Life Insurance Guide | Insurance Help Product Information | Underwriting

When the proposal form is received by the life office, it must go through the underwriting process. Underwriting is the procedure of assessing proposals and deciding whether to accept the risks, and if so, at what rate of premium. Each office has its own table of rates for the policies it offers. The rate is usually expressed per £1000 sum assured and will vary with age and the policy term. These ordinary rates are based on average mortality experience. If a life proposed reveals features which suggest that there is a significantly above average risk of death, then the office must investigate further to decide whether the risk can be accepted at ordinary rates, or whether some special terms might be required.

An underwriter must remember that life assurance contracts are based on utmost good faith. The proposed is in possession of all material facts and has a duty to disclose them. However, it is not unknown for material facts to be omitted or only partially disclosed. The job of the underwriter is to recognise defects even if they are not specifically disclosed and use his skill to assess whether the proposal can be accepted at ordinary rates or, if not, at what special terms.

If the underwriter feels that the proposal cannot be accepted immediately, he can take on of the following courses:

  • Obtain further information on which to make a decision
  • Impose some form of special terms
  • Decline the proposal

If the proposal form reveals any medical factor about which the underwriter needs further information, there are two ways of getting it:

  • The Medical Attendant’s Report, which is a report send to the proposer’s doctor for completion from his records.
  • A medical examination of the life by a doctor appointed by the office. With the information from these reports the underwriter should be able to come to a decision.

The underwriter will look for any factor which could affect the proposer’s longevity. This would include medical factors, occupation and hazardous pastimes. It is beyond the scope of this book to go into the details of everything which the underwriter will investigate, but essentially he will be interested in anything which could reduce the expectation of life.