life insurance underwriting
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WelcomeWelcome
Life Insurance UnderwritingLife Insurance Underwriting
What is Life Insurance ?What is Life Insurance ?
Life Insurance is a contract, Life Insurance is a contract, “whereby the insurer, in “whereby the insurer, in consideration of a premium paid consideration of a premium paid either in a lump-sum or in periodical either in a lump-sum or in periodical installment, undertakes to pay an installment, undertakes to pay an annuity or a certain sum of money. annuity or a certain sum of money. Either on the death of the insured Either on the death of the insured or on the expiry of a certain number or on the expiry of a certain number of years.”of years.”
Insurance is a privilegeInsurance is a privilege
Sold to lives that are insurable only.Sold to lives that are insurable only.
Insurability:Insurability:
i) Need for insurancei) Need for insurance
ii) Capacity to payii) Capacity to pay
iii) Medical fitnessiii) Medical fitness
Factors of PremiumFactors of Premium
Cost of mortality that is Net Prem.Cost of mortality that is Net Prem.
Investment ReturnsInvestment Returns
Management ExpensesManagement Expenses
Tabular PremiumTabular Premium
Net Premium Net Premium ++ Investment Returns Investment Returns ++ Management Expenses Management Expenses
= = TabularTabular Premium or Premium or OrdinaryOrdinary Premium Premium
or or OfficeOffice Premium. Premium.
Underwriter is to performUnderwriter is to perform
Asses the risk which people bring to the Asses the risk which people bring to the pool;pool;
Decide whether or not to accept the risk, or Decide whether or not to accept the risk, or how much to accept;how much to accept;
Determine terms, conditions and scope of Determine terms, conditions and scope of cover to be offered;cover to be offered;
Calculate a suitable premium.Calculate a suitable premium.
Source of information for underwritersSource of information for underwriters
The proposal form;The proposal form;
A Private Medical Attendant’s Report A Private Medical Attendant’s Report plus any supporting questionnaires;plus any supporting questionnaires;
A medical examination;A medical examination;
Specialist medical tests;Specialist medical tests;
Financial, occupation, leisure and Financial, occupation, leisure and residency evidence.residency evidence.
Underwriting depend uponUnderwriting depend upon
Structure & technical capabilities of Structure & technical capabilities of regional/branch offices,regional/branch offices,
The product mix of the company i.e emphasis The product mix of the company i.e emphasis on protection or investment oriented products;on protection or investment oriented products;
The scope & financial limitations imposed by The scope & financial limitations imposed by the current reassurance treaties;the current reassurance treaties;
The nature & influence by the consulting The nature & influence by the consulting medical officer team; medical officer team;
The structure of the other administrative The structure of the other administrative departments- new business & claim deptt.departments- new business & claim deptt.
Factors influencing assessmentFactors influencing assessmentProposer’s physical condition;Proposer’s physical condition;
Medical history;Medical history;
( Chronic diseases & Acute disease )( Chronic diseases & Acute disease )
Family medical history;Family medical history;
( Longevity & Heredity e.g. history of asthma. T.B, Diabetes )( Longevity & Heredity e.g. history of asthma. T.B, Diabetes )
Occupation;Occupation;
Hobbies & activities of hazardous in nature;Hobbies & activities of hazardous in nature;
Financial factors.Financial factors.
Factors affecting mortalityFactors affecting mortality
AgeAge ( mortality is known to generally increase with age ( mortality is known to generally increase with age after puberty )after puberty )
SexSex ( female sex is constitutionally more resistant: more ( female sex is constitutionally more resistant: more delicate and complex and has additional risks during child delicate and complex and has additional risks during child bearing period )bearing period )
RaceRace
Occupation Occupation (extra hazard due to accident, e.g., Truck (extra hazard due to accident, e.g., Truck driver, permanent way engineer etc. )driver, permanent way engineer etc. )
ResidenceResidence
Contd.,Contd., EnvironmentsEnvironments
HabitsHabits
Condition of health as evidenced byCondition of health as evidenced by
Family history :Family history :
i)i) LongevityLongevity
ii)ii) HeredityHeredity ( e.g., history of asthma, ( e.g., history of asthma,
TB, diabetes )TB, diabetes )
Personal historyPersonal history
i) Chronic diseasesi) Chronic diseases
ii) Acute diseases ii) Acute diseases
Contd.,Contd.,
Standard impairments Standard impairments ( e.g., Deafness, ( e.g., Deafness, blindness, loss of teeth, deformity as a result of blindness, loss of teeth, deformity as a result of some injury or polio )some injury or polio )
Build Build ( Stout, thin or average )( Stout, thin or average )
Any other features which can be disclosed Any other features which can be disclosed only by a medical examination.only by a medical examination.
