Underwriting, Claims, and Premiums
Domain 7 tests risk selection, claim decision-making and premium build-up: the three areas where an agent's paperwork most often decides a customer's outcome.
Underwriting
The insurer classifies risk from the proposal, medical reports and financial information. It looks for moral hazard (over-insurance, doubtful income, adverse habits) and physical hazard (age, health, occupation, family history). Decisions are standard, substandard (extra premium or exclusion), postponed or declined. Full disclosure protects the customer.
Claims
Death claims require the policy, death certificate, claim forms, identity and bank details, and sometimes medical or police records. Early claims are investigated. Under Section 45 of the Insurance Act, after three years a policy cannot be questioned on the ground of misstatement, except fraudulent misstatement, and the insurer must give notice.
Premium
Premium covers mortality cost, expenses and contingency, adjusted for interest earnings, mode of payment and underwriting loading. Monthly mode usually costs more than annual.
Worked example
A death claim is filed eight months after issue. The insurer finds the insured had heart surgery before proposing. The claim is repudiated for material non-disclosure. If the claim had arisen after three years, the insurer could still repudiate only by proving fraudulent misstatement and following Section 45.
Traps
Saying no claim can ever be rejected after three years; ignoring occupation and income in underwriting; treating extra premium as a penalty rather than a risk price.