Why We Underwrite
Underwriting is the risk selection procedure of assessing insurance applications to decide whether to accept the risk and if so, at what rate of premium.
Good underwriting practices exist to protect our policyholders, assist in attracting new business and help maintain Legal & General’s competitive position.
- Keep within mortality assumptions – premium rates are set assuming a certain level of claims given the underwriting risk selection procedures. Prudent underwriting ensures claims experience is not worse than expected
- Avoid anti-selection – this is where an applicant with a higher than average risk applies for cover but withholds information or provides misleading disclosures
- Remain competitive – if our underwriting is too harsh we could lose perfectly good business. However, if underwriting is too lenient claims experience will be higher than expected, resulting in potential increase in premiums making our products less attractive
- Maintain equity between policyholders – if all policyholders paid the same premium the healthy lives would subsidise unhealthy lives creating inequity
- Provide cover to as many lives as possible – without underwriting expertise, we would have to decline cover for applicants who were not acceptable at ordinary rates
Our aim is to collect a fair premium from each applicant based on the individual factors that represent an increased risk of death or disability depending on the type of contract.
Importantly, this enables us to maintain competitive premium rates.