Questions in a proposalQuestions in a proposal
Selection ProcessSelection Process
Average livesAverage lives
Under Average or SubstandardUnder Average or Substandard
Special termed, Declined Special termed, Declined or Deferredor Deferred
Underwriting DecisionsUnderwriting Decisions
to accept the insurance, and if to accept the insurance, and if so, at so, at what rate of premium,what rate of premium,
to call for further informationto call for further information to postpone a decision for a to postpone a decision for a periodperiod to decline.to decline.
The basic issues are taken The basic issues are taken into consideration at the time into consideration at the time
of initial scrutinyof initial scrutiny
Female lives are divided into three Female lives are divided into three groups in respect of income groups in respect of income
Those having earned incomeThose having earned income
Those with unearned incomeThose with unearned income
(i.e. income from investment)(i.e. income from investment)
With no income of their own.With no income of their own.
AddressAddress
Whether the proposer has an Whether the proposer has an independent address of his own. It independent address of his own. It may be his place of work or the place may be his place of work or the place of his residence. An address which is of his residence. An address which is ‘care of’ the agent or an employee of ‘care of’ the agent or an employee of the insurer may not be accepted for the insurer may not be accepted for obvious reason.obvious reason.
OccupationOccupation
It should be ensured that sufficient data It should be ensured that sufficient data are given to decide whether extra are given to decide whether extra premium is chargeable and if so what premium is chargeable and if so what further information is required. Insurers further information is required. Insurers maintain occupational rating schedule maintain occupational rating schedule to which reference is for this purpose. to which reference is for this purpose.
AgeAge
The date of birth is to be checked and will The date of birth is to be checked and will have to be seen whether a proper proof is have to be seen whether a proper proof is submitted. submitted.
Sum to be insuredSum to be insured
It is necessary to ensure that It is necessary to ensure that the sum proposed is reasonable the sum proposed is reasonable having regard to the income of having regard to the income of the proposer and also with the the proposer and also with the previous insurance cover, if any.previous insurance cover, if any.
NomineeNominee
The particulars of the nominee The particulars of the nominee mentioned in the proposal are mentioned in the proposal are examined with family history for examined with family history for ensuring consistency in age and ensuring consistency in age and relationship and to justify insurable relationship and to justify insurable interest and other legal issuesinterest and other legal issues
SignatureSignature
Signatures are compared with the signature Signatures are compared with the signature available in the medical report and the available in the medical report and the name stated in the proposal. If the proposer name stated in the proposal. If the proposer has signed in a language other than the has signed in a language other than the language of the proposal form, a language of the proposal form, a declaration is obtained to the effect that the declaration is obtained to the effect that the contents of the proposal have been contents of the proposal have been explained to the proposer explained to the proposer
Family HistoryFamily History
It should be examined whether the It should be examined whether the particulars of the Personal statement particulars of the Personal statement are consistent with ages of parents are consistent with ages of parents and or brothers and sisters.and or brothers and sisters.
Medical Examiner’s ReportMedical Examiner’s Report
The medical report is checked up to The medical report is checked up to ensure that the Examiner has not ensure that the Examiner has not contravened any rules in examining the contravened any rules in examining the proposer and that the agent has not proposer and that the agent has not contravened the rules relating to contravened the rules relating to arranging for the medical examination. arranging for the medical examination.
