1. What is underwriting? What does an underwriting department do in an insurance company?
Underwriting is a process of selecting risks by a department in an insurance company to determine whether a prospective policy holder can be covered by an insurance product. Risk selection is based on both health and financial analyses.
What an underwriting department does:
In order to carry out its functions, an underwriting department works with several other departments including actuarial, marketing, claim and customer service divisions.
Underwriting department's functions:
• Determine the terms and conditions of an insurance product.
• Determine additional terms which may be required for an insurance application.
• Make analyses and determine whether an insurance coverage can be accepted with additional requirements, should be suspended or denied under the insurance company's underwriting standards.
2. Should an individual undergo a health check prior to applying for an insurance? Why is that?
Not every person applying for an insurance protection needs to have his health checked. It depends on the purpose, type, terms and conditions on an insurance program he is applying for. A health check-up is usually required for a life insurance application which largely depends on the coverage total applied and the age of the applicant. A health examination is necessary to accurately and objectively check, analyze or determine the condition of health of the prospective insuree as it shows the risks that the insurance company should manage.
3. Does it mean that a person with a certain disease cannot be insured?
As its functions state, the underwriting department may decide whether or not a prospect's application can be denied or accepted under a condition, depending on the type of insurance he is applying for: life, accidental, hospitalization or critical illness insurance. For an individual with a certain disease applying for a life insurance, he can be covered after paying an additional premium, although a number of diseases may not be covered, e.g. AIDS or cancer. However, a person with a certain disease can still be accepted.
4. What bases are used by the underwriting department to accept or deny a person's insurance application?
The underwriting department decides whether an insurance applicant is accepted or denied based on health or financial reasons. For health reasons, when a known or found disease has so great a risk that it cannot be covered, the underwriting department may decide to deny the insurance application. For financial reasons, when a person is not eligible to the amount of coverage he is applying for, it is possible that the application is denied or the amount lowered. For example, someone with a monthly income of Rp 1 million applies for an insurance coverage totaling Rp 1 billion with a monthly premium of Rp 1,500,000. Financially, the person is not capable of paying the premium which is more that what he earns. Based on this reason, it is highly likely that his application is denied or his premium lowered.
5. What happens when a person does not tell the truth about his health conditions? Can he still get an insurance protection? What will the long-term effects be?
When a person falsifies his health conditions, and at the time the application is submitted the insurance company is not aware of this, he may be covered. However, when in the future the insured submits a claim and the company finds out and can prove that his health status at the time of application was false, it reserves the right to refuse such claim. Any kind of falsification is considered illegal and will in the end financially injure the insured because he had paid his premiums but he or his beneficiary cannot enjoy any protection.
