Page 218 - IC38 GENERAL INSURANCE
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3. Numerical rating method
This is a process adopted in underwriting, wherein numerical or percentage
assessments are made on each component of the risk.
Factors like age, sex, race, occupation, residence, environment, build, habits,
family and personal history are examined and scored numerically based on pre-
determined criteria.
4. Underwriting decisions
The underwriting process is completed when the received information is
carefully assessed and classified into appropriate risk categories. Based on the
above tools and his judgment, the underwriter classifies the risk into the
following categories:
a) Accept risk at standard rates
b) Accept risk at an extra premium (loading), though it may not be
practiced in all companies
c) Postpone the cover for a stipulated period/term
d) Decline the cover
e) Counter offer (either restrict or deny part of the cover)
f) Impose a higher deductible or Co-pay
g) Levy permanent exclusion(s) under the policy
If any illness is permanently excluded, it is endorsed on the policy certificate.
This becomes an additional exclusion apart from the standard policy exclusion
and shall form the part of the contract.
Expert individual risk assessment by underwriters is vital to insurance companies
as it keeps the insurance system in balance. Underwriting enables insurers to
group together those with the same level of expected risk and to charge them
the same premium for the protection they choose. The benefit for the
policyholder is availability of insurance at a fair and competitive price whereas
the benefit for an insurer is the ability to maintain the experience of its
portfolio in line with the morbidity assumptions.
5. Use of general or standard exclusions
The majority of policies impose exclusions that apply to all their members.
These are known as standard exclusions or sometimes referred to as general
exclusions. Insurers limit their exposure by the implementation of standard
exclusions.
The same have been discussed in earlier chapter.
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