1

Part 2

• Chapter 4: Risk Management Principles and their application in Life Insurance

• Chapter 5: Underwriting

• Chapter 6: Reinsurance And Claims

Chapter 4

Risk Management Principles and their application in Life

Insurance

3

Common risks faced by organizations

• Operational Risk

• Financial Risk

• Liability Risk

• Property Hazards Risk

4

Risk Classification in Insurance Companies

• Underwriting Risk• Market Risk• Credit Risk• Liquidity Risk• Operational Risk

5

Managing Underwriting Risk

Complete relevant information about the client is essential

• Medical Information• Nonmedical Information including

financial Information

6

Factors that Increase Risk of Death (Mortality)

• Medical Factors– Overweight– Tobacco smoking or chewing– Excessive alcohol drinking

– Adverse family history – Adverse medical history

• Nonmedical Factors– Advancing age– Risky occupation– Hazardous hobbies– Risky residential environment– Abject financial status

7

Tools to gather information

• Application Form• Financial Documents• Agent’s Report • Medical Report/Medical Test Reports• Verification Report

Chapter 5

Underwriting

9

Nonmedical Underwriting

• Underwriting of applications without medical examinations

• Usually for clients of younger ages and low sum assured

• Nonmedical factors assessed for underwriting include age, occupation, previous insurance, family health history etc.

10

Medical Underwriting

• Applicants with higher sum assured go for a medical test at the time of application

• Medical tests may include Medical examination, Blood chemistry, HIV test, ECG/treadmill test etc.

• These reports are assessed along with the nonmedical factors present in the application form

11

Common conditions that increase risk

• Overweight• Diabetes• High blood pressure• Smoking

12

Some health conditions that can lead to rejection of application

• Uncontrolled diabetes• Very high blood pressure• Tumors• Kidney disease• HIV

Financial UnderwritingQuestions asked for underwriting the financial risk • Appropriateness- Is the application based on a

valid insurable interest?

• Consistency-Are the type of policy applied for and, in particular, the sum to be insured reasonable?

• Affordability-Are sufficient resources available with the applicant to enable payment of future premiums?

Chapter 6

Reinsurance and Claims

15

Need for Reinsurance

• Helps insurance companies manage large losses

• Helps expansion by decreasing requirement for maintaining mandatory reserves

• Helps in underwriting of complex and rare cases

16

Types of Reinsurance

• Proportional

• Non-proportional

17

Types of Reinsurance

Proportional Non-proportional

Yearly Renewable

TermCoinsurance Stop Loss

Spread Loss

Catastrophe

18

Reinsurance Agreements

• Facultative

• Automatic

19

Types of Claims

1. Death Claims – With Or Without Riders– Term Rider– Accidental Death Benefit Rider

2. Survival Claims– Critical Illness– Disability Claims– Waiver Of Premium Rider

3. Maturity Claims– Intermediate Benefit– Money Back Plans

20

Claims Process

• Intimation• Registration• Investigation• Processing• Decision• Communication