Page 4 - Life Insurance underwriting Ebook IC 22

2. Describe the process of assessing individual risk.

2.1 Criteria for assessing risk

Risk associated with an individual can be assessed based on:

 The mortality rate

Mortality rate is the ratio of total deaths that occurred in a given group of people
in a certain area over a specified defined period of time which is usually a year.

The number of deaths in a given time in a given population is the mortality or the
death rate.

Mortality rates are generally expressed as the number of deaths per 1.000 of the

population per year. These rates are recorded in mortality tables which are
applicable to the country in which they are to be used.

 The morbidity rate

Morbidity rate is the frequency with which a disease appears in a group of people
basis of their age, gender, occupation etc.

Morbidity rate is the expected number of people becoming ill or sick over a
defined period, usually a year. These rates help insurers predict the likelihood

that an insured will contract or develop any number of specified diseases.

Morbidity rates are also used widely while designing health insurance and long-

term care insurance products.

2.2 Assessing the individual risk

Insurance companies assess the risk associated with an individual on the
assumptions based on mortality and morbidity rates.

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