Page 53 - MEDICAL AND HEALTH INSURANCE

MEDICAL AND HEALTH INSURANCE

CHAPTER 3: RISK ASSESSMENT AND MANAGEMENT

3.1 ASSESSMENT AND UNDERWRITING

Underwriting is the process of selecting risks for insurance and classifying
them according to their degree of insurability so that appropriate premium

may be set. Accordingly, risk assessment has two basic elements:

a) Underwriting the risk; and

b) Adequately pricing the risk.

3.1.1 PRINCIPLES OF ASSESSMENT AND UNDERWRITING

There is a variation in the assessment and underwriting of risk between

individual PMI and group policies.

For individual PMI the basic risk selection falls under four broad categories,

i.e. medical factors, financial factors, occupational class and age factors.

For group risk selection the factors are the group size, occupation of the

group, age distribution and level of participation.

The underwriter will work with the actuarial department and medical
personnel of the company to establish criteria for evaluating applications

for insurance coverage, to determine the risk factor represented by the

proposed Insured. The appropriate premium rate calculated would be

based on the mortality or morbidity rates of the company.

The underwriter will select those risks that are within the insurer's
appetite of acceptability as determined by the insurer's objective. In the

process of selecting and classification of the risk, the underwriter may

refer to the information provided, that is:

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