Group Underwriting
Definition of "Group underwriting"
Process of forming a large group of homogeneous lives that in order to allow the law of large numbers to operate, thereby projecting a probable rate of mortality or morbidity whose creditability approaches one, and standard deviation approaches zero. Since no evidence of insurability has to be submitted on an individual basis, the objective of this type of underwriting is to minimize adverse selection by any member of that group. In an effort to achieve this minimization, certain underwriting rules apply: the group must be formed for reasons other than obtaining insurance, or people who have a particular disease would join together for the sole purpose of buying insurance; a constant flow of young people into the group and outflow of older people out of the group is required so that, statistically, the average person (standard health) will continue to be insured; the insurance benefits should automatically be determined by some type of formula on behalf of the members, or only those members who are in poor health would select the higher limits of coverage; and close to total participation of all eligible employees should be achieved.
Popular Insurance Terms
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Same as term Unallocated Funding Instrument: pension funding agreement under which funds paid into a retirement plan are not currently allocated to purchase retirement benefits. The funds ...
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Insurance policy in force only after the insurance company approves the application. Today, most companies use the insurability conditional premium receipt. ...
Nonforfeiture option that uses the cash value of an ordinary life policy as a single premium to purchase term life insurance in the amount of the original policy. The length of the term ...
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