Important Points for IC 22 - Life Insurance Underwriting Exam
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In the numerical rating method, numerical rating is employed by underwriters for taking decisions to accept or decline the risk.
The concept of extra mortality is applied in the case of sub-standard lives. Extra mortality rate or EMR refers to the excess mortality as compared to the mortality of standard lives.
The unfavourable aspects of the risk attract addition of extra mortality ratings (called credits) to the base rating and for the favourable aspects, the base ratings attract reduction in the mortality ratings (and called debits).
Once all the factors are debited or credited, they are then totaled to determine a final rate which would then classify the applicant as standard risk, sub-standard risk, or highly sub-standard risk.
After assessment of extra mortality rates, an underwriter classifies the risk as standard, sub-standard, and highly sub-standard. Based on the level of risk, an underwriter can choose to accept, postpone / (defer) or reject the risk.
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