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Life Insurance Underwriting

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Life Insurance Underwriting

  1. 1. WelcomeWelcome Life Insurance UnderwritingLife Insurance Underwriting
  2. 2. Presented byPresented by A.K.M. Elias Hussain.A.K.M. Elias Hussain. akmeliashussain@live.comakmeliashussain@live.com
  3. 3. 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 paidconsideration of a premium paid either in a lump-sum or in periodicaleither in a lump-sum or in periodical installment, undertakes to pay aninstallment, undertakes to pay an annuity or a certain sum of money.annuity or a certain sum of money. Either on the death of the insuredEither on the death of the insured or on the expiry of a certain numberor on the expiry of a certain number of years.”of years.”
  4. 4. 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
  5. 5. 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
  6. 6. Tabular PremiumTabular Premium Net PremiumNet Premium ++ Investment ReturnsInvestment Returns ++ Management ExpensesManagement Expenses == TabularTabular Premium orPremium or OrdinaryOrdinary PremiumPremium oror OfficeOffice Premium.Premium.
  7. 7. Underwriter is to performUnderwriter is to perform Asses the risk which people bring to theAsses the risk which people bring to the pool;pool; Decide whether or not to accept the risk, orDecide whether or not to accept the risk, or how much to accept;how much to accept; Determine terms, conditions and scope ofDetermine terms, conditions and scope of cover to be offered;cover to be offered; Calculate a suitable premium.Calculate a suitable premium.
  8. 8. Source of information for underwritersSource of information for underwriters The proposal form;The proposal form; A Private Medical Attendant’s ReportA 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 andFinancial, occupation, leisure and residency evidence.residency evidence.
  9. 9. Underwriting depend uponUnderwriting depend upon Structure & technical capabilities ofStructure & technical capabilities of regional/branch offices,regional/branch offices, The product mix of the company i.e emphasisThe 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 byThe scope & financial limitations imposed by the current reassurance treaties;the current reassurance treaties; The nature & influence by the consultingThe nature & influence by the consulting medical officer team;medical officer team; The structure of the other administrativeThe structure of the other administrative departments- new business & claim deptt.departments- new business & claim deptt.
  10. 10. Factors influencing assessmentFactors influencing assessment Proposer’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.
  11. 11. 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 childdelicate and complex and has additional risks during child bearing period )bearing period ) RaceRace OccupationOccupation (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
  12. 12. 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 diseasesii) Acute diseases
  13. 13. Contd.,Contd., Standard impairmentsStandard impairments ( e.g., Deafness,( e.g., Deafness, blindness, loss of teeth, deformity as a result ofblindness, loss of teeth, deformity as a result of some injury or polio )some injury or polio ) BuildBuild ( Stout, thin or average )( Stout, thin or average ) Any other features which can be disclosedAny other features which can be disclosed only by a medical examination.only by a medical examination.
  14. 14. Questions in a proposalQuestions in a proposal
  15. 15. Selection ProcessSelection Process Average livesAverage lives Under Average or SubstandardUnder Average or Substandard Special termed, DeclinedSpecial termed, Declined or Deferredor Deferred
  16. 16. Underwriting DecisionsUnderwriting Decisions to accept the insurance, and ifto accept the insurance, and if so, atso, at what rate of premium,what rate of premium, to call for further informationto call for further information to postpone a decision for ato postpone a decision for a periodperiod to decline.to decline.
  17. 17. The basic issues are takenThe basic issues are taken into consideration at the timeinto consideration at the time of initial scrutinyof initial scrutiny
  18. 18. Female lives are divided into threeFemale lives are divided into three groups in respect of incomegroups 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.
  19. 19. AddressAddress Whether the proposer has anWhether the proposer has an independent address of his own. Itindependent address of his own. It may be his place of work or the placemay be his place of work or the place of his residence. An address which isof 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 forthe insurer may not be accepted for obvious reason.obvious reason.
  20. 20. OccupationOccupation It should be ensured that sufficient dataIt should be ensured that sufficient data are given to decide whether extraare given to decide whether extra premium is chargeable and if so whatpremium is chargeable and if so what further information is required. Insurersfurther information is required. Insurers maintain occupational rating schedulemaintain occupational rating schedule to which reference is for this purpose.to which reference is for this purpose.
  21. 21. AgeAge The date of birth is to be checked and willThe date of birth is to be checked and will have to be seen whether a proper proof ishave to be seen whether a proper proof is submitted.submitted.