A risk can be abnormal forA risk can be abnormal for
Occupation of the person to be insuredOccupation of the person to be insured
Physical condition of the person to be Physical condition of the person to be insuredinsured
Medical history- previous injuries or Medical history- previous injuries or illnessillness
Family medical historyFamily medical history
HobbiesHobbies
Moral hazard. Moral hazard.
Incidence of Extra RisksIncidence of Extra Risks
Increasing extra risksIncreasing extra risks
Decreasing extra risksDecreasing extra risks
Constant extra risksConstant extra risks
FAMILY HISTORYFAMILY HISTORY
Family history for consideration of :Family history for consideration of :
Average longevity of the familyAverage longevity of the family
Hereditary tendency to Hereditary tendency to disease disease
Exposure to infection.Exposure to infection.
Better than average when Both parents Better than average when Both parents are of 70 years.are of 70 years.
Worse than average when both parents Worse than average when both parents have died before age 50.have died before age 50.
OR OR
If the family history discloses two cases of If the family history discloses two cases of alcoholism, apoplexy (a stroke), Bright’s alcoholism, apoplexy (a stroke), Bright’s disease, diabetes, epilepsy, heart disease, disease, diabetes, epilepsy, heart disease, insanity or suicide before age 60.insanity or suicide before age 60.
UNDERWRITING OF UNDERWEIGHTUNDERWRITING OF UNDERWEIGHT
Standard weight chart ?Standard weight chart ?
Factors to be consideredFactors to be considered
Life to be assured is not an illiterate or Life to be assured is not an illiterate or semiliterate but has enough basic semiliterate but has enough basic knowledge/education which will enable him to knowledge/education which will enable him to understand the implications of certain major understand the implications of certain major illness/sickness.illness/sickness.
He has adequate means and facilities for He has adequate means and facilities for availing medical treatment in the event of availing medical treatment in the event of sickness.sickness.
Contd.,Contd.,Place of employment and area of residence Place of employment and area of residence are not unduly polluted with gas, smoke etc. are not unduly polluted with gas, smoke etc. which will affect the health very adversely which will affect the health very adversely and the areas are not know for any and the areas are not know for any contagious or infections diseases.contagious or infections diseases.
Chest expansion is at least 5 cms.Chest expansion is at least 5 cms.
The recorded weight should be at least 37 The recorded weight should be at least 37 kgs irrespective of percentage of kgs irrespective of percentage of underweight. underweight.
Where the underweight is more than 17.5% Where the underweight is more than 17.5%
Further for confusionFurther for confusion
X-Ray of chest along with X-Ray of chest along with CBC & ESR to find out the CBC & ESR to find out the exact situation. exact situation.
OVER WEIGHTOVER WEIGHT
At younger age over-weight of a moderate At younger age over-weight of a moderate degree is not a serious impairmentdegree is not a serious impairmentModerate over-weight is considered up to 40 Moderate over-weight is considered up to 40 years of age.years of age.
Over-WeightOver-Weight (Hazards)(Hazards)Degenerative diseases of heartDegenerative diseases of heartBlood vessels &Blood vessels &Kidneys.Kidneys.
Fat man over 40 years of age are Fat man over 40 years of age are 19 times19 times as liable to develop as liable to develop diabetesdiabetes than of thin than of thin manman
EffectsEffects
UnderweightUnderweight 50% death from 50% death from
TuberculosisTuberculosis
Respiratory diseaseRespiratory disease
Over-weightOver-weight 50% death from 50% death from
Cardiovascular Cardiovascular
Renal diseases. Renal diseases.
Method of RatingMethod of Rating1.1. Favourable term for a short periodFavourable term for a short period
2.2. Fixed monetary extraFixed monetary extra
3.3. Addition of years of ageAddition of years of age
4.4. Multiple of premiumMultiple of premium
5.5. Temporary extraTemporary extra
6.6. Combination of permanent & temporary extraCombination of permanent & temporary extra
7.7. Debts or liensDebts or liens
8.8. Exclusion clausesExclusion clauses
9.9. Deferment.Deferment.
Thank you very muchThank you very much
The EndThe End