What is Objective of Underwriting in Insurance

  

Objective  for Underwriting

Each insured person contributes to a common fund, In order to maintain equity amongst them, each insured should contribute according to the risk which he transfers to the common fund. When

essential that the underlying mortality experience of the existing policyholders and the new entrants, should not be significantly new entrants are admitted to the existing fund, it is particularly

In a group of individuals of same age some may be:

• Death-Bed cases,
• Suffering from varying diseases.
• Having physical disability.
• Exposed to unusual environmental risks.
• Normal lives i.e. free from any disability or disease.

It is the objective of the insurance underwriter to classify them in

appropriate groups according to the degree of risk and charge them premium commensurate with the risk for the group or even postpone/decline the acceptance.

The factors affecting risk on the life of an individual are called hazards.

Hazards are classified as

(i) Physical

(ii)Occupational or Moral.

Physical hazards belongs to:

Age: As age increases, the probability of death increases. These probabilities are built into the morality tables and thereby into the premium rates. The underwriter looks into the factor of age, mainly 

because of its relationship with other factors. For example, being

overweight is a positive factor among young children while it may not

be so among older persons. Younger persons who are underweight

need closer scrutiny than elders who are underweight.

Certain risks increase with age.

Certain other risks decrease with age.

Sex: Mortality of female lives is seen to be more than male lives at

younger ages, among the poorer and uneducated sections. One

reason could be the lack of adequate care in maternity cases.

Underwriting considerations are also different in female cases.

. Build: Build including height, weight, and chest and abdomen

measurements, may suggest tendencies towards cardiac and other ailments like diabetes or TB.

Underwriters view variations from standard weights with care.

Physical conditions: The medical examination of reflexes, blood pressure, pulse rates, urine, etc. provides data with regard to the condition of important systems of the body.

Physical impairments:

Blindness, deafness, etc. and other conditions, which are not illnesses or degenerative, are hazards affecting the

probabilities of death

Personal history: This is important as pointers to the health as well as the life style of the person.

Family history: This is looked at to see whether there is any hereditary factor that makes the person susceptible to illness. Family history of early deaths, of cardiac illness or diabetes, could be

significant.