L1: Distribution Methods, Underwriting, and Premium Flashcards
Distribution Methods
used to sell insurance products to customers
Commission System
use brokers, financial advisors to sell products to customers. These works are compensated with commissions as % of premium paid
Front End Load
percentage of first premium is higher than subsequent premiums
Direct Marketing
and size of benefit compared to those sold through commission channel
sell through tv, advertising, radio, telephone, policies have smaller benefit than those sold through commission system
Underwriting
collect and evaluates information from applicant then determines premium using rating profile with rating algorithm.
Premium is based on
multiple rating variables etc age, gender, smoking, UW class
Forms of underwriting
proposal form, applicant profile, medical history, health examination
Level of Underwriting depends on (3)
type of insurance product
amount of benefit
distribution method
type of insurance product
term policies sold more strictly than whole life
amount of benefit
larger then benefit = more stricter underwriting
distribution method
policies sold through commissions are more stricter than on direct marketing
Applicant Classes (4)
- preferred lives
- normal lives
- rated lives
- uninsurable lives
Applicant Classes - Preferred Lives
applicants have low mortality risk
Applicant Classes - normal Lives
applicants have some increased risk factor compared to preferred lives, insurable at standard premium rate
Applicant Classes - Rated Lives
have one or more factors at raised levels, insurable at higher premium
