Ch31: Underwriting Flashcards

1
Q

Purpose of underwriting

A

SAFARI
1. suitable special terms
2. avoid anti-selection
3. financial underwriting
4. actual in line with expected
5. adequate risk classification to ensure all risks are rated fairly
6. identify substandard risks

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2
Q

4 types of underwriting

A
  1. medical
  2. lifestyle
  3. financial
  4. claims
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3
Q

Medical evidence sources

A
  • questions on the proposal form completed by the applicant
  • reports from medical doctors the applicant has consulted
  • a medical examination carried out on the applicant
  • specialist tests on the applicant
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4
Q

Factors to consider when deciding on the appropriate level of underwriting

A
  • the expenses associated with the level of underwriting
  • the extent and financial significance of any potential anti-selection
  • the interaction between the level of underwriting and the potential level of sales
  • claims underwriting may deter people from taking up a contract
  • the effectiveness of the proposed underwriting
  • the more detailed the underwriting, the greater the homogenisation of the risk that may be achieved
  • the impact of regulation
  • interaction between underwriting level and terms offered by company’s reinsurers
  • how to vary underwriting criteria
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5
Q

How to limit risk of anti-selection on a group contract

A
  • applying exclusions
  • setting free cover limits
  • ensuring members are actively at work when cover begins
  • setting take-up rates on voluntary schemes
  • laying down take-over terms where the insurer accepts a scheme previously insured elsewhere
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