In the Financial Informer Third Quarter we discuss how Insurance underwriting is generally misunderstood as well as take an in depth look at the institution called the South African Reserve Bank (SARB), how it is structured and what it does.
Insurance underwriting is generally misunderstood. The “unfairness”
of an underwriting decision is a story often told. When someone gets denied a payout
due to non-disclosure the public often rallies against the insurer and calls out
the big bad company as doing everything to avoid paying. Likewise, when John
and Joe, standing around the braai, discover that one is paying double for the
same amount of cover. All of these are typical examples of how underwriting is
misunderstood. This article should clarify the ins-and-outs and make sense of a process most of us will have to go through in our lifetimes.
The contract of insurance is essentially one based on trust and risk. Clients need to trust that, if they are completely honest with their insurer, they will pay out an insured sum in the hour of need. However, what is often forgotten is that the
concept of trust goes both ways.
he insurer also needs to trust that their clients will honestly disclose all information they will need. The insurer needs all your information in order to assess the risk they will be taking insuring your life. No one likes visiting the dentist but it’s necessary.
Likewise, underwriting is a pain in the neck but if you want the cover, it is something that just has to be done. You may find the questions intrusive and time consuming. You’re asked about your income, health status, family history, lifestyle habits and a lot
more. You’re even sent a nurse to meet you at a convenient place to draw blood from you, perhaps even weigh and measure you.
It’s a deeply personal process that ultimately decides the level of cover and the cost of the premiums you will pay. Insurers do this to make sure they have enough information about you to know that they’ve charged you the correct premium, and that you have peace of mind that your claim, which is the insurer’s ultimate promise to you, is honoured when the time comes.