establishing underwriting policy for insurance prducts

8/8/2019 Establishing Underwriting Policy for Insurance Prducts

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Presented by

Neha

Deepti

VeenuMerily

Krupali

Natasha

Priyanka

Shweta samant


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Underwriting policy criteria

Policy clauses

Excesses, deductibles, loading and Incentives

Internal and External constraints on

underwriting policy

Risk Assessment

Underwriting policy guidelines


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The insurance product offered by the insurer

should reflect the underwriting philosophy

and policies of the firm.

Fulfill the insurers business requirements aswell as the expectations of the policyholders

Ensure balance between risk exposure and

premium charged

Comply with all legal and chosen ethicalrequirement


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Adhering to common and standardized policy

wordings

Benefits

Tried & tested over a period of time

Wordings are comprehensive thus removes

ambiguity

Uses Plain English

Standard policies written on modular basis Provide number of different cover

Example- home insurance policy, standard travel

policy etc.


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It include terms of contract and extent of

cover .

Criteria relevant :

Subject matter of insurance.( physicalproperty, personal injury, legal liability, private

medical expenses, legal expenses)

Risks or perils covered

Insurance period


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Example of subject matter are:

Building insured under property policy.

Injury to authorized driver, vehicle and its

content under motor policy.

Risk or perils covers:

Destructions or loss

They give information that insurer is willing to

provide cover in respect to particular risk


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Insurance period :

Usually it is 12 month

In case of mortgage indemnity, it is for fixed

duration reflected in a single premium

Exceptions in insurance cover

These include those which an insurer is not

willing to cover.

For example war risks or existing damage


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Inclusion of such type of risk can be

permitted but at an higher or increased

premium.

Terminology : Excesses

Deductible

Incentives ( ex. Long Term Agreement)

Premium loading


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In any type of insurance an excess or a deductible is a certain pre-

determined amount that is paid by the policyholder in case an

accident (or damage) occurs to the policyholder.

It is of2 types

- Voluntary : Compulsory excess is the minimum payment that is

acceptable to your insurance provider.

- Compulsory: you can also opt for voluntary excess in case you

want to lower the premiums and have enough funds to shell out

the amount in case of an accident.


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Purpose

To attract new clients & retain existing customers

Types:

Long Term Agreement (LTA)

No Claim Discount (NCD)

Profit Commission

Volume Commission

Gifts


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What is Normal Premium?

Example: Maruti 800

What is Premium loading?

Example: Modified Maruti 800


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A first-loss policy is a property insurance policy in which the

policyholder arranges cover for an amount below the full value of

the items insured and the insurer agrees not to penalize him for

under-insurance.

The main use of these policies is in circumstances in which a total

loss is virtually impossible.

Insurer provides first loss covers only in respect of property and

for losses arising due to storm, flood, impact and theft


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Externalconstraints

What iscovered

Limits ofcover

MarketPosition

NewBusinessPosition


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What tocover

Fulfill conditions

Insured should have insurable interest in the subject matter of the insurance.

Both the insurer as well as the insured should adhere to the doctrine of utmost good faith

The subject matter of the insurance should be in existence.

The subject matter should be capable of being identified

Regulatory laws

Limits tocover

Ensure sound financial resources

MarketPosition

Competition

New BusinessGrowth

Solvency

Competitive environment


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Few in number

Long time in business and possess good

experience and knows what to cover withrespect to all the classes they transact


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There may be a reluctance to provide cover

with respect to a particular class or subclass

of business at particular location or in

generalEg: cracker factory

Lack of evidence suggesting demand for a

particular cover


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Classification and

categorization of risk


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Frequency

Severity

Assessment of potential claims

Relevant and detailed statistical data

INTERNAL EXTERNAL

ARRANGEMENT IN A

SYSTEMATIC MANNER,MANAGEABLE FORMAT


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Common definitions

In U.K. , the A.B.I.- codes-simplifying process

Eg. Private motor Insurance, Property Insurance

ACCEPTANCEAND RENEWALCRITERIA

Underwriting guidelines- commercial risks

Quality of Insurance portfolio- audits

RISK IMPROVEMENTAND SURVEYCRITERIA

Verify the accuracy

Survey method- size of risk and frequency of risk


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Insured

Insurer

Insurer can choose business Insurer will not accept sub-standard risks

Higher risks if accepted, will be charged a very high premium

HARD MARKET


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Insured

Insurer

Intense competition among insurersoor ris s ill ecome accepta le

remiums ill nose-dive

SOFT MARKET

olicyholders can procure cover as per requirements

Any attempt at ris -improvement ill fail


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Competitor Activities

Stay abreast

Be armed with a counter strategy

EML Estimated Max Loss Policy requisites

How retention limits are controlled

What safeguards are in place

What measures are to be initiated to rectify negativetrends

y Reinsurance different types

y Adopt new responsive business acquisition policy


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Binding authorities Agents accept risks of a particular class within

defined limits

Limits clear, pre-defined by insurer

Ceiling imposed on agents authority to writenon-standard business

Insurer notified at regular intervals

Agent benefits

Higher commission Greater authority to take decisions quickly

Insurer benefits More business is written

Certain administrative hassles taken care of

BUT, Ensure proper monitoring & auditing arrangements


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Acceptance Slips

In case of large risks

Ability of external agents to implement firms

underwriting policy


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Standardgroup

Balancing thesize of

Substandardgroups

Balancewithin each

class

Emphasis onmajor risks

Equityamonginsurers

Socialacceptability

Recognitionof

underlyingloss

assumptions


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THANK YOU

establishing underwriting policy for insurance prducts

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