Life Insurance UnderwritingLife Insurance Underwriting
Presented byPresented by
A.K.M. Elias Hussain.A.K.M. Elias Hussain.
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.”
Insurance is a privilegeInsurance is a privilege
Sold to lives that are insurable only.Sold to lives that are insurable only.
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
Underwriter is to performUnderwriter is to perform
Asses the risk which people bring to theAsses the risk which people bring to the
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.
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.
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.
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 )
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 childdelicate and complex and has additional risks during child
bearing period )bearing period )
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. )
Condition of health as evidenced byCondition of health as evidenced by
Family history :Family history :
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
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.
Questions in a proposalQuestions in a proposal
Selection ProcessSelection Process
Average livesAverage lives
Under Average or SubstandardUnder Average or Substandard
Special termed, DeclinedSpecial termed, Declined
or Deferredor Deferred
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
to decline.to decline.
The basic issues are takenThe basic issues are taken
into consideration at the timeinto consideration at the time
of initial scrutinyof initial scrutiny
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.
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.
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.
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
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.
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
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
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.
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.
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
Medical history- previous injuries orMedical history- previous injuries or
Family medical historyFamily medical history
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 toHereditary tendency to
Exposure to infection.Exposure to infection.
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.
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.
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
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
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
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 withX-Ray of chest along with
CBC & ESR to find out theCBC & ESR to find out the
exact situation.exact situation.
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.
Degenerative diseases of heartDegenerative diseases of heart
Blood vessels &Blood vessels &
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
UnderweightUnderweight 50% death from50% death from
Respiratory diseaseRespiratory disease
Over-weightOver-weight 50% death from50% death from
Renal diseases.Renal diseases.
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
Thank you very muchThank you very much
The EndThe End