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Symbiosis Institute of Health Science, Pune

Importance of
Underwriting
Symbiosis Institute of Health Science, Pune
Group No.4
• Abhishek Nirwal (042)
• Dr. Amit Bhartiya (035)
• Dr. Mihir Gharia (026)
• Dr. Niranjan Gaikwad (041)
• Dr. Priyanka Ajmani (084)
• Shreshtha Kanojia (019)
• Rozween Sethi (018)

Symbiosis Institute of Health Science, Pune


Underwriting Defined
Underwriting: The process of selecting
policyholders by recognizing and
evaluating hazards, establishing prices,
and determining policy terms and
conditions.

Symbiosis Institute of Health Science, Pune


Purpose of Underwriting

Develop and Maintain


a Profitable Book of
Business

Symbiosis Institute of Health Science, Pune


Types of Underwriters

Underwriters

Line Underwriters Staff Underwriters

Symbiosis Institute of Health Science, Pune


Line Underwriters
• Evaluate Individual Policies and Applicants and
Are Usually Located in Branch or Regional
Offices
• Duties:
– Select insured
– Classify risks
– Determine proper coverage
– Determine appropriate rate
– Service agents and/or policyholders

Symbiosis Institute of Health Science, Pune


Staff Underwriters
• Generally Located in Home Office. Responsible
For Setting Corporate Policy

• Duties:
– Formulate underwriting policy
– Evaluate experience
– Research and develop coverage and forms
– Review and revise rating plans
– Prepare underwriting guidelines and bulletins
– Conduct underwriting audits
– Participate in industry associations
– Conduct education and training

Symbiosis Institute of Health Science, Pune


The Underwriting Process

Gather
Information

Monitor Evaluate
Results Information

Implement Select
Decision Alternative

Symbiosis Institute of Health Science, Pune


Importance of Underwriting
Function to the Company
• It is the backbone of the insurance business. It
functions as a gatekeeper for insurers by
deciding which risk is to be accepted and
which is to be rejected.
• When the issue is underwritten, the company
is assured of the required capital.

Symbiosis Institute of Health Science, Pune


Individual underwriting
• Health insurance company look at a person’s
age, sex and health history to decide whether it
will cover the individual or not and how much
will it cost to provide the coverage.

• The purpose of the individual underwriting is to


assign each insured an estimate for the frailty
factor i.e. to determine the so-called pricing
mortality rates used by the insurer for premium
calculation.

Symbiosis Institute of Health Science, Pune


Group underwriting
• A group of investment banks which jointly
underwrite and distribute a new security
offering, also called purchase group or
investment banking syndicate.
• Underwriter considers the characteristics of
the whole group not of individual members
who form the group.
• Individuals are not characteristically
underwritten rather they qualify for the
group coverage by virtue of the group itself
having qualified.

Symbiosis Institute of Health Science, Pune


Underwriting
Competencies
Symbiosis Institute of Health Science, Pune
What is a “Competency?”

“A „competency‟ is a desired skill, trait or


behavior that leads to a desired, superior
performance result.”

Symbiosis Institute of Health Science, Pune


Underwriting Competencies

Technical
Strength

Analytical/Critical
Thinker
Process/Technology
Proficiency

Customer
Focused/Strong
Interpersonal

Symbiosis Institute of Health Science, Pune


Personality Traits
• Decisive: They get paid to make
business decisions (good underwriters
make the unpopular decisions well)
• Analytical: They‟re trained to gather
info, analyze, and implement
• Judgmental: They‟re critical thinkers
that think in terms of “cause and effect”
and contingencies

Symbiosis Institute of Health Science, Pune


Steps To Take If Underwriting
Interests You

• Review Competencies

• Talk To People in Business to Learn


More About the Job

• Job Shadowing

• Insurance Coursework

Symbiosis Institute of Health Science, Pune


Current
Challenges
Symbiosis Institute of Health Science, Pune
Underwriting Challenges
– Pressure on the „producer‟ underwriter to
quote prices that could make or break
deals.
– Under pricing due to blind faith on
underwriters‟ judgment and market
pressure
– „Risk assessment‟ and „producing‟
capabilities

Symbiosis Institute of Health Science, Pune


Underwriting Challenges Contd
– Underwriters might be too wary,
thereby ignoring the opportunity cost
of not assuming certain risks
– Need to identify and manage
emerging trends in claim experience.
– Underwriters need to be on guard
for deteriorating loss ratios

Symbiosis Institute of Health Science, Pune


Future of Underwriting
•TELE – UNDERWRITING

•AUTOMATED FORM SUBMISION


•LEGISLATION OR CODE ON THE
ASPECT OF GENETICS AND AIDS
INFORMATION ISSUE.

Automated future

Symbiosis Institute of Health Science, Pune


Trend
The Underwriting Cycle: The Rule Of Six
Latest news states that the underwriting losses are 37 % for the
FY09.
A cycle can be said to begin when
insurers tighten their underwriting
standards and sharply raise premiums
after a period of severe underwriting
losses.

Symbiosis Institute of Health Science, Pune


Symbiosis Institute of Health Science, Pune