Professional Documents
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Health Insurances
Health Insurances
place. Illustrate measures that a health insurance underwriter can put in place to ensure
profitability of a medical insurance book.
1. Rigorous Risk Assessment:
- Conduct thorough evaluations of applicants' health histories to accurately assess potential
risks.
- Implement predictive modeling and data analytics to identify high-risk individuals.
Discuss the THREE major hazards faced by man, which life assurance schemes tend to
address.
1. Morale Hazard:
- Definition:Morale hazard refers to a situation where the individual's behavior and attitudes
may be affected by the presence of insurance, leading to a higher likelihood of risk-taking or
carelessness.
- In Life Assurance:Life assurance schemes address morale hazard by encouraging
policyholders to adopt healthier lifestyles and engage in preventive measures. Wellness
programs and incentives promote responsible behavior to reduce the risk of mortality.
2. Moral Hazard:
- Definition:Moral hazard occurs when the existence of insurance coverage influences an
individual to take greater risks or behave in a riskier manner, assuming that the financial
consequences will be mitigated by insurance.
- In Life Assurance:Life assurance schemes mitigate moral hazard by incorporating waiting
periods, exclusions, and limitations. They also promote responsible behavior through policy
terms, discouraging intentional risk-taking that could lead to claims.
3. Physical Hazard:
- Definition:Physical hazard refers to tangible and physical conditions or characteristics that
increase the likelihood of loss, such as hazardous occupations, health conditions, or lifestyle
choices.
- In Life Assurance:Life assurance schemes address physical hazards by considering health
conditions, medical history, and lifestyle factors during underwriting. Premiums and coverage
terms are adjusted based on the assessed physical risks.
2. Collateral Assignment:
- Description: In a collateral assignment, the policyholder uses the policy as collateral for a
loan. The lender becomes the assignee and receives the policy benefits in case of default.
- Process: The policyholder and lender execute a collateral assignment agreement. If the loan
is repaid, the assignment can be released, and the policy reverts to the original policyholder.
3. Revocable Assignment:
- Description:In a revocable assignment, the policyholder retains the right to change the
assignment or reclaim ownership of the policy.
- **Process:** The assignment is made with the understanding that the policyholder can
revoke or change it at any time. This flexibility provides the policyholder with control over the
policy's ownership.
4. **Irrevocable Assignment:**
- **Description:** An irrevocable assignment means the policyholder gives up the right to
change or revoke the assignment without the consent of the assignee.
- **Process:** Once the assignment is made irrevocable, the policyholder cannot alter it
without the assignee's approval. This type of assignment is often used for estate planning
purposes.
Using examples, illustrate how a with a with profits/bonus policy differ from a unit linked
policy.
**With Profits/Bonus Policy:**
1. **Nature of Investment:**
- **Example:** Traditional whole life insurance policies often have a with-profits feature. The
policyholder pays regular premiums, and the insurance company invests those premiums in a
mix of assets, such as bonds and stocks.
- **Differences:** The policyholder is not directly involved in investment decisions. Returns are
not directly linked to specific market performance.
2. **Bonus Declarations:**
- **Example:** A with-profits policy may accumulate bonuses over time. These bonuses are
typically declared annually or at the end of the policy term, based on the insurer's profits and
investment performance.
- **Differences:** Bonuses are a share in the insurance company's profits and are not tied to
the policyholder's specific investment choices. They enhance the policy's maturity value.
1. **Nature of Investment:**
- **Example:** Unit-linked policies involve the policyholder directly investing in various
investment funds, such as equities, bonds, or money market instruments.
- **Differences:** Policyholders have control over their investment choices, and the policy's
value is directly influenced by the performance of the chosen investment funds.
Discuss the major types of claims expected anticipated in a life assurance contract.
1.Death Benefit Claim:
- **Nature:This is the most common type of claim in life assurance. It occurs when the insured
individual passes away during the policy term.
- **Payout:** The death benefit, which is a predetermined sum assured or the policy's
accumulated value, is paid to the designated beneficiaries.