Underwriting, Rating and Claims Settlement Procedures
Underwriting decides whether a risk is accepted and on what terms; rating prices it; claims settlement is where the promise is tested. The examiner looks for the sequence, the documents and the grounds for declining a claim.
Underwriting
Sources of information are the proposal form, medical examination, doctor's or employer's reports, past claims history, inspection reports and financial documents for large sums assured. Risks are classed as standard, sub-standard (extra premium, exclusion, or reduced sum insured) or declined. Key rating factors: age, health and family history, occupation and hazard class, sum insured, past claims and, in property insurance, construction, occupancy and fire protection.
Rating
Life premiums price mortality, interest, expenses and contingencies; general premiums price expected loss frequency and severity plus expenses and profit margin. Experience rating, discounts, No Claim Bonus and deductibles all adjust the final premium.
Claims
- Intimation by the insured within the policy period to the insurer or TPA.
- Registration and issue of a claim number.
- Documentation: claim form, policy, identity and bank details, plus bills, FIR, death certificate or discharge summary as applicable.
- Survey or investigation - surveyors appointed for general insurance losses; the report is the basis of assessment.
- Assessment against sum insured, average clause, exclusions and excess.
- Settlement by payment, repair or replacement, or repudiation with written reasons.
Unpaid or delayed claims attract interest, and grievances escalate to the insurer's Grievance Redressal Officer, then the Ombudsman.
Worked example
A motor policy with IDV Rs 6,00,000 and a Rs 2,000 excess suffers a Rs 1,20,000 own-damage loss. The surveyor allows Rs 1,00,000 after depreciation and a plastic-part deduction. Payment = 1,00,000 - 2,000 = Rs 98,000. If the vehicle is a total loss or CTL, settlement is on IDV less salvage.
Traps
Naming premium alone as the basis of rating; forgetting that the average clause and excess are applied after exclusions; ignoring the duty to intimate promptly and to submit the FIR where required.