Underwriting Fundamentals
Understand how protection underwriting works and what affects premiums.
What is Underwriting?
Underwriting is the process insurers use to assess risk and determine appropriate terms. This includes evaluating medical history, lifestyle factors, occupation, and pursuits to calculate fair premiums and any special terms needed.
Key Rating Factors
- Age - the most significant factor in premium calculation
- Smoker status - typically doubles or triples premiums
- Medical history - conditions, medications, family history
- Occupation - hazardous jobs attract higher premiums
- Lifestyle - hazardous pursuits, travel, alcohol consumption
Types of Underwriting Decisions
Standard terms mean normal premiums with no exclusions. Rated/loaded terms mean higher premiums to reflect increased risk. Exclusions remove specific conditions from cover. Postponement delays a decision pending more information. Decline means cover cannot be offered.
Non-Disclosure
Non-disclosure occurs when relevant information isn't shared during application. This is the leading cause of claim declines. Always encourage complete disclosure - it protects both the client and adviser.