Ch 31: Underwriting

Question 1

Factors to consider when determining the level of underwriting to use

Answer 1

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o Sales: assess interaction between underwriting level and level of sales
o Expenses: expense associated with proposed level of underwriting
o Anti-selection: Extent of anti-selection and it’s financial significance
o Regulation: regulation may constrain level and type of underwriting
o Claims underwriting: having claims underwriting increases pH uncertain about claim, which may reduce sales
o Homogenization of risk: more detailed underwriting = more homogenization of risk
o Varying level of underwriting by age, SA, target market