Page 94 - Ebook health insurance IC27

The Insurance Times

Questions and Answers

Q1. What is Morbidity?
Ans. Morbidity is defined as the likelihood of any person to contract illness or sickness,

thereby requiring treatment or hospitalization. To an extent, morbidity is influenced
by age, and also other adverse factors like overweight, underweight, personal
history of certain past and present disease or ailments, habits like smoking or
drinking, current health status, occupation and lifestyle. Conversely, morbidity also
decreases due to certain favorable factors.

Q2. What is underwriting ?
Ans. Underwriting is the process of risk selection and risk pricing. It can be considered

as the backbone for insurance companies as acceptance of the risk indiscriminately
or inadequate premiums can lead to even insolvency of the insurer. Being too
conservative or selective can also refrain the insurance company from creating a
healthy pool so as to spread the risk uniformly.

It is therefore a critical task for the underwriters to strike an appropriate balance
between risk and business, between profitability and competitiveness, for the
organization. The underwriters strive to maintain this fine balance based on the
philosophy, policies, and risk appetite of the insurer.

His job is to classify the risk and decide the terms of acceptance at appropriate
price. It is a very critical job, as acceptance of risk is like giving a promise of
settlement of claims.

Q3. What is the need for underwriting ?
Ans. Underwriting is the process of risk selection, based on the characteristics of an

9 8 Guide for Health Insurance