This document discusses life assurance underwriting. It explains that individuals seeking life assurance must fill out a proposal form with general and specific questions. Underwriting can be medical, non-medical, or financial based on the risk. Medical underwriting involves medical exams and reports. Non-medical underwriting assesses risk based on the proposal form for smaller policies. Group life assurance provides death benefits for employees and has features like master policies and membership certificates. Underwriting is more lenient for groups due to risk spreading.

1. Life assurance underwriting
• A person seeking life assurance must
fill a Proposal form
• A proposal form contains 2 sets of
questions namely
• 1. General questions (apply to all
proposers and to all types of life policies)
Name of proposer
Name of life to be assured
Address 1

2. • 2. Specific questions (apply to each proposer)
• Material facts
• Must be disclosed including:
 Occupation
 Current health status
 Previous life assurance history
 Family medical history
 Habits and leisure pursuits of the proposed life
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3. • Underwriting
• Life assurance can be underwritten in
three ways:
Medical underwriting
Non-medical underwriting
Financial underwriting
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4. • Medical underwriting
• Assessment of medical reports
• Apply where :
Sum assured is high
There are adverse features in the proposal
form
Age is above a certain age say over 40
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5. Common reports used are:
Medical examination report
Private medical attendants report
Electrocardiogram
Xray
Blood chemistry
HIV Test
Urinalysis
Blood pressure test
Glucose tolerance test
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6. • Non medical underwriting
Assessment of risk based on proposal
form
Applies to proposals with small sums
assured or where the age of the proposer
is below a certain age e.g. 40
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7. • Financial underwriting
Applies where sums assured are higher
than those set by the company
Financial investigation will be carried out
Consideration of moral hazard
May include increase in risk resulting from
lack of moral integrity on the part of the
assured or life assured
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8. • Acceptance terms
• The terms on which a life risk is accepted
vary with nature of risk
• The main terms are
Standard-Ordinary rates or normal
rates-pay normal rates
Substandard or under average lives-
Pay higher than normal rates due to
extra risk
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9. • Extra risks can be classified as:
1. Increasing extra risks-increase with
passage of time e.g. overweight, high blood
pressure or chronic bronchitis
2. Decreasing/Reducing Extra Risks-Decrease
with the passage of time e.g. tuberculosis or
cancer which is being treated successfully
3. Constant/Level Extra Risks-Remain
constant while the life assured is exposed to
it e.g. aviation risks or motor racing
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10. Under average lives are dealt with in the
following was:
Loading –addition of an extra premium, either
in the form of a fixed monetary extra premium
or rating up the proposers age (upper age
bracket)
Postponement i.e. .deferring acceptance of
the proposal to a later date e.g. if a person
was to undergo operation
Debt or lien i.e. imposition of a debt which
effectively reduces sum to, say 75% or 80%
Declinature i.e. outright rejection of the risk
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11. • Premium Rating and Calculation
 The main factors considered in premium rating and
premium calculation are:
 Mortality-the rate at which people die at a given
time
 Interest i.e. the rate of interest expected to be earned
on the premium
 Expenses i.e. commission and other cover
operational expenses
 Profit margin i.e. loading for share holders profit
 Reserves i.e. loading for fluctuation in claims
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12. • Group Life Assurance
• The purpose of Group life assurance is to
provide death benefits for the dependants of
employees, who die while in the services of their
employer
• Group policies have the following features:
• Issued on the basis of one year renewable
contract
• Group or Master Policy
 One policy, known as group or master policy is
issued to the employer as the assured
 A membership certificate is issued to each
employee setting out the sum to be paid at death
and any conditions applicable should the
employee leave the service of the employer
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13. • Application of individual underwriting
Only non standard lives are rated
individually
Cover is issued on basis of proposal form
• Contribution
Scheme may be contributory or not
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14. • Leaving employment
Cover is effective during period of service
Usually ceases on leaving employment
• Conversion to individual cover
Some schemes allow conversion to
individual cover on individual rates
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15. • Fixed rate
The benefit is on a flat scale or a multiplier
of annual salary
• Exclusions
The exclusions in group policies are fewer
that individual covers but HIV exclusion is
often found
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16. • Free cover limit
This is the level of sum assured the life
office will accept without medical
examination
It depends on the number of members and
the average level of benefits to be
provided
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17. • Renewal
 Are annual renewable contracts
 Some policies allow guaranteed renewal for 3 or
5 years
• Requirements for Group Life Quotation
 Minimum number required
 Date of birth of members
 Proposed benefit levels
 Claims experience
 Trade of employer
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18. • GROUP LIFE UNDERWRITING
• Group life policies are underwritten on a
more lenient basis than individual policies
due to the large number of people involved
and the presumed spread of risk
• Conditions
• The majority of life offices are prepared to
offer a substantial amount of group life
assurance cover without evidence of
health (the free Cover Limit), provided the
following conditions are fulfilled
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19. • A stated minimum percentage of those
who are eligible to join the scheme at its
inception do actually join the scheme.
• A minimum of 75% is mostly considered
adequate if the group has more than, for
instance, 100 eligible members do.
• In case of a smaller group, then a higher
percentage might be required.
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20. • Requiring sponsor or employer to declare that
individual members are actively at work on the
day when they become eligible for membership.
• Alternatively, the condition might be that all lives
are physically and mentally capable of working,
which would also cover those on normal leave.
• The group of lives to be assured must exist for
some purpose other than assurance, for
example, employees of a firm or members of a
co-operative society.
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21. • Evidence of Health
• Evidence of the health will, however, be required
in the following instances:
• Groups of advanced age;
• Groups engaged in hazardous occupations;
• Lives who were ill at the commencement date of
the scheme;
• All lives where the group is small, for instance,
less than 20; and
• Lives proposing for exceptionally high sums
assured (sums assured above The-Free Cover
Limit).
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22. • Group Life Policies Administration
• Renewals
• Group schemes are mainly annual policies.
• At the expiry of every policy period, a renewal
becomes necessary in order to keep the cover in
force.
• Renewal evaluation focuses on the same risk
characteristic and claims experience data used
in the underwriting process except that at this
stage there is a likelihood of having access to
more information.
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23. • The renewal procedure normally involves
issuance of a renewal notice to the client.
• The renewal notice should be dispatched one
month prior to the scheme’s anniversary so as to
give a policyholder sufficient time to fulfill cover
requirements.
• Renewal notices contain these details:
 the deposit or renewal premium required;
 a notice of changes in the terms and conditions
of the policy, if any; and
 a request for renewal data such as revised
salaries, new entrants.
 Normally 30 days of grace are provided after the
due data for a policy renewable annually.
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