Skills without mastery are useless. Mastery is impossible without the right methods. SimpliGrok platform makes mastery effortless and fastest with proven, smart practice.
Skills without mastery are useless. Mastery is impossible without the right methods. SimpliGrok platform makes mastery effortless and fastest with proven, smart practice.
Underwriting is the process of evaluating risk, classifying applicants, and determining whether to accept, modify, or reject coverage. It's essential for maintaining insurer solvency and ensuring fair premiums.
Primary goals:
1. Assess risk accurately: Evaluate mortality risk
2. Prevent adverse selection: High-risk individuals more likely to seek coverage
3. Ensure equity: Charge fair premiums based on risk
4. Maintain solvency: Protect company financial health
The problem: People at higher risk seek more insurance, creating concentration of bad risks that could bankrupt the insurer.
Example:
Healthy person: "I'm healthy, I'll wait"
Sick person: "I need this now"
Without underwriting:
- Most applicants are high-risk
- Claims exceed premiums
- Insurer becomes insolvent
Key sources:
- Application: Primary source (personal, medical, lifestyle)
- Medical exam: Paramedical (basic) or full physician exam
- APS: Attending Physician Statement - records from applicant's doctor
- MIB: Medical Information Bureau - codes from past applications
- Inspection report: Third-party investigation (large cases)
- Pharmacy records: Prescription history (past 5-7 years)
- Credit report: Financial information
Typical by amount:
Under $250K: No exam
$250K-$1M: Paramedical exam
Over $1M: Full medical exam
Over $5M: Extensive testing
(Varies by age and insurer)
Categories:
Physical: Health, medical history, family history, build, blood pressure
Moral: Character, honesty, financial stability, moral hazard (over-insurance)
Occupational: Hazardous jobs (miners, pilots, loggers)
Avocational: Dangerous hobbies (skydiving, racing, scuba diving)
Lifestyle: Smoking (2-3x higher premiums), alcohol, drugs
Standard: Normal premium, no exclusions
Preferred: Lower premium for superior health
Preferred Plus: Best class
Preferred: Very good health
Standard: Average risk
Table rating:
Standard: 100%
Table B (2): 150%
Table D (4): 200%
Table H (8): 300%
Example:
Standard: $1,000
Table D: $2,000
Flat extra:
Additional $ per $1,000 coverage
Example:
$5 per $1,000 on $500K = $2,500 extra
Temporary flat extra: Applied for limited period (5-10 years)
Specific causes excluded:
- Aviation: Private pilots
- War: Military in combat zones
- Hazardous activities: Racing, skydiving
Delay pending:
- Test results
- Recovery from surgery
- Pregnancy
- Temporary condition
Reject due to:
- Terminal illness
- Unacceptable risk
- Moral hazard
FCRA requirement: Must provide adverse action notice if declined based on consumer report
No medical exam:
- Uses data analytics (MIB, Rx, credit, public records)
- Fast approval (minutes to hours)
- Up to $1-2M
- Younger applicants, no red flags
Underwriting is the process of evaluating risk, classifying applicants, and determining whether to accept, modify, or reject coverage. It's essential for maintaining insurer solvency and ensuring fair premiums.
Primary goals:
1. Assess risk accurately: Evaluate mortality risk
2. Prevent adverse selection: High-risk individuals more likely to seek coverage
3. Ensure equity: Charge fair premiums based on risk
4. Maintain solvency: Protect company financial health
The problem: People at higher risk seek more insurance, creating concentration of bad risks that could bankrupt the insurer.
Example:
Healthy person: "I'm healthy, I'll wait"
Sick person: "I need this now"
Without underwriting:
- Most applicants are high-risk
- Claims exceed premiums
- Insurer becomes insolvent
Key sources:
- Application: Primary source (personal, medical, lifestyle)
- Medical exam: Paramedical (basic) or full physician exam
- APS: Attending Physician Statement - records from applicant's doctor
- MIB: Medical Information Bureau - codes from past applications
- Inspection report: Third-party investigation (large cases)
- Pharmacy records: Prescription history (past 5-7 years)
- Credit report: Financial information
Typical by amount:
Under $250K: No exam
$250K-$1M: Paramedical exam
Over $1M: Full medical exam
Over $5M: Extensive testing
(Varies by age and insurer)
Categories:
Physical: Health, medical history, family history, build, blood pressure
Moral: Character, honesty, financial stability, moral hazard (over-insurance)
Occupational: Hazardous jobs (miners, pilots, loggers)
Avocational: Dangerous hobbies (skydiving, racing, scuba diving)
Lifestyle: Smoking (2-3x higher premiums), alcohol, drugs
Standard: Normal premium, no exclusions
Preferred: Lower premium for superior health
Preferred Plus: Best class
Preferred: Very good health
Standard: Average risk
Table rating:
Standard: 100%
Table B (2): 150%
Table D (4): 200%
Table H (8): 300%
Example:
Standard: $1,000
Table D: $2,000
Flat extra:
Additional $ per $1,000 coverage
Example:
$5 per $1,000 on $500K = $2,500 extra
Temporary flat extra: Applied for limited period (5-10 years)
Specific causes excluded:
- Aviation: Private pilots
- War: Military in combat zones
- Hazardous activities: Racing, skydiving
Delay pending:
- Test results
- Recovery from surgery
- Pregnancy
- Temporary condition
Reject due to:
- Terminal illness
- Unacceptable risk
- Moral hazard
FCRA requirement: Must provide adverse action notice if declined based on consumer report
No medical exam:
- Uses data analytics (MIB, Rx, credit, public records)
- Fast approval (minutes to hours)
- Up to $1-2M
- Younger applicants, no red flags