Underwriting, Rating, and Claims Handling
Scope
This domain links risk selection and pricing to the claim lifecycle. Expect questions on hazard classification, rating methods, surveyor roles and settlement mechanics.
Core rules
- Underwriting is risk selection and pricing: gather material facts (proposal, medical or inspection report, past claims), classify physical hazard (construction, occupancy, location, age) and moral hazard (intent, financial pressure, claims history). Decisions: accept at standard rate, load, impose excess, restrict by endorsement, or decline.
- Rating may be class-based, experience-rated (using the insured's own loss record) or retrospectively rated; discounts such as NCB and deductibles modify the premium. Products are filed under the use-and-file regime, so pricing must be actuarially adequate and not unfairly discriminatory.
- Claims workflow: intimation → registration → appointment of a licensed surveyor where the loss exceeds the threshold under Section 64UM of the Insurance Act, 1938 → investigation and documents → assessment of loss net of salvage, depreciation, average clause and excess → settlement or reasoned repudiation → subrogation/recovery.
- The surveyor recommends; the insurer decides. Insurers must reserve for reported and IBNR claims and settle within regulatory turnaround times.
Worked example
A fire loss is assessed at ₹5,00,000. Salvage realises ₹30,000; the policy carries a ₹10,000 excess. Reasoning. Net loss = 5,00,000 − 30,000 = 4,70,000. Apply the average clause if the sum insured is inadequate (say 80% adequate: 4,70,000 × 0.8 = 3,76,000), then deduct ₹10,000 excess, giving ₹3,66,000. Order matters: salvage, then average, then excess.
Traps
Letting the surveyor "settle" the claim. Confusing moral hazard with physical hazard. Assuming depreciation and salvage are optional. Treating a repudiation as final without checking for a reasoned written order.