Scribd
Upload
15 views2 pages

Insurance Fundamentals: Mortality & Claims

The document outlines key concepts in insurance, including mortality, morbidity, lapse rate, claims, and underwriting. Mortality and morbidity influence life and health insurance pricing, while lapse rates affect insurer profitability. Claims processing and underwriting are critical for evaluating risk and ensuring fair policy pricing.

Uploaded by

atharva.raibagi15
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
15 views2 pages

Insurance Fundamentals: Mortality & Claims

The document outlines key concepts in insurance, including mortality, morbidity, lapse rate, claims, and underwriting. Mortality and morbidity influence life and health insurance pricing, while lapse rates affect insurer profitability. Claims processing and underwriting are critical for evaluating risk and ensuring fair policy pricing.

Uploaded by

atharva.raibagi15
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Insurance Basics: Mortality, Morbidity, Lapse Rate,

Claims, and Underwriting


1. Mortality
Mortality = probability of death in a population.

Used heavily in life insurance pricing.

Based on mortality tables created by actuaries.

Factors: Age, gender, smoking, occupation, lifestyle, medical history.

Higher mortality = higher life insurance premiums.

Applications: Term/whole life pricing, reserve calculations, mortality improvements impact


profitability.

2. Morbidity
Morbidity = probability of illness, disability, or disease.

Used in health insurance, disability, and critical illness policies.

Based on morbidity tables (similar to mortality).

Higher morbidity = higher health/disability premiums.

Applications: Pricing hospitalization, critical illness, income protection plans.

3. Lapse Rate
Lapse rate = % of policies discontinued (not renewed) before maturity.

Reasons: Affordability issues, better competitor offers, lack of awareness.

Different from surrender rate (where policyholder withdraws with some value).

High lapse = negative impact on insurer (loss of future premiums).

Used in persistency analysis and cash flow projections.

Low lapse = higher customer stickiness and long-term profitability.

4. Claims
Claim = policyholder (or beneficiary) request to insurer for payout.

Types:

Life insurance → death claims.

Health insurance → hospitalization, medical bills, critical illness.

General insurance → motor, fire, property losses.

Process:
Policyholder/beneficiary notifies insurer.

Documents verified.

Decision: claim settled or rejected.

Claim ratio = claims paid / premium earned → indicator of insurer health.

Fraud detection is critical in claims.

5. Underwriting Basics
Underwriting = process of evaluating risk before issuing a policy.

Steps:

Customer fills proposal form.

Risk evaluated based on age, health, occupation, lifestyle, income.

Medical tests/financial checks (if required).

Decision: Accept standard, accept with extra premium, or reject.

Types:

Medical underwriting → health reports, medical tests.

Financial underwriting → ensures coverage matches income/assets.

Automated underwriting → AI/rule-based fast approval.

Importance:

Prevents adverse selection.

Ensures policies are priced fairly.

Protects insurer profitability.

You might also like