Insurers are looking for more modern and challenging forms of decision-making in order to accomplish higher scales of business. However, in an industry like insurance, such leverages would ensure total success if both the parties are totaly aware of the business ethics and rules. In nascent markets, the policyholder's acumen with regard to the basic concepts of insurance should be increased if such modern techniques are to be successful.
Underwriting process is the most key function for an insurer, be it in life insurance or any other class of insurance. The entire success of the insurance organization is dependent on the efficiency with which an insurer conducts his underwriting function. There are several other functions, which also go into deciding the eventual success of an insurerlike the investment decisions, the marketing strategies, etc. While all these functions are by themselves very crucial, it is underwriting that really plays a critical role, as a few bad decisions by the insurer, can mar the entire business over a period of time.
This key function has undergone several stages of improvement historically. For example, in life insurance, it was the acumen or the judgment of the underwriter that used to be the deciding factor for arriving at a decision whether a proposal for life insurance should be accepted or not. Those were the days of judgment method of underwriting. It used to be entirely dependent on the experience and the gut feeling of the underwriter and was quite successful in its own way as long as the complexities of the function and the challenges related to it were limited. As the challenges grew, it was woefully inadequate and had to make way for a more scientific and analytical process called the numerical rating method.
In the ancient method, when a combination of risk factors presented itself, the underwriter still used his underwriting acumen. This led to the problem of inconsistent decisionsinconsistency with regard to decisions taken at different times; or the inconsistency with regard to a similar decision taken by different underwriters. These decisions sometimes unduly favored the insurers or in some cases, the proponents of life insurance. |
