Page 6 - Life Insurance underwriting Ebook IC 22
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3.2 Standard risk
If the risk associated an individual is considered to be low and insurable at
standard premium rate by insurance companies, then it is known as standard risk.
3.3 Sub-standard risk
If the risk associated with an individual is considered to be high and cannot be
insured at standard premium rates by insurance companies then it is known as
sub-standard risk. The range of sub-standard too may also vary from being sub-
standard to substantially sub-standard.
a) Increasing extra risk
If the risk associated with an individual is considered to be low at the time of
commencement of policy. But there is a chance of that risk becoming high after a
certain period; it is known as increasing extra risk.
b) Decreasing extra risk
Decreasing extra risk is the opposite of increasing extra risk. The risk associated
with an individual is high at the time of initial underwriting but decreases over a
period of time as time elapses.
c) Constant extra risk
If the risk associated with an individual is considered to remain constant over the
period, then it is known as constant extra risk.
4. Explain the possible outcomes of the underwriting process.
4.1 Possible outcomes of the underwriting
An underwriting will base his decision of accepting the risk associated with an
individual after careful analysis of information, if the individual is considered to
cam- sub-standard risk by an underwriter then the decision to accept the risk can
be based on following:
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