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Underwriting

V

Viki2010

Member
The CMP notes - chapter 23 - section 6.2 on underwriting - last paragraph discussing the changes in underwriting practices notes that the business which is not underwritten will be impacted by any changes to the underwriting practices.

What kind of business is generally not underwritten? Would it typically be just group insurance business?
 
Not sure I can name an actual example, but how about say a company that writes term assurance on guaranteed acceptance - thinking about over 50s assurance adverts that crop up on TV in the UK (albeit to the best of my knowledge they also write business which is underwritten)
 
So, are we saying there are no black and white categorisations and it all depends how the company decides to price and underwrite different product groups etc etc
 
I haven't got the SA notes but thoughts are this. Suppose there are two companies only. One always underwrites, the other doesn't ever. If the one who underwrites changes its approach, it affects its experience. But it may also affect the other as some move to the company underwritten hence experience of both changes. I think you need an Acted tutor to explain the actual paragraph in context.
 
Hi - these answers are all fine!

The classic example of underwritten v. not underwritten is immediate annuities. If you think about standard annuities (not underwritten) and impaired life annuities (underwritten), then if the approach to underwriting impaired life annuities changes this will mean that a different pool of lives will take out such annuities (may be smaller, may be larger - depending on whether the underwriting has become more or less stringent). Hence there will be a different pool of lives taking out the standard annuities = which is what you purchase if you are not eligible for an impaired life annuity.

Similarly, if more companies start to offer impaired life annuities there will likely be fewer impaired lives purchasing standard annuities, and hence the experience within the standard annuity population on average lightens.
 
Is it true that only immediate annuities and income protection business would be underwritten?
And that we can assume that all other products in SA2 would not be underwritten?
 
Any product with material mortality or morbidity risk would be underwritten. So term assurances and critical illness business would be underwritten. Even products which are principally sold as savings products but which have a material death benefit (eg whole life assurances and endowment assurances, where the amount payable on death could be higher than reserves - particularly early on) are likely to have some degree of underwriting, albeit this is likely to be less intensive than for pure protection business.

Standard immediate annuities do not tend to be underwritten: only those that are targetted to impaired lives.
 
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