Page 28 - Life Insurance underwriting Ebook IC 22

5. Understand the challenges faced in underwriting.

5.1 Challenges faced in underwriting

The process of underwriting (which involves risk assessment. selection and
classification of lives) and various sub-processes that is dependent on many external
(e.g. outsourced data entry operators. insurance advisors) and internal entities (e.g.
internal staff).

As a result underwriting activities face many challenges due to stiff cut-throat
competition. Some of these are enlisted below

 The legislative and dynamic taxation and regulatory environment make the
framing / modification of the underwriting norms a challenging one.
 Thin profit margins kept by the insurers to ensure competitive pricing of premium
and staying ahead in the product rat-race has created a lot of challenges in
executing prudent underwriting and actuarial doctrines in its original form.
 Socio-economic differences and practices across the globe have resulted in
differential practices and processes posing typical under rating challenges.
 Difficulties exist in getting appropriate and accurate documentation on financial or
medical facts of the life to be assured. thereby making a fair risk assessment. a
difficult one.
 In the absence of a well-documented case file. and the evidence of case in
chronological sequence (including the clients' conversation), there can arise legal
disputes especially in the event of an early claim. Such cases sometimes could
prove to be potential threats to an insurance company. as the decision bodies
like the Ombudsman; courts could hold the insurer liable to pay the benefits to
the claimants. on grounds that the documentation of the case on the underwriting
sheet being inadequate to support repudiation of a claim.

 The ever growing demands from the prospects for having low priced excellent
customer-service coupled with the challenge of maintaining prudent risk
management norms, too have a direct impact on the process of an insurance
company
 Non-disclosures miss-representation of information and facts at the point of
either by the customer/ agent /as a nexus in the medical evaluation process),
impact the underwriting decision and the terms of acceptance of the policy. This
could in turn result in denial' repudiation of claim benefits at the of a death claim,
based on the extent of non-disclosure and its overall impact on the underwriting
decision taken at the point of sale.
 The dependency on external agencies who assist the insurance sale process (
e.g. Third-party administrators which include diagnostic centers, medical
examiners, laboratory personnel and methods used by them in rendering their

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