Underwriters and risk
Underwriting involves making decisions regarding whether or not to accept risks. If the underwriter deems the risk acceptable, they determine the:
- conditions; and
- applicable premium.
Why do you think underwriting is such an important decision making process in the context of insurance?
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In Australia, the Insurance Contracts Act 1984 (Cwlth) limits an insurer’s right to cancel a policy. As a result, insurers must fully understand the potential risks and exercise sound judgement prior to any offer of insurance.
In New Zealand, there is no directly relevant legislation, but underwriters still need to be aware of the adverse public reaction that cancellations can incur. Accordingly, New Zealand insurers are still reluctant to cancel contracts mid-term unless justified by the discovery of information such as non-disclosure by the insured of a fact considered material to the risk.
The Fair Insurance Code provides a set of principles that all members (including MAS) must observe.
Whilst not legislated, most companies follow these guidelines as if compulsory.