  22. 22. Sum to be insuredSum to be insured It is necessary to ensure thatIt is necessary to ensure that the sum proposed is reasonablethe sum proposed is reasonable having regard to the income ofhaving regard to the income of the proposer and also with thethe proposer and also with the previous insurance cover, if any.previous insurance cover, if any.
  23. 23. NomineeNominee The particulars of the nomineeThe particulars of the nominee mentioned in the proposal arementioned in the proposal are examined with family history forexamined with family history for ensuring consistency in age andensuring consistency in age and relationship and to justify insurablerelationship and to justify insurable interest and other legal issuesinterest and other legal issues
  24. 24. SignatureSignature Signatures are compared with the signatureSignatures are compared with the signature available in the medical report and theavailable in the medical report and the name stated in the proposal. If the proposername stated in the proposal. If the proposer has signed in a language other than thehas signed in a language other than the language of the proposal form, alanguage of the proposal form, a declaration is obtained to the effect that thedeclaration is obtained to the effect that the contents of the proposal have beencontents of the proposal have been explained to the proposerexplained to the proposer
  25. 25. Family HistoryFamily History It should be examined whether theIt should be examined whether the particulars of the Personal statementparticulars of the Personal statement are consistent with ages of parentsare consistent with ages of parents and or brothers and sisters.and or brothers and sisters.
  26. 26. Medical Examiner’s ReportMedical Examiner’s Report The medical report is checked up toThe medical report is checked up to ensure that the Examiner has notensure that the Examiner has not contravened any rules in examining thecontravened any rules in examining the proposer and that the agent has notproposer and that the agent has not contravened the rules relating tocontravened the rules relating to arranging for the medical examination.arranging for the medical examination.
  27. 27. 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 bePhysical condition of the person to be insuredinsured Medical history- previous injuries orMedical history- previous injuries or illnessillness Family medical historyFamily medical history HobbiesHobbies Moral hazard.Moral hazard.
  28. 28. Incidence of Extra RisksIncidence of Extra Risks Increasing extra risksIncreasing extra risks Decreasing extra risksDecreasing extra risks Constant extra risksConstant extra risks
  29. 29. FAMILY HISTORYFAMILY HISTORY Family history for consideration of :Family history for consideration of : Average longevity of the familyAverage longevity of the family Hereditary tendency toHereditary tendency to diseasedisease Exposure to infection.Exposure to infection.
  30. 30. Better than average when Both parentsBetter than average when Both parents are of 70 years.are of 70 years. Worse than average when both parentsWorse than average when both parents have died before age 50.have died before age 50. OROR If the family history discloses two cases ofIf the family history discloses two cases of alcoholism, apoplexy (a stroke), Bright’salcoholism, 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.
  31. 31. 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 orLife to be assured is not an illiterate or semiliterate but has enough basicsemiliterate but has enough basic knowledge/education which will enable him toknowledge/education which will enable him to understand the implications of certain majorunderstand the implications of certain major illness/sickness.illness/sickness. He has adequate means and facilities forHe has adequate means and facilities for availing medical treatment in the event ofavailing medical treatment in the event of sickness.sickness.
  32. 32. Contd.,Contd., Place of employment and area of residencePlace 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 adverselywhich will affect the health very adversely and the areas are not know for anyand 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 37The recorded weight should be at least 37 kgs irrespective of percentage ofkgs irrespective of percentage of underweight.underweight. Where the underweight is more than 17.5%Where the underweight is more than 17.5%
  33. 33. Further for confusionFurther for confusion X-Ray of chest along withX-Ray of chest along with CBC & ESR to find out theCBC & ESR to find out the exact situation.exact situation.
  34. 34. OVER WEIGHTOVER WEIGHT At younger age over-weight of a moderateAt younger age over-weight of a moderate degree is not a serious impairmentdegree is not a serious impairment Moderate over-weight is considered up to 40Moderate over-weight is considered up to 40 years of age.years of age. Over-WeightOver-Weight (Hazards)(Hazards) Degenerative diseases of heartDegenerative diseases of heart Blood vessels &Blood vessels & Kidneys.Kidneys. Fat man over 40 years of age areFat man over 40 years of age are 19 times19 times as liable to developas liable to develop diabetesdiabetes than of thinthan of thin manman
  35. 35. EffectsEffects UnderweightUnderweight 50% death from50% death from TuberculosisTuberculosis Respiratory diseaseRespiratory disease Over-weightOver-weight 50% death from50% death from CardiovascularCardiovascular Renal diseases.Renal diseases.
  36. 36. Method of RatingMethod of Rating 1.1. 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.
  37. 37. Thank you very muchThank you very much The EndThe End

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