Term – 3^rd Term

Week: 5

Class: Senior Secondary School 1

Age: 15 years

Duration: 40 minutes of 2 periods each

Date:

Subject: Insurance

Topic:- Underwriting

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

Define Underwriting
Highlight the considerations to be aware of as an insurance buyer

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION	TEACHER’S ACTIVITY	STUDENT’S ACTIVITY
STEP 1 INTRODUCTION	The teacher reviews the previous lesson on self insurance	Students pay attention
STEP 2 EXPLANATION	He defines underwriting	Students pay attention and participates
STEP 3 DEMONSTRATION	He highlights the considerations one should be aware of as an insurance buyer	Students pay attention and participate
STEP 4 NOTE TAKING	The teacher writes a summarized note on the board	The students copy the note in their books

NOTE

UNDERWRITING

Underwriting is the process by which an insurer offers to cover a portion or

part of a risk. Underwriting is most common in marine insurance because of

the amount of money involved. The person or company that offers to cover

or assume a portion of a risk is called an UNDERWRITER.

Underwriting began as a manual process based entirely on developed

acumen. Today, that process also involves the use of tools such as data

analytics and artificial intelligence.

The underwriting process is critical for any insurance company to maintain

a healthy loss ratio. It is the core of the business and, along with

investment returns, the main driver behind the financial performance. Bad

underwriting decisions lead to high loss ratios, meaning the insurance

company will end up paying more in insurance claims than what it collects

in insurance premiums. By setting an underwriting strategy and investing

in underwriting training, insurance companies can reduce the variability in

results.

How does the underwriting process work?

Here’s what you can expect:

A senior executive who has a good understanding of the corporation’s risk and controls completes an application form.
The underwriter reviews the application and determines if they have enough information to underwrite the submission.
The underwriter may reach out to the broker to request additional information if required. The applicant may need to complete additional questionnaires related to policy extensions.
Once all necessary information is gathered, the underwriter evaluates the risk and determines the pricing, terms, and conditions under which an insurance contract will be offered.
The underwriter may need to obtain approval internally from more senior underwriters or managers prior to presenting the insurance quote to the broker.

It is wise to provide all the required information with your initial submission

to avoid extra back and forth – this will only result in delays and frustration.

Be ready to submit all relevant information regarding the risk. For example,

a D&O insurance application includes financial statements, actuarial

reports for defined benefit plans, the ownership chart, information on board

composition, company registration, and bylaws, and a list of all directors

and officers applying for coverage.

For large accounts, the submission process may also include meetings.

The applicant may need to meet with the insurance broker and, or with the

insurance company directly as they will want to verify the information that

has been provided in the application.

UNDERWRITING CONSIDERATIONS YOU SHOULD BE AWARE OF AS

AN INSURANCE BUYER

Here are some of the considerations that affect an underwriter’s decision

on any given risk:

Underwriting capacity

Underwriters juggle their day-to-day duties like the rest of us. They may

receive dozens of submissions on a given day and may be forced to

prioritize which risks to spend their time on. Make it easy for the underwriter

to decipher who and what they are insuring. Work with your broker to

ensure that your insurance application is accurate and complete.

Portfolio strategy

Insurance companies are ‘for profit’ corporations looking to turn a profit for

their shareholders every year. As such, the executive team will review their

underwriting strategy, and that strategy may change from year to year. This

means that the insurance company may accept your insurance application

one year and decline it the following year. This can be frustrating for clients.

Do your due diligence when it comes to insurance companies – look for

financial strength and stability and profitability in your industry.

Relationships

In business, relationships matter. The same applies to the insurance

industry. Work with a broker that has strong relationships with a selection of

insurance companies. Know your role, the role of your broker, and the role

of the insurance company in the buying process, and hold each

accountable in their role (including yourself). Whenever possible, meet with

the insurance company along with your broker.

Risk selection & capacity

In achieving profitability, underwriters need to manage their capacity and

exposure. This includes managing risk aggregation and exposure. An

example of this is restricting underwriting in flood zones. They may do this

declining the risk entirely, reducing limits, or increasing deductibles.

Pricing & terms

When it comes to insurance there is no such thing as a good deal.

Underwriters toggle between price and terms and conditions. And that’s ok,

not everybody wants the Rolls-Royce of insurance, but know what you’re

giving up by paying a lower price.

EVALUATION: 1. Define underwriting

Highlight the five considerations one should be aware of as an insurance buyer

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively

Lesson Notes By Weeks and Term - Senior Secondary 1