Sources of Risk Information in Life Insurance

Information on the factors affecting risk is collected before it can be evaluated to determine the degree of risk. It is collected from various sources because it is not possible to get all information from one source.

Moreover, information from various sources on a particular item will provide an effective check.

1. The Proposal Form

The first and the important source of risk information is application form. The prospect is required to disclose all the material facts truly and fully.

If any information is not asked by the insurer, the proponent should reveal the information if he thinks it to be material. Usually, the agent asks all the questions which are written in the proposal form.

The proposal form is divided into two parts:

  1. Application form; and
  2. Personal Statement

The application includes questions pertaining to home, address, term of insurance, sum to be assured, mode of premium payment, date of birth, object of insurance, name of the nominee, previous insurance history, acceptance or rejection of the proposal, engagement in navy, air force and military services or the intention to be engaged in these services.

Double accident benefit is sought or not. There are some additional questions to be answered by formal processes, which are about education, their income, income occupation and insurance of husband. There is declaration in the end of the form which form the basis of contracts between the insured and the insurer.

Part II of the proposal form is called personal statement which is filled by

(i) either the life to be assured, or
(ii) the agent or the development officer, writing at the dictation of the life to be assured.

This statement mentions name of the life to be assured, family history of father, mother, brothers and sisters in connection with their health and illness and cause of death.

Questions about the bodily impairments, serious disease, habits, operation , accident or injury. There are special questions for such as observing of predate, conceptions, miscarriages and abortion for female proposers. Declaration of the proposer is also essential.

In non-medical proposals some detail information is also required. Name and address of family physicians, absent on ground of ill-health, height, weight, name and address of present and previous employers and declaration.

The proposal form gives all the required information of risk. Different types of proposal forms are used for different policies.

2. Medical Examiner’s Report

The medical examiner has to identify the applicant to avoid the case of impersonation. The knowledge of medical examiner to the assured is also required.

General appearance is an important question where proposal’s apparent age, general health, habit, vaccination, deformity are asked.

Measurement of height, weight, conditions of teeth, gums, ears, chest, heart, digestive tract, gentio-urinary system, nervous system operations and other details, etc. are inquired by physical test of the life to be assured.

There are special questions for female proposers. Opinions of the medical examiner for the longevity, suspected health, first class lives, etc., are required. He has to declare that the findings are true and correct.

The information given by medical examiner is deemed to be correct and it is expected that the medical examiners would give true and fair picture; but certain cases in India have revealed that the reports of medical examiner are not hundred per cent reliable.

Therefore, the underwriting officers at divisional and zonal office are required to go into details of suspected cases because one proposal has been accepted it cannot be repudiated on the ground of wrong medical reports.

3. Agent’s Report

Although agents have to pursue or canvass a lot for getting proposal, yet he is required to state whether the life to be assured, is insurable or not.

He has to furnish information of sum assured, name, acquaintances with the proposer, time and place of first introduction, identity of the life, medical examiners, name and address, monthly income and occupation of the proposer, general state of health, relationship with the agent, etc.

The agent has also to disclose the financial and social position of the proposer.

The agent is required to disclose all the unfavourable information of the life proposed. The agent’s report can be of great value to the underwriting department because he has personal acquaintances with the life proposed and can give full and correct information of all the factors affecting the risk.

Insurers do not place too much reliance on the agent’s certificate because, he, in his zeal to increase his commission, might tend to colour his judgement.

The comparison of agent’s reports with information of other sources may reveal the fair or unfair reports of the agent. In case of wrong information of material facts, his license may be cancelled.

4. The Inspection Report

The insurers generally verify the information obtained by an independent agency. Sometimes this investigation is conducted without the knowledge of the applicant.

Today, the insurers have their own inspection staff who are generally known as inspectors or field officers or development officer.

When the amount of insurance is not large, the inspectors make a general inquiry but when the amount is substantial, a deep and thorough inquiry of habits, character, social condition, occupation and health is required.

In this case, the inspector interviews the applicant’s neighbours, employers, bankers, business associates and other who have special information pertaining to business , personal ethics, temperate habit, social behaviour and health.

The main advantage of this source is that the inspectors provide fair and frank information because they have no interest in the outcome of the case.

5. Private Friends Report

The information from private friends is not generally required. But for some checking purposes, confidential reports of the friends of the proposer are considered. They are requested to reply those questions which are generally asked in agents report.

Since friends are fully aware of the personal and private life of the proposer, they can give better information than the agents. But naturally the real friend does not want to harm his friend. So friends’ report may not always be correct.

6. Attending Physicians

The attending physicians can give better records of health, history of the proposed life and his family. It has been reveled that the family physicians have given true and fair reports of the required information by the insurers.

The family physicians give the information only after charging a certain amount of fees.

7. Medical Information Bureau

The organization commonly known as ‘MIB’ is an effective bureau for furnishing confidential medical reports. This bureau is common in U.S.A., but in India such bureau has not started.

The insurers are members of this bureau and pay a certain fees annually. Sometimes they are required to pay commission for furnishing information.

The MIB has recorded sufficient information of reputed and distinguished persons so the bureau is competent enough to report adequate and fair information.

8. Neighbours and Business Associates

Confidential reports about the applicant can be easily obtained from the neighbours and business associates although it may be prejudice to the extent of friendship or enemity with the proposer. The obtained information can be tallied with other information.

9. Commercial Credit Investigation Bureau

The bureau assembles financial and social information of businessmen. The credit worthiness is decided by the Bureau. The information given by the Bureau is treated confidential. These reports are expected to be correct and fair to a great extent.