Underwriting*

When the insurance company receives all the requirements enumerated in the Posts 31-40 the company can proceed with underwriting the proposal. From those documents the nationality of the proposer is determined, his identity is ascertained, his place of residence is confirmed    and the source of his income is also known. The insurer registers the proposal in their books assigning a proposal number and date of registration. Within fifteen days of this date the insurer has to take a decision of acceptance or otherwise of the proposal. This is as per the IRDA (Protection of Policyholder’s Interests) Regulations, 2002. If for some reason there is likelihood of delay over the fifteen days the same shall be communicated to the proposer with reason.

Underwriting is the process of assessing risk on the proposed life and deciding whether cover shall be granted or not, and if granted on what conditions and premium. Different companies do have different standards of assessment of risk. Some give more weight to the experience of the underwriter where as methods, like numerical rating, are also used to assess the risk. Companies may devise their own programs on underwriting and use the computer for helping in standardization of underwriting.

If I am to make a broad generalization of underwriting decisions, the following are the most prevalent decisions in underwriting:

(i)                        Proposal accepted on the company’s standard / ordinary terms

(ii)                      Proposal accepted on terms other than those proposed

(iii)                     Consideration of the proposal is postponed, and

(iv)                    Proposal is declined

Each of these decisions shall be discussed in the coming Posts.

*The concept of Reverse Underwriting in life insurance was developed by me and my Paper on this was published in the Journal of the Insurance Institute of India. A link to this Paper is given in the page ‘other publications’.