Hi, I just wanted to check something from one of the end of chapter questions on in the Underwriting chapter (Chapter 26) Question 26.2 says "one of the main costs of underwriting is the fact it discourages people who are healthy from applying for insurance" -- is that correct? I thought that underwriting would discourage unhealthy people from applying for insurance - because they would get charged higher premiums / have their application rejected altogether. For healthy people, underwriting should be a good thing right? As they will pay fair premiums and won't be subsidising unhealthier lives as would be the case if a contract was not underwritten.
Hi George I agree that one of the advantages of underwriting is that it discourages applications from unhealthy people. But the question is correct. Underwriting can reduce applications from healthy people too. Underwriting is time consuming for the applicant - lots of forms to fill out, going for medical checks. Underwriting can be considered an invasion of privacy - lots of personal sensitive data is asked for. And underwriting can be unpleasant, eg blood tests. So there is a real danger that underwriting will put people off from applying. Best wishes Mark
