Life Insurance
Why underwriting decides if your insurance policy gets the green light?
When you buy insurance, you may assume the company will just check some boxes and issue you a policy. But beneath the surface, there is a meticulous process called underwriting. Let us explore this topic in more detail.
What is insurance underwriting?
Underwriting is the process by which insurance companies determine whether to accept your application and how much premium to charge you. An underwriter reviews the risk of insuring you and establishes conditions that are reasonable for you as well as the company.
For instance, when you get life insurance, underwriters review your age, health, occupation, and way of life to determine how risky it is to insure you. High-risk means higher premiums.
How the underwriting process works
The underwriting process takes a few steps:
- Review of the application - The underwriter reviews the information you provided
- Collection of data - They acquire more details about you
- Evaluation of risk - They balance all parameters to assess the degree of risk
- Making decisions - They determine if they will accept you and at what price
- Issuing the policy - If accepted, your policy is formed with certain terms
Factors considered during underwriting
| Type of Insurance | Key Factors Checked |
|---|---|
| Life Insurance | Age, health, family history, job, lifestyle habits |
| Health Insurance | Medical history, age, BMI, existing conditions |
| Car Insurance | Driving record, car type, age, location, credit score |
| Home Insurance | Home value, location, age of home, safety features |
How underwriting affects your insurance
Underwriting directly impacts:
- Whether your application gets approved
- How much do you pay in premiums
- What coverage limits do you receive
- What exclusions apply to your policy
- Whether you face waiting periods
Conclusion
Underwriting is the most important decision in determining your insurance coverage. Such due diligence in risk assessment will help in determining the premium amount you would be liable to pay for insurance.
Disclaimer: This article is for information purposes only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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