Chapter 31 : Underwriting Flashcards
How is underwriting used to manage risk?
FAMOSS
Fairly - treat all risks fairly
Avoid antiselection
Mortality experience is in line with pricing assumptions
Over insurance avoided through financial underwriting
Special terms for substandard risk
Substandard risks identified
What is the process of underwriting?
The process of underwriting involves requesting adequate information prior to acceptance of a risk to ensure the risk is properly estimated.
What is medical underwriting?
The medical assessment of a potential p/holders health.
- Question on a proposal form
- Existing reports from medical doctors
- Medical examination
- Specialist medical tests on an applicant
What is financial underwriting?
An assessment of the sum assured to ensure:
1. Person is not trying to commit fraud (high sum-assured not justified by income)
- Premiums payable are affordable
What could happen to applicants who do not reach the required standard of health?
- Decline
- Defer
- Offer special terms
i. Increased premiums
ii. Reduction in benefit
iii. an exclusion - Offered an alternative policy
What factors go in to determine the level of underwriting.
Underwriting level should balance:
- Risk of mis-estimating the risk
- Costs of obtaining the evidence
Regulation may constrain underwriting.
Reinsurance will require a certain level of underwriting.
What is lifestyle underwriting?
An assessment of the sporting and hazardous leisure pursuits on the risk.
What is claims underwriting?
An assessment at claims stage to check if there is anything is under exclusions, or to check for non-disclosure.
What are some common exclusions?
Risks associated with anti-selection & moral hazard
- Alcohol and drug abuse
- Self-inflicted injury or attempted suicide
- War/civil unrest
- Failure to follow appropriate medical advice
