Risk mean something that cannot
be certain an elements of uncertainty
attached with it. It also means that the probability possibility of a certain
loss. This probability is estimated depending
upon a large number of factors such as a person’s age, gender education,
habits etc., PHYSICAL HAZARD: This risk is increased a by a few physical
factors known as physical hazards and a
few nonphysical factors known as moral hazards. The physical hazards are in
view of the physical conditions which
increase the possibility of risk like the physical impairment, onset of a disease etc.,
MORAL HAZARDS: This occurs when the life proposer wants to
obtain an undue pecuniary benefits from a
policy. This takes place when one person plans a suicide after taking the policy, so that the benefits
of the policy go it his or her family members or by hiding certain facts of his
or her illness account in the proposal
form, which may lead to his or her death the and the insurer may have to pay the
claim. The insurer controls this moral
hazard by the careful underwriting, calling for special examinations., by imposing restrictive clauses waiting
periods, lien clauses etc., Legal hazard
too can be there due to the legal systems in the country or due to the
regulatory provisions. It can be case of
the over insurance where in the insurer has to investigation the character and
the financial standing of the applicant. For example has the applicant already
been adequately insured or can be he afford so much of insurance from the point
of view of his income? There are all to be verified. Wherever the life assured and the applicant are two
different persons, the insured has to be cautions about the insurable interest,
I ,e the extent of the economics loss due to the death of the assured.
Female lives are a having more hazard with regard to childbirth
and also a place of their residence as to whether all modern medical facilities
are available . The risks include: 1.
Personal risk, 2. property risks,. 3,. Liability risks,. 4,. Natural
catastrophes like hurricane, earthquake, flood etc., affecting the society as a whole., Let us deal with personal risks only in this
unit. 1. PERSONAL RISKS: These affect the individual personally like death, disability illness,
etc., Untimely death of an individual leads to certain unfulfilled
financial obligations such as a mortgage loan of the house, educational needs
to the children, social commitments like marriage of children, start-up funds
etc., If adequate risk cover is not there the death can lead to the family
coming to the street sooner or later.
There are other exp0enses too such as a medical and funeral expenses,
settlements cost, cost of probate of the will , etc., The non economic costs causes such as loss of guidance,
support loss of the apparent etc., which are called the emotional costs, can
never be compensated by the insurance company money./ That way insurance is not
a substitute for the human life . It can be only mitigate the economic suffering of the people who are left
behind. There is also a risk of insufficient of retirement. This is a called
the risk of living long as a against the
risk of dying early. Both can be covered through life insurance. There is a
risk of poor health of
a person like losing the capacity to earn on account of an accident or onset of a diseases etc., These lead to
the concept of health insurance. In this unit
we have restrict to the life
insurance angle only.
FACTORS AFFECTING
MORTALITY: The rate of the mortality
means that the probability of a person dying in a particular year, i, e,.
out of the 100 people how many may die within one year. The factors affecting mortality are: 1. Age, 2. sex, 3. race,
4. occupation, 5. residence, 6. the hygienic conditions of
living, 7. personal habits, 8. longevity as revealed in the family
history I ,e hereditary factors, 9.
personal health, 10. any physical
disability, 11. body built, 12. any other details revealed in the medical
report. NON MEDICAL UNDERWRITING:
An insurer can choose to underwrite a risk purely on the basis of
information declared personally in a personal statements in the personal forms.
This is a called non medical underwriting . This comes under the umbrella of “Uberima fides” the principle of utmost
good faith. This does not mean any
lowering of standard of selections. Coupled with the field representative’s like agent
field officer’s report the personal can
be accepted. The claim experience under non medical is generally not
unfavorable . We have a lot of saving in cost due to medical
fees, hassles avoided for the proposer , simplicity in forms etc.,