.g. jewellery shop)
What are the main underwriting factors for commercial legal expenses insurance?
- Occupation
- Compliance with legislation (health and safety)
- Employment criteria
- Breakdown of current staff diversity
What is the main underwriting factor for business interruption insurance and what are the considerations that feed into this?
How quickly would it take the proposer to resume business after an interruption?
- Could they conduct business from a different premises? Home working?
- Do they have any critical infrastructure eg machinery or IT equipment?
- Are replacements easy to obtain?
- Is there any dependency between sites or external to the company?
- Is the business seasonal?
- Physical features of the property
What is the main underwriting factor for both employer’s and public liability?
Type of business/occupation
What are the main underwriting factors for pollution liability?
- Type of business
- Materials used and storage
- Control measures
What are the main underwriting factors for products liability?
- Occupation of the business
- Potential damage of the product
- Where the products are sold
- Quality control measures
What are the main underwriting factors for professional indemnity insurance?
- Occupation
- Moral hazards
- Qualifications and experience
What is the main underwriting factor for extended warranty insurance?
Likelihood of the product breaking down over time
Usually sold as add-on to a product through a retailer so not really underwritten in the conventional sense
What is a common underwriting factor across most lines of business, for both commercial and consumer insurance?
Credit rating
What are some different types of fraudulent claims?
- Exaggerating effects
- Claiming for an event that never actually occurred
- Deliberately causing a loss
How does fraud affect both the insurer and their insureds?
The insurer has to pay out more in claims impacting their profits and possibly causing them to raise their premiums. These higher premiums may cause policyholders to look elsewhere.
Innocent policyholders may be affected by premium increases.
Who mainly deals with the prevention of fraud in the insurance industry?
The Insurance Fraud Bureau
What do the Insurance Fraud Bureau do?
Publicly educate against insurance fraud
Assist with industry wide actions against fraud
Support the industry and law enforcement in detecting and preventing fraud