Question

What is the importance of underwriting philosophy for an insurance company?

a.

It ensures a fair and prudent risk evaluation process

b.

It determines the premium rates of the products

c.

It ensures maximum profit for the company

d.

It helps in aggressive expansion of the company

Posted under IC22 Life Insurance Underwriting

Answer: (a).It ensures a fair and prudent risk evaluation process Explanation:The underwriting philosophy is important for an insurance company because it ensures a fair and prudent risk evaluation process. It determines the risk appetite and thresholds pre-decided by the actuaries and senior management team, which in turn impacts the underwriting rules and guidelines formulated by the company. This ensures that the risk evaluation process is fair and justified by statistical data available. It also ensures that any gaps in internal processes are identified and addressed, and that there are no major variations in assumptions made by the actuaries while deciding the premium rates under various products. The aim of the underwriting philosophy is not to maximize profit or promote aggressive expansion of the company, but rather to ensure that risks are thoroughly assessed and suitable priced to protect the interests of the company and its customers.

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