Factor in the selection of insurance

Many choices in insurance as needed

Underwriter of group life insurance companies will conduct research in parallel to the factors involved. Research conducted to determine the insurance program and the Insured that a request submitted by the closing of the collection of insurance.

Selection of Eight Risk Factors

In principle, there are eight important factors that will be examined by life insurance companies to evaluate the issue life insurance policies for one group, namely 1) the existence of the background of the group, 2) type and the types of groups, 3) stability, 4) the amount of the number of participants, 5) the type of business, 6) level of participation in the program, 7) age, and 8) gender.

First, the background presence of the group. Generally, life insurance companies under insurance policy was issued for the group if the group is formed solely or established with the aim to cover the needs of life insurance for members in it.

This corresponds to a drift that occurred (based on experience in some countries) that anti-selection can occur in groups like this. Anti-selection is a general term used in the field of insurance in respect to situations that occur as a result of asymmetric information.

Here, the Insured or prospective policyholders to apply for insurance to life insurance companies associated with the disease is high risk or health that has been known by that.

Second, the type and the types of groups. In this case, the attention to be life insurance companies associated with the evaluation of a group. For example, if a group form, because of the relationship between workers and the employers? Or, if the group is a cooperative, association, or other entity?

Third, stability. Stability associated with the condition in which group or groups can maintain flow entrance of new members younger from time to time so that this condition allows the group members have the age distribution of the uniform. Experience shows that old age has the morbidity and mortality risk is higher.



Group underwriter also considers the high intensity show changes in the members a short period. In the cases such as this, life insurance companies will be exposed to additional administrative costs in the framework of the insurance coverage of each member in the group.

Fourth, the amount of the number of participants. There are many life insurance companies which provide limits of not too strict on the size of the number of participants in the group. However, a large number of participants in a group tends to have the following three characters:

a) The number is close to the assumption in the case Actuarial morbidity level and mortality,
b) have tended to claim that small fluctuations,
c) management requires administrative costs of smaller (percentage of the premium amount).

Fifth, the type of business. In the process of risk selection, group underwriter is looking at this factor. Why? For life insurance companies, type and type of business has a certain probability that the risk of higher rather than other types of businesses. Sixth, the level of participation in the program.

Life insurance companies generally Group Insurance Program Plan into two parts, namely noncontributory plan and contributory plan. In the noncontributory plan, the company sponsoring the employers that the program will pay full insurance premiums to the insurance company. In this case, the employees as members or participants in the group does not participate in the premium. How about the contributory plan?

In this case, the participants take part in contributing to pay a small premium. To reduce the effect of anti-selection, in the noncontributory plan, insurance companies generally require that all participants must follow the insurance program. Conversely, for the contributory plan, the insurance companies free to join.

Seventh age. Although the group underwriter will not make a risk evaluation of each participant in the group one by one (except the group with a very few participants), insurance companies still evaluate the distribution of age of the members or participants in it. In particular, life insurance companies will put attention on the large number of participants who are already old. Experience shows that this group has the morbidity risk and mortality are higher.

Eighth, sex. Proportion of sexes in the group is also a factor for evaluation of life insurance companies. Generally, woman's group in the group tends to have a smaller risk. Therefore, the group with the proportion of women participants in a larger statistics will have a smaller risk for insurance coverage.