Selection And Classification Of Risks Underwriting

Selection And Classification Of Risks (Underwriting)


Objectives for Underwriting:


Each insured person contributes to a common fund. In order to maintain equity amongst them, each insured should contribute according to the risk which he transfers to the common fund. When new entrants are admitted to the existing fund, it is particularly essential that the underlying mortality experience of the existing
policyholders and the new entrants, should not be significantly different. Reasonable homogeneity of the risks has to be ensured.

In a group of individuals of same age some may be :

• Death- Bed cases,
• Suffering from varying diseases.
• Having physical disability.
• Exposed to unusual environmental risks.
• Normal lives i.e. free from any disability or disease.

It is the objective of the insurance underwriter to classify them in appropriate groups according to the degree of risk and charge them premium commensurate with the risk for the group or even postpone/ decline the acceptance.

The factors affecting risk on the life of an individual are called hazards.
Hazards are classified as
 (i) Physical
(ii) Occupational
(iii) Moral.