Here are the stages of Life insurance underwriting
THE SELECTION OF THE PROSPECTS:
- The whole process of underwriting begins with the agent
- The agent attempts to select attractive prospects
- Those he feels have a need for Life Assurance
- Those that can be interviewed
- Those that have the ability to pay for Life Assurance
- Those that can pass the underwriting standards of his company
- The selection by the agent is however limited in scope
THE COLLECTION OF INFORMATION ON THE PROSPECTIVE LIFE (PROPOSER)
At this stage, information is collected through various sources which include the Life to be insured, appointed doctors or personal doctors
EVALUATION OF THE INFORMATION
- Normally over 90% of all proposals are accepted as standard lives.
- The remaining 10% or less are classified as substandard or enhanced risks.
- About 10% of the Substandard Lives will usually be refused cover
ESTABLISH THE UNDERWRITING DECISION OR RATING
- Accept all standard Lives
- Postpone those that are not immediately acceptable
- For substandard Lives,
- determine the degree of extra risk on the Life
- Ascertain the percentage extra mortality based on the degree of the extra risk. E.g. 50% EMP
- This stage of underwriting involves the use of Rating Manual