Underwriting 核保

Meaning and Purpose of Underwriting 核保的意義及目的

Underwriting is one of the core functions of an insurance company and is carried out by underwriters. The underwriter assesses the nature and size of a proposed risk and then decides three things: whether to accept it, on what terms and conditions, and at what premium.

The aim is to classify risks so that each insured pays a premium in proportion to the risk they bring to the common pool, known as an equitable premium. If high-risk and low-risk applicants paid the same premium, the low-risk ones would leave and the insurer would make losses.

Underwriting also protects against anti-selection, meaning that people who are more likely to suffer a loss tend to be keener to buy insurance. Underwriters work within the company's underwriting guidelines and capacity, so that the book of business stays profitable and similar risks are treated consistently.

Assessing the Risk: Hazards and Sources of Information 評估風險：風險因素及資料來源

Underwriters look mainly at two kinds of hazard. Physical hazard is a tangible feature of the risk itself that makes a loss more likely or more severe, such as a building made of timber, a factory storing flammable chemicals, or a driver with a high-performance sports car.

Moral hazard concerns the attitude and conduct of the insured, such as dishonesty, a history of fraudulent claims, carelessness towards property, or financial difficulty. Moral hazard is harder to spot from the outside, so underwriters must watch for it closely.

The main source of information is the proposal form, together with the material facts the applicant discloses under the duty of utmost good faith. Other sources include survey reports, medical reports or examinations, past claims records and information passed on by the intermediary. When an insurer collects and uses this personal data it must comply with the Personal Data (Privacy) Ordinance (Cap. 486).

Underwriting Decisions 核保決定

After assessing the risk, the underwriter may accept it at standard terms and standard premium. If the risk is above average but still acceptable, it can be accepted on special terms, such as an additional premium (loading), an excess, an exclusion, a warranty (for example, requiring a burglar alarm to be installed and maintained) or a reduced sum insured.

If the risk is too high or falls outside the company's underwriting policy, the underwriter may decline it. In life insurance, where the applicant's health is temporarily uncertain (for example, just after surgery), the underwriter may postpone the decision and reassess once the condition has settled.

Where a single risk is larger than the insurer's retention, the underwriter can still accept it and pass the excess portion to reinsurers, so that the company is not exposed to an excessive loss.

In Hong Kong, a licensed insurance agent or broker normally only gathers information and submits the proposal. Unless the insurer has given them authority, the decision to accept the risk rests with the insurer's underwriter.

Underwriting Factors in Life and General Insurance 人壽與一般保險的核保因素

Life underwriting looks mainly at the life insured's age, sex, health and medical history, family medical history, occupation, hobbies and lifestyle (such as smoking), and whether the sum insured is reasonable in relation to income and needs.

General insurance factors depend on the class of business. Property cover focuses on construction, use, fire and security protection, location and claims history. Motor cover focuses on the driver's age and experience and the type and use of the vehicle. Liability cover focuses on the nature of the business and the legal liabilities it may give rise to.

In every class, underwriters work with the actuarial, claims and reinsurance functions. Claims experience feeds back into underwriting guidelines and rates, and reinsurance arrangements determine how much the company can accept.